Chapter 3

General Ledger and Subledgers

What Is the General Ledger?

A general ledger is the master set of accounts that summarizes all transactions occurring within an entity. The general ledger is indexed by chart of account number (as described in Chapter 2, “Chart of Accounts”), starting with the lowest account number and ending with the highest account number.

The general ledger is essentially the ultimate source document for a business's financial information, since it contains virtually all of the transactions that occurred in the history of the organization.

There may be a subsidiary set of ledgers (or subledgers) that summarize into the general ledger, if there are many transactions that would otherwise cause too much information to be stored in the general ledger.

An example of the line items in a single general ledger account is shown in the following table. This is for the accounts payable account, which has a beginning balance, a summary total brought forward from the purchases subledger (see the next section), and a running balance that shows the current balance in the account.

General Ledger Detail for the Accounts Payable Account.

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What Is a Subledger?

A subledger is also known as a subsidiary ledger or a journal. You use a subledger when there are so many transactions that pass through a particular account that it makes sense to keep them segregated, and only create ...

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