General Ledger Accounting

In this step, you need to compare the previous accounting periods closing trial balances to the opening balances of the current period ledger accounts. Thus, you need to check the balances for balance sheet accounts like assets, liabilities, and stockholder’s equity. A general ledger is used to record every financial transaction made by an organization and serves as the basis for various types of financial reports.

Best accounting software to view your general ledger

To maintain financial health, your total debit balances must equal your total credit balances. Some disadvantages of a general ledger include the cost and amount of time it takes to set up. Additionally, if you make errors in updating or recording transactions, the GL account balances will be incorrect.

Double Entry Bookkeeping

However, with online accounting software like QuickBooks, the General Ledger Reconciliation had become a lot easier. Thus, as per the above table, the credit sales figure of $200,000 would go into the accounts receivable control account. Whereas, the sales details of various general ledger account debtors like Jack & Co., Mayers, and John can be found in the related subsidiary ledger. Further, this could become a cause of concern for you as a business entity. Now, it becomes challenging for you to identify this transaction if the Ledger Accounts are not prepared.

Create correcting entries

Furthermore, the information recorded in General Ledger is divided based on the type of accounts. This equation states that the assets of your business are always equal to the sum of the owner’s capital and the claims of the outsiders. As per this principle, there are at least two accounts involved when a particular transaction takes place. Further, the Duality Principle is expressed in terms of the below accounting equation. This means you first need to record a business transaction in your Journal. Remember, you need to record each of them in Journal in the order in which they occur.

Sub-ledgers are like notebooks you use to write down business transactions as they happen. Then, you summarize that information in a master notebook—the general ledger. The GL serves as the basis for a company’s income statements, balance sheets, and cash flow statements. By keeping your general ledger up-to-date, stakeholders, investors and analysts can accurately assess the company’s performance.

• Now that you’ve learned more about what a general ledger is in accounting, you’ll be better able to provide your accountant with the information they need to keep your books balanced.
• Thus, you need to refer to a related subsidiary ledger to know the details of such a control account.
• Thus, these details come in handy as you do not have to look for invoices or bank statements at the time of filing tax returns.
• FreshBooks offers smaller businesses a great way to manage their general ledger.
• General ledger accounting summarizes and sorts a company’s financial information.
• Whereas, the sales details of various debtors like Jack & Co., Mayers, and John can be found in the related subsidiary ledger.

Examples of General Ledger Control Accounts

List of General Ledger Accounts and Content

What is the difference between a general ledger and a balance sheet?

• A business’ financial transactions are first recorded in a general journal.
• Likewise, having proper Ledger Accounts help you to prepare the Trial Balance Sheet.
• You can save time on bookkeeping tasks with QuickBooks experts by your side.
• The double-entry bookkeeping method ensures that the general ledger of a business is always in balance — the way you might maintain your personal checkbook.
• Your general ledger might break these down into accounts for rent, merchant fees, software subscriptions, telephone and internet, cleaning, and so on.