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In application of this original meaning the commercial usage of the term is for the “principal book of account” in a business house. Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs. We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. We will also need to make an entry of $4,000 on the credit side of the furniture account because the liability to this creditor is increasing.

Therefore, it is worthwhile for transactions of a similar nature to be sorted out and accumulated in one place. This is because the journal contains a large number of transactions relating to purchases at different places according to their respective dates of occurrence. General ledgers that incorporate artificial intelligence (AI) are often referred to as in intelligent general ledgers. Get up and running with free payroll setup, and enjoy free expert support. About the Author – Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya.

What is a general ledger?

In a manual or non-computerized system, the general ledger may be a large book. Organizations may instead employ one or more spreadsheets for their ledgers, including the general ledger, or may utilize specialized software to automate ledger entry and handling. The ledger is a book in which all accounts relating to a business enterprise are kept. In other words, it is the collection of all accounts of a business enterprise. The accounts kept in the ledger are sometimes termed ledger accounts. Any increase in capital is also recorded on the credit side, and any decrease is recorded on the debit side of the respective capital account.

Ledger Account

The net result is that both the increase and the decrease only affect one side of the accounting equation. To maintain the accounting equation’s net-zero difference, one asset account must increase while another decreases by the same amount. The new balance for the cash account, after the net change from the transaction, will then be reflected in the balance category. Certified public accountants (CPAs) and bookkeepers typically are the ones accessing and using general ledgers.

Importance of a general ledger

Journalize the following transactions and post them to the Ledger Accounts. Consider the following example where a company receives a $1,000 payment from a client for its services. The accountant would then increase the asset column by $1,000 and subtract $1,000 from accounts receivable.

The size of your general ledger depends on how big your business is. If you have a smaller business, you might have fewer accounts and sub-accounts because you have fewer transactions. Sub-accounts, or sub-ledgers, give you details behind your general ledger entries.