How to Understand the General Ledger

Hemera Technologies/PhotoObjects.net/Getty Images

Within the Accounting Department of a business, the general ledger is an important component. Records of the company’s accounts are stored in the general ledger. Included are accounts for current assets, liabilities, revenue, costs and expenses, among others. A general ledger is set up as a double-entry format. Entries on the left side are debits and entries on the right side are credits. The journal entries posted to the general journal are the source of material for constructing the general ledger.

Review all transactions posted to the general journal. Every transaction in the general journal will be moved to the general ledger, with one side of the transaction posted as a debit and the other as a credit. These transactions can be purchases of office equipment, sales or a variety of other items. Transactions are records of business activity within a company.

Post the transactions to the general ledger. Each posting to the general ledger will have a date, description of the transaction and a debit and credit entry. The entry should also have a reference number so that it be can traced back to the general journal.

Review the account balance. The last category should be a balance column so everyone can see the balance for that particular account after the transaction was posted to the general ledger. All debits must equal all credits for general ledger accounts. In order for everything to add up, you must take the debits and credits from all of the general ledger postings for all T-accounts, not just one particular T-account, according to teemwork.com.