General Ledger

Transactions are usually first recorded as journal entries in date order. They are then posted to the general ledger, where they are sorted by account. The ledger shows, for each account, every amount debited and credited and the resulting balance.

For example, the cash account in the general ledger shows every receipt and every payment of cash, so you can see how the balance moved from the start of the month to the end. The sales account shows every sale made during the period.

The general ledger is the source for the trial balance and, ultimately, the financial statements. If the ledger is accurate, the balance sheet and income statement can be prepared directly from the account balances.

Large businesses often keep subsidiary ledgers for detailed records, such as a separate ledger listing every customer who owes money. The totals of these subsidiary ledgers feed into control accounts in the general ledger. In modern software, posting to the ledger usually happens automatically when a transaction is entered.