General Ledger

What is the General Ledger?

The general ledger is the system of accounts that make up the double entry accounting system.

How it Works

​The double-entry accounting system is based upon a series of accounts

Collectively, these accounts form something known as the general ledger.

Each account in the general ledger provides a record of transactions. 

The account also has a balance.

These account balances can be shown diagrammatically.

Furthermore, each account falls into one of five categories.

Account Categories in the General Ledger

Asset accounts show what the business owns—or money owed to the business by customers.

Liability accounts show what the business owes to others.

Equity accounts show what the business owes to the owners or shareholders.

Income accounts show what the business earns during an accounting period.

Expense accounts show the business’s running costs during an accounting period.

​General Ledger and the Chart of Accounts

All accounts in the general ledger are listed in the chart of accounts.

The chart of accounts lists accounts by category.

It assigns each account a number—prefixed according to category.

© R.J. Hickman 2020