What is a General Ledger?

A general ledger is a comprehensive history of all the financial transactions relating to your business for a particular reporting period. It is where all of the information from all sub-ledger or subsidiary ledger accounts can be found; an index that you can refer to in order to make sure your accounts are correctly balanced. Any money that goes in or out, in any form, will be recorded here. That includes assets, equity, revenue, and costs. For example, you may have one sub-ledger for your assets, one for your sales, and one for your expense accounts. If that’s the case then at the end of each day, week, or month, you would record all of those transactions again in your general ledger, where they could all be found later. A general ledger is usually kept for the entirety of a reporting period, which may be a month, a quarter, or a year. It may be kept by hand, but it is almost always done with the help of an accounting software these days.

What Does a General Ledger Look Like?

When creating a general ledger, you will place each account type in different sections. Those might include: Assets: This includes cash, money owed to you in the form of accounts receivable and notes receivable, your inventory, and your fixed assets. Liabilities: This refers to money you owe, such as accounts payable and notes payable, and accrued expenses. Equity: This might be owners’ capital, stocks, paid-in capital, dividends, treasury stock, retained earnings, or distributions. Operating revenues: This refers to money coming in through sales and service fees. Operating expenses: Operating expenses denote money going out during and because of operations. It includes wages, salaries, rent, depreciation, and utilities. Any other income: Think of this as your miscellaneous category, where other transactions or changes will be placed. Things like income from investments, cost of interest, and any gains or losses in asset disposal.

Why Do You Need a General Ledger?

Whether or not you need a general ledger will depend on your unique needs and accounting system. Most advisors will recommend that you keep one, even if you are a small business owner doing your own bookkeeping. The benefits of keeping a general ledger far outweigh the hassle, and include: To provide and inform financial statements: Keeping a detailed record like a general ledger makes it much easier to generate financial statements and documents that can give owners and stakeholders a better idea of their financial position. To fill out other financial reports: Other reports, like your balance sheet, can be filled out much more easily by referencing a general ledger. To simplify taxes: Having all of your documents and records in one place can take some of the headache out of filing taxes. To track cash flow: It is much easier to get an idea of trends, strengths, and weaknesses when tracking them in a general ledger account. To detect mistakes and fraud: It’s more likely that inconsistencies will be identified quickly if they are regularly recorded and checked in a general ledger. To compile a trial balance: A trial balance involves using your records to total your credits and debits to ensure balances are correct and to identify errors. You can refer to your general ledger account balances periodically to create this trial balance. To keep track of expenses: Documenting all transactions, including expenses, can make you more aware of your spending.

How Do You Keep a General Ledger?

You, your accountant, or your bookkeeper can keep a general ledger by hand, but most people use software like NetSuite or OASIS. Still, to enter information into these systems and understand the report, it’s helpful to know how to keep a general ledger account.

Create and Maintain a General Ledger in 4 Easy Steps

A general ledger is a complete record of a company’s financial transactions, organized by account to show financial activity and balances.

Your business’s financial information comes from multiple sources, including invoices, payroll records, and everyday expenses. Without a central system, it becomes difficult to see how those pieces connect or how one business transaction impacts another. The general ledger brings those records together so you have one place to review your company’s financial transactions and overall financial position.

Over time, this structure supports clearer financial reporting and makes it possible to produce financial statements without rebuilding data from scratch. Join our Raleigh-Durham area CPAs as they guide you on creating and maintaining a helpful general ledger for your business.

The Purpose of a General Ledger for Your Business

For many small businesses, the general ledger becomes the central point for tracking business’s financial activities. Instead of working from scattered spreadsheets or disconnected tools, it creates a single view of how money is coming in, going out, and being allocated across accounts.

As activity increases, it becomes harder to keep track of what has already been entered. The general ledger process brings all transactions recorded into one system, helping you review account balances without sorting through multiple sources.

Differences between incoming payments and outgoing expenses show up over time. Looking at cash flow within the general ledger helps surface delays, shifts in spending, or timing gaps that may impact your business’s overall financial health.

Documents like the income statement, balance sheet, and cash flow statements are built from general ledger accounts. When these reports are consistent, they provide a reliable view of your company’s financial performance.

When transactions are recorded on a consistent basis, shifts in account balances are easier to notice. That visibility helps identify missing entries, duplicates, or other issues before they carry through into reporting.

When a business keeps financial records up to date throughout the year, it’s easier to avoid searching for missing details later on. When small business accounting records are organized, tax compliance tends to be more straightforward and last-minute adjustments are less likely.

With clearer access to financial data, business owners make better informed decisions about pricing, staffing, and expenses. Even small changes become easier to evaluate when the numbers are easy to interpret.

Key Accounts in a General Ledger

Whether your business has operated for years or you are a small business start-up in the early stages of operating revenue accounts, including these accounts within the general ledger serves to provide a clearer view of your company’s financial position.

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Asset Accounts

Asset accounts reflect what the business currently has or expects to collect. This includes cash accounts, inventory, fixed assets, and accounts receivable. For example, open invoices appear alongside longer-term assets like equipment, making it easier to see what resources are currently available.

Liability Accounts

Liability accounts track amounts the business still owes, including accounts payable, loans, and accrued expenses. Reviewing these balances allows you to anticipate upcoming obligations and understand how they may affect short-term cash flow.

Equity Accounts

Equity accounts represent ownership in the business. This includes owner’s equity and retained earnings, which shift as profits are earned or funds are withdrawn. Over time, this section reflects how the business has grown financially.

Revenue Accounts

Revenue accounts track income as it comes in, including payments for products or services. Over time, reviewing these entries can help show which parts of the business are bringing in the most revenue.

Expense Accounts

Expense accounts track costs incurred, including payroll, utilities, and rent expense. Reviewing these accounts highlights spending changes that may need attention.

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Steps for Creating and Maintaining a General Ledger

Setting up a general ledger is a straightforward process that works best when entries are handled consistently. Whether you’re using accounting software or keeping records manually, compliant recordkeeping should focus on accuracy and keeping information easy to review as your records grow.

Enter transactions as they happen so important details are not lost. Each entry should include clear transaction data, such as the date, amount, and description. These bookkeeping entries form the foundation of your financial records and help track how each financial transaction affects the accounts involved.

A clear chart of accounts makes it easier to keep records organized as entries build. When transactions are assigned to the right general ledger accounts from the start, there’s less need to go back and fix misclassified items later.

Set time aside to compare your ledger with bank statements and other external records. This review helps confirm that entries line up with actual activity and can bring attention to timing gaps or missing transactions.

When you go account by account, it’s easier to spot things that might get missed in a report. Changes in balances or entries that don’t look familiar usually become more noticeable this way.

Double Entry Accounting for Balanced Financial Reporting

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Most businesses rely on the double entry accounting system to maintain accuracy in their general ledger. With double entry accounting, every transaction is recorded in at least two accounts using corresponding debit and credit entries. This double entry system ensures that the books stay balanced over time.

For example, a payment toward rent expense would be recorded in the expense account, while the same amount is reduced from your cash account. Seeing both sides of the entry helps confirm that the transaction was recorded correctly.

Trial Balance and Financial Review

A trial balance is created from the general ledger to confirm that debits and credits align. It summarizes each ledger account and helps identify discrepancies before preparing reports. Because the trial balance pulls directly from general ledger accounts, it plays a key role in preparing documents for financial statement audits, including the income statement and balance sheet.

Schedule a Raleigh Business Accounting Consultation Today

If you are a business owner or individual managing multiple accounts and transactions, questions about maintaining a general ledger, reviewing financial data, or applying double entry bookkeeping can come up quickly.

Steward Ingram & Cooper, PLLC’s small business accountants work with clients across Raleigh, Durham, Morrisville, and surrounding areas. To inquire about our current availability and timeline, please fill out the contact form on our website.

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How to Create and Maintain a General Ledger for Your Business

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The Purpose of a General Ledger for Your Business