In conclusion, the general ledger is very important in accounting because the transaction details contained in a company’s general ledger are compiled and summarized at various levels to produce a trial balance, income statement, statement of cash flows, statement of financial position, and many other financial reports. However, the total of all debit and credit entries must balance. The double-entry transactions known as journal entries are posted in two columns, whereby the debit entries are posted on the left and the credit entries are posted on the right. Hence, each financial transaction affects at least two sub-ledger accounts, which means that each entry has at least one debit and one credit transaction. The trial balance that is created is then checked for errors and adjusted by posting additional necessary entries, and then the adjusted trial balance is then finally used to generate the company’s financial statements.įurthermore, businesses that employ the double-entry bookkeeping method make use of a general ledger. The transactions are then closed out or summarized in the general ledger, and a trial balance is generated, which serves as a report of each ledger account’s balance. Hence, the company’s transactions are posted to individual sub-ledger accounts, as defined by the company’s chart of accounts. On the general ledger, the financial transaction data is segregated, by type, into accounts for assets, liabilities, equity, expenses, and revenues. It gives a record of each financial transaction that takes place during the life of an operating company.
Therefore, the general ledger holds the account information that is needed to prepare the financial statements of a company. It is the foundation of a system that is used by accountants to store and organize financial data in order to create a company’s financial statements. Related: Net Profit Margin Examples and Interpretation General ledger explainedĪ general ledger is a record-keeping system that is used for a company’s financial data, with debit and credit account records. In this article, we will discuss general ledger examples and types of general ledger accounts. Hence, the general ledger holds financial data for a company. Accounting data are collected from journals and aggregated from sub-ledgers, such as accounts receivable, cash, fixed assets, accounts payable, purchasing, projects, etc, and posted in the general ledger. Video: General ledger examples – Posting Journal entries to a ledgerĪ general ledger is a type of ledger that is used in bookkeeping.
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