A general ledger, more commonly referred to as an accounting ledger, is a basic record for accounting. The main aim of the record is so as to help the business keep track of any financial transaction made during a particular range of time. Financial transactions in this case can be easily divided into two main categories namely credits and debits. Debits normally lead to an increase in the assets of the business whereas credits do the exact opposite. Just as the name suggests, general ledgers contain ALL records of transactions regardless of whether or not the transactions are to be recorded in any of the subsidiary ledgers. Whether it includes cash at hand, accounts receivable, debts or the likes; they all have to be included in the general ledger.
Today, the whole concept of ledgers has been taken to a whole other level with the computerizing of most ledgers. In the past, ledgers were normally maintained manually. Most business men used hand written books as ledgers. They would note down all the transactions after they happened in one account and include receipts and the likes as proof of transactions. However, today, all you need is a fast computer and an accounting software. There are quite a number of software programs available online today. One can easily download one for free online or buy one. The difference will be the features.
The whole concept behind maintaining a general ledger is what accountants refer to as double-entry book-keeping. Normally, there are five types of accounts used in creating a general ledger. These are:
- Owner’s equity
In some cases, loses and gains are included in the ledger. With that in mind, double-entry book keeping normally affects two accounts. Normally, every time a transaction occurs, it is reflected in two accounts. It is translated equally but with opposite effects on the two accounts. In other words, the credit on one should be a debit in another. The two digits should be equal. At the end of the day, the credit side and the debit side of the general ledger should be equal. The sum figures of the debit and credit on both sides should be equal. If it so happens that the two are not equal, then that will automatically mean that the ledger is wrong. With any errors, the ledger cannot be used in compiling of the financial statements.