What Is a General Ledger Report?The general ledger is a master of all accounts of your business and is primarily used for monitoring the financial activity of your business. It details all business account and account activity during a period. The general ledger report contains the account summaries, including details of every transaction going in and out of your accounts. It is organized not only by date but also by account type. What this article covers:
- What Is the Purpose of a General Ledger?
- What Are the Types of Ledger?
- How to Read a General Ledger Detail Report?
- What Is the Importance of a Ledger?
What Is the Purpose of a General Ledger?Before computers when record keeping was done by hand, accountants would maintain three journals: accounts receivable, accounts payable and payroll. The summaries of these journals would be recorded in the general ledger. If the information was accurate and all the entries were correct, the books would balance. The general ledger reports are used by businesses that use the double-entry accounting system, which means that the transaction affects two general ledger accounts and each entry has a debit and a credit transaction.
What Are the Types of Ledger?The general ledger report lists the general accounts in the chart of accounts. Here are the main types of general ledger accounts:
- Asset Accounts
- Liability Accounts
- Revenue Accounts
- Expense Accounts
- Stockholder’s Equity Accounts
- Other Gain and Loss Accounts
How to Read a General Ledger Detail Report?The accounts in a general ledger report are listed with their account numbers and transaction information, including date, client and notes. Here is what a general ledger template looks like in debit and credit format. Source: https://support.freshbooks.com/hc/en-us/articles/360006980031-What-is-the-General-Ledger-Report- The most commonly used sections in the general ledger report include assets, liabilities, equity, income and expenses. These are divided into monthly sections, with the beginning and ending monthly balances.
What Is the Importance of a Ledger?Since the general ledger contains a database of information about accounting transactions, it is mainly used by accountants and auditors for investigating accounts. Here are some of the other reasons why accountants use a general ledger report.
- It helps in the compilation of the trial balance and find out if your books balance
- It helps you spot unusual transactions, errors and fraud
- It shows you the revenue and expenses and helps you limit your spending
- It eases tax filing
- It helps in compiling financial statements at the end f the year to evaluate liquidity, profitability and financial health of the business