General Ledger

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DEFINITION of 'General Ledger'

A company's main accounting records. A general ledger is a complete record of financial transactions over the life of a company. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.

A general ledger is typically used by businesses that employ the double-entry bookkeeping method - where each financial transaction is posted twice, as both a debit and a credit, and where each account has two columns. Because a debit in one account is offset by a credit in a different account, the sum of all debits will be equal to the sum of all credits.

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BREAKING DOWN 'General Ledger'

A company's general ledger can either be a physical book into which credits and debits are posted, or an accounting computer program where the various credits and debits are entered. The general ledger's double-entry bookkeeping requires that each transaction will be entered on the left side, or debit side, of one account and simultaneously on the right side, or credit side, of another account. A general ledger is used to prepare financial statements directly from the accounts, and as a means to identify errors and/or instances of fraud.

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RELATED FAQS
  1. Which accounting cycle is best for my business?

    Most accounting resources suggest that there are between five and eight different accounting transaction cycles, each of ... Read Full Answer >>
  2. What is the best general ledger software for small businesses?

    General ledger software is available as both paid software and freeware. Some programs stand alone, while others require ... Read Full Answer >>
  3. How do you calculate credits and debits in the general ledger?

    A general ledger acts as a record of all accounts and their transactions. Balancing the ledger involves subtracting the total ... Read Full Answer >>
  4. Why do businesses calculate accrued expenses?

    Whenever a business recognizes an expense before it is actually paid, it can make an accrual entry in its general ledger. ... Read Full Answer >>
  5. How can I use Excel as my business's general ledger?

    For a small business with few transactions, a savvy business owner can use Excel as a substitute for accounting software. ... Read Full Answer >>
  6. What is double entry bookkeeping and how does it work in the general ledger?

    Double entry bookkeeping is the concept that every accounting transaction has two affects on a company’s finances. The general ... Read Full Answer >>
  7. When should a company recognize revenues on its books?

    When a company makes revenues from its operations, it must be recorded in the general ledger and then reported on the income ... Read Full Answer >>

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