General Ledger

What is a general ledger?

The general ledger (GL) is your business's complete financial record. It contains every transaction, organized by account—all your income, expenses, assets, liabilities, and equity in one place. Think of it as the master database that accounting software uses to generate all your financial reports.

Every invoice you send, payment you receive, and expense you record ultimately flows into the general ledger.

How the general ledger works

The general ledger organizes transactions by account type:

• Asset accounts — Cash, accounts receivable, equipment
• Liability accounts — Accounts payable, loans, credit cards
• Equity accounts — Owner's capital, retained earnings
• Revenue accounts — Service income, product sales
• Expense accounts — Materials, labor, rent, utilities

Each transaction affects at least two accounts (double-entry bookkeeping), keeping the ledger balanced.

General ledger and financial reports

Your profit and loss statement, balance sheet, and other financial reports are all generated from general ledger data. If your ledger is accurate and up-to-date, your reports will be too. Most accounting software maintains the general ledger automatically as you record transactions.