General Ledger in Accounting

For a business to identify an accounts detail, it is important to summarize the information of the financial transactions, account wise. Some of the most important financial documents of an organization like balance sheet and profit and loss statement are derived from a general ledger. General ledger also known as nominal ledger, used in double entry book keeping system, represents a collection of all accounts of an organization. Double entry book keeping balances and strengthens the accounting equation in the ledger where assets = liabilities + owner’s equity

The content of information in a general journal is same as that in the ledger, but the difference lies in the format and presentation of the data. While the general journal has financial transactions entered in the chronological order, this data when posted in the ledger, account wise, gives a readable format to the activity and balance associated with an account in a glance. The order of the account names is derived from the chart of accounts. A simpler way to understand is to map the entries in the general journal to the postings in the general ledger. The postings can be done either manually or with the help of automated software. As posting only transfers and rearranges the data from the journal to different fields and columns in a ledger, accounting software can be used for the continuous transfer of data or in batches after a day’s or week’s business. Reference numbers can be used in ledger for reverse calculation and ensuring reconciliation of data with the journal.