How to Create a General Ledger for a Business

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    A general ledger is a master accounting document that is used to keep track of all accounting transactions throughout the life of your company.

    The bookkeeper or accountant of a company uses the double-entry accounting system to record financial transactions in the ledger. This means that for every debit transaction on the left side of the ledger (which increases assets or expenses, decreases revenue or liability), there is an equal and opposite credit entry on the right side—hence the term "balancing the books."

    The general ledger contains all of the data you'll need to construct financial statements (such as a balance sheet, cash flow statement, and income statement), which allow you to assess your company's profitability, liquidity, and overall financial health. We'll look at what a general ledger is and how to make one in the sections below.

    What Is a General Ledger in a Business?

    All corporate transactions are organised and summarised in the general ledger, which is used to construct financial statements such as a balance sheet and income statement. Subledgers are used to manage the money your company generates and spends, allowing you to distinguish between different types of business transactions as they happen. Accounts receivable (money owed to your business), accounts payable (money owed to your business), cash (liquid assets your company has), and inventory are all examples of typical subledgers (sales or purchases affecting your inventory).

    General Ledger vs. General Journal

    A business's general journal is where it maintains track of one-of-a-kind, infrequent transactions that aren't covered by other accounting journals, such as checks or invoices. Other generic journal entry examples include:

    Depreciation

    Asset sales by the corporation
    Interest earnings and expenditures
    The general journal's transactions are listed in a chronological fashion. Until they are moved to the general ledger and formal computations are made, these statistics are raw and imbalanced.

    Components of a General Ledger in a Business

    A general ledger is a book that categorises and summaries transactions into various accounts. The following are some of the most regularly utilised accounts:

    Assets are tangible or intangible elements that increase the value of your company. Cash, property, trademarks, and patents are only a few examples.
    Liabilities are any current or prospective debts owed by your company to another company, vendor, or employee. Employee pay and rent are examples of current liabilities, whereas bank loans and lines of credit are examples of future obligations.
    Revenue is the amount of money earned by a company from the selling of goods and services. Other revenue sources include asset sales, interest, royalties, and any other fees your company gets from individuals or businesses.

    Expenses are the costs incurred by a company in exchange for a product or service. Rent, utilities, insurance, travel, and food are all examples of expenses.

    How to Create a General Ledger for a Business

    To create a professional business ledger, you must follow a few key stages, which are explained below.

    Accounts for the General Ledger

    To make adding and deleting accounts easier, each account should have its own page. Create a table with the following column titles for each account:

    Date

    Description of the reference number
    Credit or debit card (expressed as a positive or negative number)
    Then, for each account, assign a value.

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