General ledger

In bookkeeping, a general ledger is a bookkeeping ledger in which accounting data are posted from journals and aggregated from subledgers, such as accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects.^[1] A general ledger may be maintained on paper, on a computer, or in the cloud.^[2] A ledger account is created for each account in the chart of accounts for an organization and is classified into account categories, such as income, expense, assets, liabilities, and equity; the collection of all these accounts is known as the general ledger. The general ledger holds financial and non-financial data for an organization.^[3] Each account in the general ledger consists of one or more pages. It includes details such as the date of sale, invoice number, customer details, and the amount due. This ledger helps businesses track outstanding receivables and manage cash flow efficiently. An organization's statement of financial position and the income statement are both derived from income and expense account categories in the general ledger.^[4]

Sample Ledger book

Terminology

The general ledger contains a page for all accounts in the chart of accounts^[5] arranged by account categories. The general ledger is usually divided into at least seven main categories: assets, liabilities, owner's equity, revenue, expenses, gains and losses.^[6] It is the system of record for an organization’s financial transactions.^[7] The main categories of the general ledger may be further subdivided into subledgers to include additional details of such accounts as cash, accounts receivable, accounts payable, etc.

The extraction of account balances is called a trial balance. The purpose of the trial balance is, at a preliminary stage of the financial statement preparation process, to ensure the equality of the total debits and credits.^[8]

Process

Posting is the process of recording amounts as credits (right side), and amounts as debits (left side), in the pages of the general ledger. Additional columns to the right hold a running activity total (similar to a chequebook).^[9]

The general ledger should include the date, description and balance or total amount for each account.

Because each bookkeeping entry debits one account and credits another account in an equal amount, the double-entry bookkeeping system helps ensure that the general ledger is always in balance, thus maintaining the accounting equation:

Assets = Liabilities + (Shareholder's or Owner's equity).^[10][5]

The accounting equation is the mathematical structure of the balance sheet. Although a general ledger appears to be fairly simple, in large or complex organizations or organizations with various subsidiaries, the general ledger can grow to be quite large and take several hours or days to audit or balance. In a manual or non-computerized system, the general ledger may be a large book. Organizations may instead employ one or more spreadsheets for their ledgers, including the general ledger, or may utilize specialized software to automate ledger entry and handling. When a business uses enterprise resource planning (ERP) software, a financial-features module produces subledgers and the general ledger, with entries drawn from a database that is shared with other processes managed through the ERP.

Subsidiary Ledgers and Supporting Records

While the General Ledger (GL) contains the aggregated accounts necessary for preparing the financial statements, modern double-entry bookkeeping often necessitates the use of subsidiary ledgers (or sub-ledgers) to provide transaction-level detail. These books stand outside the core double-entry system (they do not use their own debit/credit entries) and serve to supplement the GL by organizing information chronologically and systematically.^[11]

Common Subsidiary Ledgers

The most common subsidiary ledgers are:

• Accounts Receivable Ledger (Debtors Ledger): Also known as the Customer Ledger. It maintains an individual account for every single customer, tracking all sales, payments, and outstanding balances from their creation to settlement.
• Accounts Payable Ledger (Creditors Ledger): Also known as the Vendor Ledger. It maintains an individual account for every single supplier, tracking all purchases, payments, and outstanding balances.^[11]

Reconciliation with the General Ledger

The core principle of subsidiary ledgers is that the sum of all individual balances within the sub-ledger must equal the balance of its corresponding control account in the General Ledger. For example:

Sum of all individual Customer Balances in the Accounts Receivable Ledger = Balance of the Accounts Receivable Control Account in the GL

If these balances do not agree (known as a reconciliation error), it indicates a posting error that must be investigated and corrected.^[11]

Other Supporting Records

Other common supporting records include:

• Inventory Ledgers: Used to track the quantity and value of goods and materials in stock, providing detailed documentation for the inventory figure in the GL.
• Payroll Records: Contain detailed documentation for each employee's gross pay, deductions, and net pay. Only the summarized totals of salaries and withholding liabilities are typically posted to the General Ledger.
• Fixed Asset Register: Provides the detailed breakdown of each asset (acquisition date, cost, depreciation) that supports the overall Fixed Assets account balance in the GL.^[11]

Alternative Tracking Systems

In some jurisdictions, the function of these ledgers (especially the Accounts Receivable/Payable Ledgers) can be replaced by an Open-Item Accounting (or Open-Invoice) System, where control over outstanding debts is maintained primarily by tracking unpaid invoices rather than formal account balances.^[11]