Learn How To Use
The General Ledger

The general ledger (GL), also referred to as accounting ledger, T-account or T-ledger is a book in which raw accounting data is kept. All other financial records of a Sewer Contractor company such as balance sheet and profit and loss account are created from this book. If by any chance, the records in this book are not entered properly, this is reflected in other accounts.

The T-account is often confused with the general journal. The latter is simply a chronological list of a business's transactions. It contains more descriptive data than the T-account. The totals (debit and credit) in the general journal need to tally with each other.

The Principle behind the Ledger Book
In business, money is either coming in or moving out of the business. Anytime you buy a product, you 'lose' money. On the other hand, you gain the product. In accounting, this principle is called double-entry and is the foundation of the ledger.

Therefore, the accounting ledger has two sides: the credit and debit side. On the left side is the debit side where all the cash and (other items valued in terms of money) coming into the business is entered. An accountant records money leaving the business in the right-side – the credit side.

In essence, all transactions have a debit and credit entry. Consequently, these two sides MUST balance. In fact, if the general ledger does not balance, then it means that a mistake was made. However, balancing does not necessarily mean all entries are correct.

Importance of the T-ledger
As mentioned earlier, this book contains raw data. Therefore, in case an accountant makes any mistake, they can always trace it to the T-ledger. In addition, other accounts such as the balance sheet and income account are made from it. This account is also used to proof expenditure and besides that it helps keep accounting records organized.

Accounting ratios such as the Acid-Test ratio, the liability ratio among other can be traced back to this ledger. This account makes tracing of mistakes easier as one does not need to go through many other papers such as receipts, shipping orders, or bank statements. However, these papers must be kept for future reference.

This book of accounting contains seven other accounts: asset, liability, owner's equity, revenue, expense, profit and loss. Typically, the T-ledger is created, then these other sub-groups are created. These so-called sub-ledgers and are able to capture more information than the ledger.

The total in the sub-ledgers should always match the T-ledger. Since the general ledger is organized chronologically, it makes it easy to observe the activity of any account at any time. Indeed, the GL can be used to make important decisions for businesses.

As you can see, the basic general ledger has two sides: the debit and credit side which must balance. Today the manual T-ledger has been replaced by computer software; however, the basics remain the same. Before buying any of ledger software, it is vital that you consult a professional accountant so that they can help you select the best one for your business. Only trained account should be used to do the entries and analysis.

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