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What is a General Ledger?

A general ledger (GL) is the complete, chronological master record of every financial transaction a business posts through double-entry bookkeeping. Every transaction is sorted into accounts — assets, liabilities, equity, revenue, and expenses — and the GL is the source from which the trial balance and all financial statements are produced.

Think of the general ledger as the central nervous system of a company’s books. Each account in the chart of accounts — Cash, Accounts Receivable, Inventory, Sales Revenue, Rent Expense, and so on — has its own page in the GL, and every journal entry that touches that account is recorded there with a date, amount, debit or credit side, and a reference back to the source document. At period close the bookkeeper sums each account to produce the trial balance, which must show equal total debits and credits.

Modern general ledgers live inside accounting software rather than in physical books, but the logic is identical. Sub-ledgers for Accounts Receivable, Accounts Payable, and inventory roll their totals up into control accounts in the GL. The GL is also the audit trail: an auditor reconstructing a transaction follows the paper trail from source document to journal entry to GL account to financial-statement line, which is why clean, well-referenced GL entries are the backbone of a defensible set of accounts.

Example

A furniture maker sells a custom table for €1,500. The bookkeeper posts a journal entry that debits Cash €1,500 and credits Sales Revenue €1,500. That single entry is visible in two GL accounts — Cash and Sales Revenue — and both feed directly into the trial balance at month-end.

Questions

What is the difference between a general ledger and a sub-ledger?

A sub-ledger holds the detail for one group of transactions — every individual customer invoice in Accounts Receivable, for example — and posts a single rolled-up total to a control account in the general ledger. The GL shows the summary balance; the sub-ledger shows the individual line items that make it up.

How does the general ledger relate to the trial balance?

The trial balance is built directly from the general ledger. At the end of a period you list every GL account with its debit or credit balance; the total of all debits must equal the total of all credits. If they do not, a posting error exists and must be found before financial statements are prepared.

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