General Ledger

From Open Risk Manual

Definition

General Ledger, also nominal ledger, is a Accounting term denoting a Ledger in which accounting data is posted from journals and subledgers, such as Accounts Payable, Accounts Receivable, Cash Management, fixed assets, purchasing and projects.

Structure

  • A Ledger Account is created for each account in the chart of accounts for an organization, are classified into account categories, such as income, expense, assets, liabilities and equity, and the collection of all these accounts is known as the general ledger.
  • The main categories of the general ledger may be further subdivided into subledgers to include additional details of such accounts as cash, accounts receivable, accounts payable, etc.
  • The general ledger holds both financial and non-financial data for an organization.
  • Each account in the general ledger consists of one or more pages. An organization's Statement of Financial Position and the Income Statement are both derived from income and expense account categories in the general ledger.
  • The general ledger contains a page for all accounts in the chart of accounts arranged by account categories.
  • The general ledger is usually divided into at least seven main categories: assets, liabilities, owner's equity, revenue, expenses, gains and losses.
  • The general ledger should include the date, description and balance or total amount for each account.

Operation

Posting is the process of recording amounts as credits (right side), and amounts as debits (left side), in the pages of the general ledger. Additional columns to the right hold a running activity total (similar to a chequebook).

Because each bookkeeping entry debits one account and credits another account in an equal amount, the Double-Entry Bookkeeping helps ensure that the general ledger is always in balance, thus maintaining the Accounting Equation:

Implementations

  • In a manual accounting system, the general ledger may be a book.
  • Organizations may instead employ one or more spreadsheets for their ledgers, including the general ledger
  • may utilize specialized software to automate ledger entry and handling.


See Also

References