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What Is the Role of General Ledger in Accounting?

Jim B.
Jim B.

The role of the general ledger in accounting is to act as the ultimate bookkeeping account for all transactions undertaken by a business. Not only does it include records of credits and debits for all of the various accounts, the general ledger also should have include bills, invoices, shipping orders, and other records of the various business dealings. Since it is compiled these days mostly on specially designed computer software, a general ledger in accounting should have a main page detailing an overview of the company’s bookkeeping, from which financial reports like the balance sheet and the profit-and-loss and statement are derived. In this way, all transactions can be traced in the general ledger from the records of their taking place to the financial impact they cause.

Keeping track of all of the various types of business transactions conducted by a large firm can be a difficult task. Nonetheless, keeping an accurate general ledger is a necessity for a company’s bookkeeping department. The general ledger in accounting is the ultimate record for every single piece of business that has been conducted over a specific period of time.

A general ledger focuses on major account categories.
A general ledger focuses on major account categories.

One of the important roles played by a general ledger in accounting is that it serves as the one place where all business records can be tracked down. This not only includes the amounts of transactions, but it also includes all of the official records, such as bills or invoices, concerning those dealings. Thus, the ledger serves as a reliable paper trail to track down mistakes, which is essential for someone trying to balance books.

In addition, the general ledger in accounting acts as the source for some of the most pertinent financial information surrounding a company. This information is collected on the balance sheet, which shows the value of a company’s assets and liabilities, and the profit-and-loss statement, which is concerned with revenues and expenses. When a company takes an overview of its financial health, it often consults these two documents. Thus, the general ledger must be accurate to reflect the company’s true standing.

While the general ledger in accounting should show the big picture of how a company’s finances are doing, it should also include all of the different aspects of a business that comprise that overall view. It accomplishes this by providing a path to all of the myriad components of the financial record, such as accounts receivable, accounts payable, cash, inventory, and so on. If the ledger is compiled on a computer, as is the case on most occasions, the software often includes links from the main general ledger to all of the disparate subsets of the business.

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    • A general ledger focuses on major account categories.
      By: robert cabrera
      A general ledger focuses on major account categories.