What does a ledger look like
The Ledger is part of the double-entry bookkeeping, in which all business transactions systematically and based on the objective reason be entered. The basis for this is the journal, in which all business transactions are sorted chronologically. The general ledger must follow the principle of unity so that it can serve as the basis of the balance sheet.
From the land register to the general ledger
The general ledger consists of so-called G / L accounts, which organize business transactions according to their merits. The basis for this is the so-called journal, in which all incidents are entered in their chronological order. The transmission can take place in three different ways:
- With transfer accounting, postings are first entered in the land register and then manually in the general ledger.
- The carbonless bookkeeping relies on a single work step. The entries are made directly in the journal and in the general ledger using carbonless paper.
- When using modern accounting programs - as they are used by all companies - only the land register is kept. The general ledger accounts are created automatically by the system and based on the entries in the journal.
Keeping and closing the general ledger
The general ledger is usually structured according to the industrial accounting framework, the standard accounting framework or the joint accounting framework. Closing all general ledger accounts and the general ledger as a whole automatically results in the Balance sheet. Also the Profit and Loss Account is created directly when the general ledger is closed.
The legislature therefore provides that the general ledger should follow the principle of Unity considered. Formally, this means that a debit / credit balance takes place. The total of the debit items must be exactly the same as the total of all credit items. But material must also be closed, which means that the general ledger actually records all business transactions in a period.
General Ledger Definition & Explanation - Summary
- The general ledger arranges all business transactions by reason
- The journal forms the basis for creating the general ledger
- Closing the general ledger automatically creates the balance sheet and income statement
More information: Chart of accounts
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