A general ledger is a complete listing of an organization’s accounts used to record bookkeeping transactions. It contains a list of all accounts in a specific order, and each account has an account number assigned to it. The accounts are divided into groups of assets, liabilities, equities, revenues and expenses. Every time a transaction occurs, the amount is posted as a combination of debits and credits, which must be equal. Certain accounts have debit balances while others have credit balances.
Understand the types of accounts. The accounts are divided into different groups. Asset and expense accounts have normal debit balances. This means that when the account increases, the amount is posted as a debit. When the balance decreases, a credit is posted. Liability, equity and revenue accounts have normal credit balances. When these accounts increase, a credit is posted. When they decrease, a debit is posted.
Learn what asset and expense accounts are. Asset accounts are those that track things of value and include accounts such as cash, supplies, prepaid insurance, land and buildings. Expense accounts are used to track how much a company spends on various types of expenses. Expense accounts include repairs, utilities and insurance.
Calculate asset and expense account balances. These types of accounts have debit balances. To calculate the balance in these types, start with the beginning debit balance in the account. Add any additional debits made to the account and subtract any credit postings. This calculation represents the current balance in the account.
Learn what liabilities, equities and revenues are. Liabilities are accounts that track amounts of money owed to others. Equity accounts track the amount of money each business owner possesses individually. For example, if a business has three owners, each has his own equity account. The amount in each owner's account represents that individual business owner's investment in the company. This amount is the portion of the business that particular owner has rights to. Revenue accounts track the amount of money a company earns. These accounts all have normal credit balances.
Calculate liability, equity and revenue account balances. Because these accounts have credit balances, to calculate the current balance, start with the beginning credit amount. Add any credit posting made to the account and subtract any debit postings. After completing this, you have calculated the current balance of an account.
- Jupiterimages/Polka Dot/Getty Images