What is the Purpose of a General Ledger?
The general ledger (GL) is the primary record of an organisation’s financial transactions. It contains all accounts in the chart of accounts and stores the debits and credits that ultimately produce the income statement, balance sheet, and supporting financial reports.
- The GL is the system of record for financial statements and period-end reporting.
- Subledgers and source systems feed the GL through postings and journals.
- A well-controlled GL supports faster close, stronger audit trails, and reliable reporting.
How the general ledger works
Every transaction posted to the GL affects one or more accounts as debits and credits. Examples include revenue invoices, supplier bills, payroll journals, bank postings, and adjusting entries. Over a reporting period, the GL accumulates these entries and provides account balances used to produce the trial balance and financial statements.
GL vs chart of accounts vs subledgers
- Chart of accounts: the list/structure of accounts (labels and categories)
- General ledger: the entries and balances within those accounts
- Subledgers: detailed transaction records feeding the GL (e.g., accounts payable, accounts receivable, fixed assets)
A well-run finance function ensures the subledgers reconcile back to the GL, so totals are complete and consistent.
Why the GL matters for reporting and control
The GL is where financial truth is consolidated. If posting rules are weak, journals are poorly controlled, or coding is inconsistent, reporting quality drops and close becomes slow and stressful. Strong GL governance typically includes:
- Period controls (open/close, lock dates)
- Approval workflows for journals
- Clear account usage rules
- Regular reconciliations and review checkpoints
Common issues
Common GL problems include miscodings, duplicate postings, late journals, or using suspense accounts without timely clearance. These issues often show up as unexplained variances and audit queries.
What is a GL posting?
It’s the act of recording a transaction into the general ledger accounts.
Does a GL replace subledgers?
No. Subledgers hold transaction detail; the GL is the central summary and reporting backbone.
How do you ensure GL accuracy?
Reconciliations, controlled journals, consistent coding, and period lock discipline.
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