General Ledger

A General Ledger (GL) is a comprehensive record-keeping system used in accounting to track all financial transactions of a business. It serves as the main accounting record, containing all account information needed to prepare financial statements and manage financial performance.

The GL is divided into various accounts, such as Assets, liabilities, Equity, Revenues, and expenses. Each account records transactions that impact the company’s financial position.

Examples of General Ledger accounts include:

• Cash: Records all cash transactions.
• Accounts Receivable: Tracks Money owed to the business by customers.
• Inventory: Reflects the value of products held for sale.
• Accounts Payable: Monitors Money the business owes to suppliers.
• Sales Revenue: Records income generated from sales.

In a case where a company sells a product for $1,000, the General Ledger would reflect an increase in the Sales Revenue account and an increase in the Cash account if the sale was made in cash. Conversely, if the sale was made on Credit, Accounts Receivable would increase instead of Cash.