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As the heart of the double-entry accounting system, the general ledger is the record of a company's entire financial transaction history. The left side of the general ledger is for debits: assets, expenses, losses and dividends: while the right side of the general ledger is for credits: liabilities, gains, income, revenues and equity. In double-entry accounting, every transaction is recorded as both a debit and a credit. For example, when a business pays the electric bill, the dollar amount is entered in the general ledger as a debit to utilities expense, and a credit to cash.

Because every financial transaction affects both a debit account and a credit account, the sum of the total general ledger debits and credits should always be equal. If this is not the case, then the general ledger is said to be out of balance, and must be corrected before accurate financial statements can be drawn from it.

Periodically, usually on a monthly basis, all the account balances in the general ledger are summarized in trial balances and used to generate financial statements such as an income statement and a balance sheet. 

While historically the general ledger was hand-written in an accounting book, today most businesses use computer software to manage the ledgers. While a very small business might have a simple general ledger, the general ledger of a large business is likely to be very complex, involving multiple subsidiary ledgers.

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