What is the format of a general ledger?

General Ledger Format Date – Contains the date of the transaction. Description – Describes the details of the transactions. Debit Amount – All the debit entries of the account need to be recorded in this column. Credit Amount – All the credit entries of the account need to be recorded in this column.

What is the general ledger process?

In accounting, a general ledger is used to record a company's ongoing transactions. Within a general ledger, transactional data is organized into assets, liabilities, revenues, expenses, and owner's equity .

What are the 5 elements of the general ledger?

General Ledger (Accounting) The general ledger tracks all of a company's accounts and transactions and serves as the foundation of its accounting system. It's typically divided into five main categories: assets, liabilities, equity, revenue, and expenses .

What are the 4 C's of general ledger?

Note: The 4 C's is defined as Chart of Accounts, Calendar, Currency, and accounting Convention . If the ledger requires unique ledger processing options.

How to read a general ledger for beginners?

The ledger has credits on the right-side column and debits on the left side. The first step in reading the ledger is to look at the different categories or accounts it contains such as assets, liabilities, and equity . Read the ledger from top to bottom to see the transactions entered for each month.

How to complete a general ledger?

When creating a general ledger, divide each account (e.g., asset account) into two columns. The left column should contain your debits while the right side contains your credits. Put your assets and expenses on the left side of the ledger. Your liabilities, equity, and revenue go on the right side.

What is the GL account process?

General Ledger in simple language is grouping of transactions of similar nature . An organization has multiple transactions in a day. Every transaction leads to two entries as per the double entry system of bookkeeping. These entries are then posted in respective accounts called ledgers.

What best describes a general ledger?

A general ledger is a record of all of a company's, and its subsidiaries', assets, liabilities, expenses, income and equities . General ledgers are generally broken down into records of accounts and account balances and financial transactions and from there, if necessary, into subledgers.

What are the rules for general ledger?

A general ledger summarizes all the transactions entered through the double-entry bookkeeping method. Under this method, each transaction affects at least two accounts; one account is debited, while another is credited. The total debit amount must always be equal to the total credit amount .

What is general ledger basic example?

Below is an example of a general ledger for a small business. On January 10th, 2024, a sale of goods is made on credit for $5,000, and the revenue is credited to the Sales account (representing the revenue earned) and debited to the Accounts Receivable account (representing the increase in amounts owed by customers).

What is the formula for the general ledger?

Assets = Liabilities + Equity Each transaction entered to both the journal (and later, the general ledger) is organized according to this equation, with debits on the left and credits on the right. For accurate reconciliation, the total debit balances must equal the total credit balances.

What is the format of a ledger entry?

Ledgers have a T format where the debit is depicted on the left side, and credit is shown on the right side . Each side has four columns: date, particulars, reference number, and amount.

General ledger – Definition, Format, Process and Example (2024)

Tally Solutions |Updated on: September 13, 2022

What is general ledger?
Specimen of ledger accounts
Steps to prepare general ledger
- Posting
- Balancing an account
Example of general ledgers

After passing the entries in the journal-register, the transactions are classified and grouped for the preparation of accounts. The principal book which contains all set of accounts (viz. nominal, personal and real accounts), is known as Ledger. It is also known as principal books of account in which the account-wise balance of each account is determined.

What is general ledger?

General Ledger is a process of summarizing all the financial transaction of an account for a given period in a prescribed format with the objective to ascertain the closing balance at the end of the given period.

What is ledger account?

Ledger account and general ledger account are interchangeably used to denote the account report that contains a record of all business transactions related to an account. For every account, you deal with, a separate ledger account is prepared that summarizes the closing balance for a given period. For example, for all transactions related to a bank, a bank ledger account is prepared.

Some of the most common ledger accounts are: bank account, bank cash, debtors, creditors, fixed assets, and more.

What is ledger accounting?

A ledger accounting is an account or record utilized to keep bookkeeping entries for balance-sheet and income-statement transactions. Some of the entries for the accounting ledger includes cash, accounts receivable, investments, inventory, accounts payable and more. They are maintained for all sorts of balance sheet and income statement transactions.

Specimen of ledger accounts

A general ledger account has two sides debit (left part of the account) and credit (right part of the account). Each of the general ledgers debit and credit side has four columns.

Date
Particulars
Journal folio i.e. reference number of the page from where the entries are taken for posting and
Amount

Date

Particulars

Journal Folio

Amount

(Rs.)

Date

Particulars

Journal Folio

Amount

(Rs.)

Steps to prepare general ledger

Posting

The methodology of transferring the debit and credit items from journal to classified accounts in the ledger is known as posting. The posting of the ledger should be followed in accordance with the rules.

Rules for posting of entries in the ledger accounts

Balancing an account:

At the end of each month or year or any particular day, it is necessary to ascertain the closing balance in an account.

This is not a too difficult thing to do; suppose a person has bought goods worth 1,000 Bangladeshi taka and has paid only 850 Bangladeshi takas, he owes 150 Bangladeshi takas and that is the closing balance in his account.

Therefore, to ascertain the balance in any account, you must total the sides and ascertain the difference. The difference is the closing balance of the account. If the credit side total is higher than the debit side total, it is a credit balance and otherwise, it is a debit balance.

The credit balance is written on the debit side as, “To Balance c/d”. Here, ‘c/d’ refers to balance carried down. By doing this, two sides will be equal. The totals of both the debit and credit side are written on the two sides opposite one another. Then the credit total balance is written on the credit side as “By balance b/d (i.e., brought down)”. This becomes the opening balance for the new period.

Similarly, the debit balance is written on the credit side as “By Balance c/d”, the totals then are written on the two sides. Just like the credit side, the total debit balance is written on the debit side as, “To Balance b/d”, as the opening balance of the new period.

What's the Difference Between a Journal and a Ledger

Journal	Ledger
Journal refers to the subsidiary book of accounts that documents transactions.	Ledger refers to the main book of accounts that categorizes transactions recorded in a journal.
The journal transactions get documented in sequential order as per their occurrence.	The ledger organizes the transactions from the journal under the individual related accounts.
Each journal entry has precise details of the transaction.	The ledger does not have details of each transaction.
The journal doesn't provide the complete results of a transaction	The ledger provides the result of account transactions.
The journal doesn't have a direct role in preparing financial statements and reports like profit and loss accounts and more.	Whereas balances from different ledgers help create statements like Profit and Loss Account or Balance Sheet.

Examples of general ledger

ABC and Co., a partnership firm registered in Kenya had the following entries to be posted in its ledger books.

2019	Particulars	Amount
Jan 1	Opening stock of Raw material	320
May 10	Purchase of Raw material by cheque	900
Oct 11	Purchase of Raw material on credit from XYZ Co.,	1,280
Nov 2	Returned goods purchased from XYZ Co.,	340

As discussed above, the first step in the process of preparing general ledger is posting. The following are ledger posting of ABC and Co.

Posting the above entries in the books of ABC and Co.,

(Dr). Raw Material A/c. (Cr)

Date	Particulars	Amount	Date	Particulars	Amount
1.1.15	To balance b/d	320	31.12.15	By XYZ Co.,	340
10.5.15	To Bank	900	31.12.15	By balance c/d	???
11.10.15	To XYZ Co.,	1280
1.1.16	To balance b/d.	???

Once the posting is done the next step balancing accounts. This step will help you determine the closing balance of ledger accounts for a given period. In the above example, we need to find out the closing balance of Raw material A/C (Indicated with a question mark(?))

Balancing of accounts in books of ABC and Co.,

FAQ:

What is a general ledger?

General ledger refers to the primary accounting record of a company.

How do you create a ledger account?

If you are using TallyPrime, you can easily create a ledger account from:

Create menu>Ledger>Provide the ledger name and other details>save

Is a general ledger part of the double-entry bookkeeping method?

Double-entry bookkeeping refers to the concept wherein every accounting transaction affects the business’s finances in two ways. The general ledger is the record of the two sides of each transaction.

What are the types of ledger account?

Typically, there are three types of ledger account -general, debtors, and creditors.

Learn More

Capital Lease, Life Cycle Costing, Budgeting vs. Forecasting, Royalty in Accounting, Auditing Process, External Audit

As an accounting expert, I possess a comprehensive understanding of the concepts and practices outlined in the provided article about general ledger, ledger accounts, ledger accounting, posting, balancing accounts, and the differences between a journal and a ledger. Here's an explanation of each concept mentioned in the article:

General Ledger:
- A primary accounting record summarizing all financial transactions for a specific period in a prescribed format to determine closing balances.
Ledger Account:
- An account report containing records of business transactions related to specific accounts. Each ledger account summarizes the closing balance for a given period.
Ledger Accounting:
- Recording bookkeeping entries for balance sheet and income statement transactions. It includes accounts like cash, accounts receivable, investments, inventory, and accounts payable.
Specimen of Ledger Accounts:
- Demonstrates the format of a general ledger account with debit and credit sides, each having columns for date, particulars, journal folio (reference number), and amount.
Steps to Prepare General Ledger:
- Involves posting, transferring debit and credit items from the journal to classified accounts in the ledger following specific rules, and balancing accounts to determine closing balances.
Posting:
- The process of transferring journal entries to respective ledger accounts, following guidelines like opening separate accounts for each entry and using 'To'/'Dr' for debit side and 'By'/'Cr' for credit side.
Balancing an Account:
- Calculating the closing balance by totaling both debit and credit sides and determining the difference. If the credit side total exceeds the debit side, it indicates a credit balance, and vice versa.
Difference Between a Journal and a Ledger:
- Journal records transactions sequentially, whereas the ledger organizes these transactions under individual accounts. The journal contains detailed transactional information, whereas the ledger shows the result of account transactions.
Examples of General Ledger:
- Provides a practical example of entries for a company and demonstrates the posting and balancing process for a specific account.

Additionally, the article touches upon common ledger accounts like bank account, bank cash, debtors, creditors, and fixed assets, along with instructions on how to create ledger accounts in TallyPrime and explanations regarding double-entry bookkeeping.

The FAQ section clarifies queries about general ledger creation, types of ledger accounts, and the relationship of the general ledger to double-entry bookkeeping.

For further learning, the article hints at more advanced accounting topics like Capital Lease, Life Cycle Costing, Budgeting vs. Forecasting, Royalty in Accounting, Auditing Process, and External Audit. These topics expand the understanding of accounting practices beyond basic ledger management.

Particulars	Amount
Debit side totals (320+900+1280)	2470
Credit side totals	340
Ideology (Debit Side total > Credit side total) then the balance is	Debit balance
Rule 1: Rule of balancing (Debit balance to be written on the credit side as By balance c/d which comes to) [ 2,470 ( - ) 340]	To balance c/d = 2,130 Kenyan shillings
Rule 2: Balances to be written on both sides (in the given example on)	Debit Side as By balance b/d = 2,130