The general ledger is the accounting record of all financial transactions for a company. It includes all accounts that are used to record debit and credit entries. The ledger is the foundation for an organization’s financial statements, and accounting records must be accurate and up to date in order for the statements to be reliable.
The general ledger can be divided into two main types of accounts:
– Assets: Accounts that represent something of value that a company owns, such as cash, inventory, or equipment.
– Liabilities: Accounts that represent debts or obligations owed by a company, such as loans or accounts payable.
The general ledger also includes shareholder equity accounts, which represent the owners’ investment in the company. These accounts show the amount of money that would be available to shareholders if the company were to be liquidated.
Accuracy and timeliness are essential in maintaining a general ledger. If transactions are not recorded properly, it can lead to errors in a company’s financial statements. This can cause problems when a company is trying to obtain financing or make important business decisions.