Accounting

The General Ledger

The general ledger simply represents a record of the firm’s complete accounts, organised into different accounts depending on the nature of the transactions. As such, the general ledger is often made up of a series of T-accounts: the general accounting method of recording debit and credits due to having two columns which resemble a T when blank. However, many general ledgers may include third or fourth columns to display running balances and other details such as reference numbers to make it easier to track the transactions. This is particularly important for large companies which may experience thousands of transactions in any accounting period, and need to keep track of their overall financial position.

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As the general ledger is populated from the journals, the same accounting data and transactions will appear in both documents. However, whilst the journals simply serve as a chronological record of all transactions, the general ledger splits these transactions into different accounts, to make it easier to analyse them and prepare the financial statements. The additional redundancy offered by the general ledger is also useful when preparing the trial balance, as it can make it easier to compare what the accounts say with the company’s actual holdings of cash, loan agreements and other assets and liabilities. In addition, as the process of posting to the general ledger is simply a case of mechanically transferring information from the journals, it is often completed by accounting software on an ongoing basis, hence reducing the overall workload required by the accounting process.

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