Definition
The general ledger is the complete set of a business's accounts, showing every posted movement and the running balance of each account. Journal entries flow into it line by line. The trial balance, balance sheet and income statement are all built from general ledger balances, which makes it the backbone of the books.
How it works
Think of the journal as the diary and the ledger as the filing cabinet. The journal book lists entries in date order; the general ledger takes the same lines and sorts them by account, so you can open Cash or Trade receivables and see every movement with its date, reference and balance after each line.
A good ledger report lets you drill from a balance to the entries behind it and from an entry to its source document. That traceability is what auditors test, and it is what makes month-end reviews fast: an odd balance can be explained in a couple of clicks.
Keep the general ledger at summary level and push detail into subsidiary ledgers or line dimensions such as parties, cost centers and projects. A chart with a separate account for every customer quickly becomes unmanageable.
Example: a bank account in the general ledger
Opening balance 12,000; a customer receipt and two payments during the month leave a closing balance of 13,350.
| Date | Entry | Description | Debit | Credit | Balance |
|---|---|---|---|---|---|
| 1 Mar | Opening balance | 12,000 | |||
| 4 Mar | JE-0412 | Receipt from customer A | 5,000 | 17,000 | |
| 10 Mar | JE-0419 | Rent for March | 2,400 | 14,600 | |
| 28 Mar | JE-0455 | Supplier payment B | 1,250 | 13,350 |