General Ledger

While the journal lists transactions in chronological order, its format does not faciliate the tracking of individual account balances. The general ledger is used for this purpose.

The general ledger is a collection of T-accounts to which debits and credits are transferred. The action of recording a debit or credit in the general ledger is referred to as posting. The posting of a journal entry to the general ledger accounts is a purely mechanical process using information already in the journal entry and requiring no additional analysis.

To understand the posting process, consider a journal entry in the following format:

General Journal Entry

Date	Accounts	Debit	Credit
mm/dd	Account 1	xxxx.xx
	Account 2		xxxx.xx

There are two ledger accounts affected by the above journal entry (Account 1 and Account 2). Each of these accounts is represented by a T-account in the general ledger. To post the entry to the ledger, simply transfer the information to the T-accounts:

Ledger Accounts

Account 1 mm/dd xxxx.xx                                                       Bal. xxxx.xx

Account 2                            mm/dd xxxx.xx                                    Bal. xxxx.xx

Note that the debit portion of the journal entry is posted to the left side of its associated T-account, and the credit portion is posted to the right side of its T-account. The date helps to identify the transactions with the journal entries. Additionally, a reference number may be added to further facilitate cross-referencing.

Because the general ledger is organized by account, it allows one to view the activity and balance of any account at a glance

The general ledger contains a debit and credit entry for every transaction recorded within it, so that the total of all debit balances in the general ledger should always match the total of all credit balances. If they do not match, the general ledger is said to be out of balance, and must be corrected before reliable financial statements can be compiled from it.

The general ledger is comprised of all the individual accounts needed to record the assets, liabilities, equity, revenue, expense, gain, and loss transactions of a business. In most cases, detailed transactions are recorded directly in these general ledger accounts. In some cases where the volume of transactions would overwhelm the record keeping in the general ledger, transactions are shunted off to a subsidiary ledger, from which just the account totals are recorded in a control account in the general ledger. In the latter case, a person researching an issue in the financial statements must refer back to the subsidiary ledger to find information about the original transaction.

General ledger accounts are assigned unique identifying account numbers. These numbers may range from a simple three-digit code to a more complex version that identifies individual departments and subsidiaries.