The General Ledger
Sorting transactions by account — the bridge between recording and reporting.
Why This Matters
Journal entries record transactions in chronological order—the sequence they happened. But that's useless if you want to know "How much cash do we have?" or "How much do we owe suppliers?"
For that, you need the general ledger—a tool that reorganizes journal entries by account so you can track balances and see the complete picture of each account at a glance.
Without the general ledger, you'd have to search through hundreds of journal entries just to find out how much money you have. With it, you flip to the Cash account and instantly see the balance.
What Is the General Ledger?
The general ledger is a collection of all accounts (T-accounts) where journal entries are posted and organized.
Think of it like a filing system:
Journal
One big pile of receipts organized by date
General Ledger
Receipts sorted into folders by category
The Flow of Accounting Data
Transaction Happens
Business activity occurs
Write Journal Entry
Chronological order
Post to General Ledger
Organized by account
Prepare Financial Statements
Using ledger balances
The general ledger is the bridge between recording transactions and preparing financial statements.
How Posting Works
Posting is the process of transferring information from the journal to the general ledger.
Take a Journal Entry
| Cash | $5,000 | |
| Sales Revenue | $5,000 |
Post the Debit to the Cash Account
In the general ledger, locate the Cash T-account and record the $5,000 debit:
Post the Credit to the Sales Revenue Account
In the general ledger, locate the Sales Revenue T-account and record the $5,000 credit:
That's it! The journal entry is now "posted" to the ledger.
A Real General Ledger Example
Let's say you own a small business. Here are your journal entries for January:
| Date | Account Name | Debit | Credit |
|---|---|---|---|
| Jan 1 | Cash Owner's Equity (Initial investment) | 50,000 | 50,000 |
| Jan 2 | Equipment Cash (Purchased computers) | 15,000 | 15,000 |
| Jan 5 | Cash Service Revenue (Completed project for client) | 8,000 | 8,000 |
| Jan 10 | Supplies Accounts Payable (Purchased supplies on credit) | 2,000 | 2,000 |
| Jan 15 | Salary Expense Cash (Paid employee wages) | 3,000 | 3,000 |
GENERAL LEDGER — JANUARY 2026
Understanding Account Balances
After posting all journal entries, each account has a balance—the net total of all debits and credits.
Debit Balance Accounts
(Assets, Expenses)
Balance = Total Debits − Total Credits
Credit Balance Accounts
(Liabilities, Equity, Revenue)
Balance = Total Credits − Total Debits
Example: Cash Account Balance
Total Debits: $58,000
Total Credits: $18,000
Balance = $58,000 − $18,000 = $40,000
Cash has a debit balance of $40,000 (which makes sense—assets go on the left side with debits).
The Real-World Process
Here's how a real accounting department does it:
1. Daily Recording
Accountant records all transactions in the general journal (chronologically).
2. Weekly or Monthly Posting
The same (or different) accountant takes the journal entries and posts them to the general ledger accounts.
3. Verification
After posting, the accountant prepares a trial balance to verify that total debits equal total credits.
4. Financial Statements
Using the ledger balances, the accountant prepares the income statement, balance sheet, and cash flow statement.
Key Features of the General Ledger
Organized by Account
Each account gets its own page (or T-account) in the ledger.
Shows Complete History
Every debit and credit to an account is visible, making it easy to track changes.
Calculates Balances
The running balance shows you exactly where each account stands at any point.
Ready for Financial Statements
Once all entries are posted, you can pull the final balances and create financial statements.
Allows For Corrections
If an error is found in the ledger, it can be corrected without going back to the journal.
Manual vs. Digital Ledgers
Manual (Old School)
| Date | Explanation | Ref | Debit | Credit | Balance |
|---|---|---|---|---|---|
| Jan 1 | Investment | J1 | 50,000 | 50,000 | |
| Jan 2 | Equipment | J1 | 15,000 | 35,000 | |
| Jan 5 | Revenue | J1 | 8,000 | 43,000 | |
| Jan 15 | Salary | J1 | 3,000 | 40,000 |
Ref column = Reference to which journal page the entry came from
Digital (Modern)
Most accounting software (QuickBooks, Xero, Sage) does this automatically:
- 1You enter the journal entry in the system
- 2The software automatically posts it to the ledger
- 3Account balances update instantly
- 4Financial statements generate automatically
You never manually post in modern accounting.
Common Ledger Accounts
Here are the accounts you'll find in most general ledgers:
Assets
(Left Side / Debit Balance)
- • Cash
- • Accounts Receivable
- • Inventory
- • Equipment
- • Buildings
- • Land
Liabilities
(Right Side / Credit Balance)
- • Accounts Payable
- • Salaries Payable
- • Notes Payable
- • Loans Payable
Equity
(Right Side / Credit Balance)
- • Owner's Equity
- • Common Stock
- • Retained Earnings
Revenue
(Right Side / Credit Balance)
- • Sales Revenue
- • Service Revenue
- • Rental Income
Expenses
(Left Side / Debit Balance)
- • Rent Expense
- • Salary Expense
- • Utilities Expense
- • Supplies Expense
- • Depreciation
Why the General Ledger Matters
You Can See Account Balances at a Glance
Instead of searching through hundreds of journal entries, you flip to one page and see the Cash balance.
You Can Verify Accuracy
After posting, you can prepare a trial balance (total all debits vs. all credits). If they don't match, you know there's an error.
You Can Prepare Financial Statements
The balances in the general ledger become the numbers in your income statement and balance sheet.
You Can Track Changes
You can see the complete history of every account—every debit and credit that affected it.
Key Takeaway
The general ledger takes transactions recorded chronologically in the journal and reorganizes them by account. This allows you to see account balances, verify accuracy, and prepare financial statements. It's the essential bridge between recording transactions and reporting financial results.
Test Your Understanding
1. What is the purpose of posting journal entries to the general ledger?
2. After posting a journal entry (Cash debit $2,000 / Service Revenue credit $2,000), which accounts are affected in the ledger?
3. You post three journal entries to the Cash account. The debits total $10,000 and the credits total $4,000. What is the Cash balance?
4. In a general ledger, what does the 'Ref' column typically show?
5. True or False: In modern accounting software, you have to manually post journal entries to the general ledger.
Ready to Practice?
You now understand how the general ledger organizes transactions. The Practice Lab is where you'll see it in action—record journal entries and watch them post to the ledger in real-time.