Accounting > General Ledger
The General Ledger
The general ledger is a collection of the firm's accounts. While the general journal is organized as a chronological record of transactions, the ledger is organized by account. In casual use the accounts of the general ledger often take the form of simple two-column T-accounts. In the formal records of the company they may contain a third or fourth column to display the account balance after each posting.
To illustrate the posting of transactions in the general ledger, consider the following transactions taken from the example on general journal entries:
Date | Account Names | Debit | Credit |
9/1 | Cash | 7500 | |
Capital | 7500 | ||
9/8 | Bike parts | 2500 | |
Accounts payable | 2500 | ||
9/15 | Expenses | 1000 | |
Cash | 1000 | ||
9/17 | Cash | 400 | |
Accounts Receivable | 700 | ||
Revenue | 1100 | ||
9/18 | Expenses | 275 | |
Bike parts | 275 | ||
9/25 | Cash | 425 | |
Accounts receivable | 425 | ||
9/28 | Accounts payable | 500 | |
Cash | 500 |
The above journal entries affect a total of seven different accounts and would be posted to the T-accounts of the general ledger as follows:
General Ledger
(T-Accounts)
Note the direct mapping between the journal entries and the ledger postings. While this posting of journalized transactions in the general ledger at first may appear to be redundant since the transactions already are recorded in the general journal, the general ledger serves an important function: it allows one to view the activity and balance of each account at a glance. Because the posting to the ledger is simply a rearrangement of information requiring no additional decisions, it easily is performed by accounting software, either when the journal entry is made or as a batch process, for example, at the end of the day or week.
Finally, while such T-accounts are handy for informal use, in practice a three-column or four-column account may be used to show the running account balance, and in the case of a four column account, whether that balance is a net debit or credit. Additionally, reference numbers may be used so that each posting can be traced back to its original journal entry.
Accounting > General Ledger
Transactions the firm conducts with a separate economic entity
A single location that provides a sit of transactions affecting each account and the account's balance
A list of all account names used to record transactions of a company
A list of all accounts and their balances at a particular date, showing that total debits equal total credits
A summary of the effects of all transactions related to a particular item over a period of time
A chronological record of all transactions affecting a firm
Left side of an account. Indicates an increase to asset, expense, or dividend accounts, and a decrease to liability, stockholders' equity, or revenue accounts
The process of transferring the debit and credit information from the journal to individual accounts in the general ledger
A simplified form of a general ledger account with space at the top for the account title, one side for recording debits, and one side for recording credits
For every transaction one account will increase while one account decreases
Right side of an account. Indicates a decrease to asset, expense, or dividend accounts, and an increase to liability, stockholders' equity, or revenue accounts
The format used for recording business transactions