Parts of a General Ledger

by Marquis Codjia; Updated September 26, 2017
A general ledger has two or more subsidiary ledgers.

A general ledger is a two-entry document that indicates account debits and credits. A bookkeeper records corporate operating activities by debiting and crediting financial accounts such as assets, liabilities, revenues, expenses and equity. This helps accountants prepare financial statements that conform to professional standards.

Subsidiary Ledgers

A subsidiary ledger is a portion of a general ledger. It helps an accountant or a financial auditor review account details and ensure that general ledger amounts include subsidiary ledger data. To illustrate, a pharmaceutical company's general ledger indicates $1 million in accounts receivable. A closer look reveals that subsidiary ledgers for Customer A, Customer B and Customer C indicate $700,000, $200,000 and $100,000, respectively.

Assets

An asset is a physical or nonphysical resource that a firm owns. A short-term asset is a resource that a company intends to use in operating activities in 12 months or less. Examples include cash, accounts receivable and inventories. A long-term asset is a resource that a company intends to use for more than a year. Examples include property, machinery and equipment.

Liabilities

A liability is a debt a borrower must repay. A debt may also be a financial promise or guarantee a business partner must honor on time. A short-term or current debt is a liability that a borrower must repay within 12 months. Examples include accounts payable and fiscal debt. A long-term debt has a maturity exceeding one year. Examples include bonds payable and other long-term corporate borrowings.

Expenses

An expense is a charge or cost that a company incurs when selling goods or providing services. An operating expense is a charge that relates to the primary activity of a company and include the cost of goods sold or salaries. A non-operating expense is a cost that relates to "peripheral," or nonprimary, operating activities. One examples of a non-operating expense is a loss on an asset sales.

Revenues

Revenue is income that a company generates through operations. These operating activities may include selling goods and providing services. A firm's total revenue indicate operating revenue and nonoperating revenue. An example of operating revenue is earnings from sales. Nonoperating revenue items include gains on sales of long-term assets, such as property, plant and equipment, or short-term assets, such as stocks and bonds.

Equity

Equity refers to investments that corporate owners make in a firm. A corporate owner is otherwise known as a shareholder, equity holder or stockholder. A shareholder may invest in a firm by buying common stock or preferred shares. A stockholder holds voting rights and attends annual stockholders' meetings. A company may also pay dividends to equity holders periodically, in accordance with corporate policies.

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.

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