General Ledger
What is the General Ledger?
The general ledger is the system of accounts that make up the double entry accounting system.
![ge1](https://seeaccountingnow.online/wp-content/uploads/2020/04/ge1.jpg)
How it Works
The double-entry accounting system is based upon a series of accounts
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/ge2.jpg)
Collectively, these accounts form something known as the general ledger.
![ge3](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge3.jpg)
Each account in the general ledger provides a record of transactions.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/ge4.jpg)
The account also has a balance.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/ge5.jpg)
These account balances can be shown diagrammatically.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/ge6.jpg)
Furthermore, each account falls into one of five categories.
![ge7](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge7.jpg)
Account Categories in the General Ledger
Asset accounts show what the business owns—or money owed to the business by customers.
![ge8](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge8.jpg)
Liability accounts show what the business owes to others.
![ge9](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge9.jpg)
Equity accounts show what the business owes to the owners or shareholders.
![ge10](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge10.jpg)
Income accounts show what the business earns during an accounting period.
![ge11](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge11.jpg)
Expense accounts show the business’s running costs during an accounting period.
![ge12](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge12.jpg)
General Ledger and the Chart of Accounts
All accounts in the general ledger are listed in the chart of accounts.
![ge13](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge13.jpg)
The chart of accounts lists accounts by category.
![ge14](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge14.jpg)
It assigns each account a number—prefixed according to category.
![ge15](https://seeaccountingnow.online/wp-content/uploads/2021/06/ge15.jpg)
© R.J. Hickman 2020