The general ledger is the primary financial record of a business which uses debit and credit postings to summarize all transactions from subsidiary accounts into main headline categories over time.
Key Components:
- Contains real (asset, liability and equity) and nominal (income and expense) accounts.
- Transaction details from sources like sales invoices and checkbooks populate relevant general ledger accounts.
- Post-closing trial balance proves debits equal credits to ensure accuracy before financial statements.
Example Usage:
The accountant’s preparation of financial reports to meet management’s information needs was streamlined by entering diligently all transactions into the general ledger on a monthly basis.
Significance:
It is essential for an accurate company general ledgers, as it forms a central repository of financial information that can be used to create performance metrics, support audits and drive strategic decision-making.