The general ledger is the core accounting record of a business which utilizes double-entry bookkeeping. It will generally include accounts for items such as current assets, liabilities, fixed assets, revenue and expense items, gains and losses. All General Ledgers are divided into debits and credits sections. The left hand side represents debit transactions and the right hand side shows credit transactions. This provides a 'T' shape to each individual general ledger account.
The general ledger is a compilation of the group of accounts that supports the value items presented in the major financial statements. It is made by posting transactions recorded in the purchases daybook, sales daybook, cash book and general journals daybook. The general ledger can be supported by subsidiary ledgers that give details information for accounts in the general ledger. For example, an accounts receivable subsidiary ledger would contain a different account for each credit customer, tracking that customer's balance individually. This subsidiary ledger would then be summed up and compared with controlling account to ensure accuracy as part of the method of preparing a trial balance.
There are seven basic categories in which all accounts are categorized:
3. Owner's equity
As each bookkeeping entry debits one account and credits another account in an equivalent amount, the double-entry bookkeeping system helps ensure that the general ledger is always in sense of balance, hence maintaining the accounting equation:
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