General Ledger

In general, a general ledger is a bookkeeping record where accounting information is recorded from multiple journals and by multiple ledger accounts, such as outstanding accounts receivable, outstanding bills, current accounts, current assets, and financial documents for the year. General-ledger books are more precise than micro-ledger records, as micro-ledger records only record business transactions and financial information, while general ledgers provide comprehensive business information. A general ledger must comply with the requirements of the US generally accepted accounting principles (GAAP). The Financial Accounting Standards Board (FASB) created the guidelines for the accounting practices used by registered public accountants (or CPAs), which include a basic description of the principles and procedures used in accounting.

A general ledger is a comprehensive account that details all of a company’s financial transactions, as well as all of its payments and receipts. Every financial transaction is recorded in a current account, which includes the balance as of the last day of the month entered in the general ledger. Entries are also recorded in a profit and loss account, an allowance to creditors, capital assets, liabilities, and ownership equity. All other transactions, both assets and liabilities, are reflected in an income statement. An inventory account provides information about the inventory held by the company at any point during the year. All inventory items, including raw materials and finished products, are accounted for under one or more individual account classes.

bookkeeping

General-ledger records contain financial data that can influence the determination of the value of the company’s stock, property, and ownership equity. For example, financial data relating to customer accounts receivables determines the amount of bank loans outstanding, material costs and equipment costs, and inventory costs. Sales and purchases, as well as accumulated expenses are also reflected in general ledger accounts. It is the responsibility of an accountant to reconcile these items against their corresponding financial data. The general ledger is used to facilitate the preparation of financial statements.

General Ledger Records

General Ledger Records contain entries for the purchasing, selling, transfer, and expense of goods or services. It includes a list of all general journal transactions, from the purchase of a machinery or equipment to the payment of utility bills. All vouchers, deposits, advances, payrolls, and miscellaneous receipts are included in general journals. Sales and expenses are recorded by categories, as well as by month, day, week, or yearly interval. The balance sheet, which represents the combined balance of all assets and liabilities, is displayed on the general ledger.

A general journal contains only those transactions and events that are known to the accounting process. Transactions are grouped according to their cash effect, including sales and purchases and by date. Cash causes the accumulation and disposition of surplus cash and also represents the accumulation and disposal of liability. Entries are grouped according to their source, as for instance, by date-month-day-date (or sometimes according to individual invoice). Interest on outstanding balances is reflected on the appropriate line, while charges on outstanding debts are recorded with the appropriate category, as described above. The balance sheet, and therefore the general ledger, reflects the activity of an account, not the activity of an institution.

The balance sheet, as reflected in the general ledger, can be used by the public as a Summary of Financial Data (SFFD), which is an electronic format that summarizes the performance of an entity, as shown in its income statement. The SFFD can also be used to compare different entities within an enterprise to show how operations have been changing over time. The SFFD is usually produced for a single financial year. The information provided is therefore limited to the most recent period. Because of this, the general journal may be used as a supplement to the SFFD for drawing up an accurate picture of the state of an enterprise’s finances.