What is the General Ledger?

//What is the General Ledger?
What is the General Ledger? 2017-10-04T22:08:06+00:00

Definition: The general ledger or ledger is a record of all the accounts that the company uses. In all modern accounting systems, the general ledger is computerized. A general ledger divides accounts into three account types: assets, liabilities, and equity accounts.

What Does General Ledger Mean?

All companies have a specific set of accounts that they use to record transactions. The list of these accounts is most often called the chart of accounts. Depending on a company’s size, its chart of accounts might have a large number of accounts or just a few accounts. All of the accounts in the chart of accounts are summarized and categories in the general ledger.

Example

Most companies have many of the same general accounts like cash, accounts payable, and retained earnings, but some companies have specialized accounts specific for their operations. For instance, a retailer might have an account for promotional inventory not for sale. Manufacturers probably wouldn’t have an account like this. Instead, a manufacturer would probably have raw materials inventory, work in process inventory, and finished inventory accounts. It isn’t uncommon for manufacturers to create specific accounts for each custom job done during the year.

After the accounts are categorized by type, they are arranged in balance sheet order starting with assets, then liabilities, then equity accounts. Here are some example accounts in balance sheet order.

Assets:

Liabilities:

Equity: