General ledger

Definition

A general ledger is a comprehensive record of a company's financial transactions organized by account. It serves as the foundation for preparing financial statements and ensures accuracy in reporting.

5 Must Know Facts For Your Next Test

1. The general ledger includes accounts for assets, liabilities, equity, revenues, and expenses.
2. Transactions recorded in the general ledger must be classified according to the double-entry accounting system.
3. The general ledger is updated through journal entries that detail each transaction.
4. It plays a crucial role in ensuring the trial balance is accurate and balanced.
5. Adjusting entries are made in the general ledger at the end of an accounting period to reflect accrued or deferred items.

Review Questions

• What types of accounts are included in a general ledger?
• How does double-entry accounting affect entries in the general ledger?
• Why are adjusting entries important for maintaining an accurate general ledger?

Related terms

Journal Entry:

A detailed record of a financial transaction that includes date, amounts debited and credited, and descriptions.

Trial Balance:

A report that lists all balances from the general ledger to check that total debits equal total credits.

Double-Entry Accounting:

An accounting system where every transaction affects at least two accounts, with one debit and one credit entry.