General ledger (GL)
The master record of every financial transaction a business has posted, organized by account.
In short
- Every entry from every subledger, such as payables, receivables and payroll, ends up here.
- Financial statements are produced by summarizing its balances.
- It follows double entry: every transaction's debits equal its credits.
The general ledger, or GL, is the core of a business's accounting records. It contains every account in the chart of accounts and every transaction posted to them, with the date, amount, description and reference to the source.
How it fits together
Detailed activity often happens in subledgers: accounts payable tracks each supplier invoice, accounts receivable each customer invoice, payroll each employee's pay, fixed assets each asset. Summaries of that activity post to control accounts in the general ledger. Other transactions, such as accruals, depreciation and corrections, are recorded directly as journal entries.
Double entry
Every transaction in the GL affects at least two accounts, and its debits always equal its credits. Paying a $500 supplier bill reduces cash by $500 and reduces accounts payable by $500. Because every entry balances, the ledger as a whole balances too, which is what a trial balance checks.
What it produces
The income statement is built from revenue and expense accounts, the balance sheet from asset, liability and equity accounts. Management reports, tax returns and audit work all start from the general ledger, which is why its accuracy and its audit trail matter so much.
Worked example
One sale in the ledger
A retailer sells goods for $1,000 plus $130 HST on credit. The general ledger records: debit Accounts receivable $1,130; credit Sales revenue $1,000; credit HST payable $130. When the customer pays, it records: debit Bank $1,130; credit Accounts receivable $1,130. Debits equal credits in both entries.