Many consider the General Ledger as the most important of all accounting, because it summarizes the transactions of all ledger accounts individually used during a specific period. In the General Ledger, both the debits and credits of an account, as well as the balance thereof, are recorded.
The ledger is very useful, since we can know the balance of a specific account, which allows us to prepare the Financial Statements in the next steps of the accounting cycle. The General Ledger includes the control accounts of Assets, Liabilities, Capital, Income, Costs, and Expenses. Detail or auxiliary accounts will be registered in what is known as Auxiliary Major, such as Accounts Receivable Auxiliary Ledger .
How is it recorded in the General Ledger?
After having recorded the various economic transactions in the General Daily Book , we must record all the amounts associated with their respective accounts. It must be taken into account that unlike the General Journal book, which is organized chronologically, the Major General is ordered according to the type of account.
To summarize, the characteristics of the general ledger are:
- It is the third step of the accounting cycle .
- Enter the code and name of the account (this can be searched in the chart of accounts ).
- The folio number is placed, which usually goes in the upper right corner.
- Each transaction that has affected the account with which we are working is written.
- The balance of said account is calculated.
As a clarifying note, it should be mentioned that the balance is the result of subtracting the debits with the credits of the same account. In addition, you always have to take into account the nature of the account you are working with to know if the debits will add or subtract.
At first, this entire accounting process appears to be somewhat laborious, time-consuming, and repetitive. However, today there are accounting software that facilitate this task and can do it automatically. Some just require journal entries to be entered, and others automate the entire process.