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What is General Ledger Accounting and Why You Need One?


A general ledger is a record of a company's financial transactions. General ledger accounting summarizes and sorts a company's financial information. Most businesses track this information with accounting software.

A general ledger outlines each transaction that took place and sorts them by type.

Companies use general ledger data to compile their financial statements. There are four primary components of a general ledger:

  1. Journal: The journal contains raw accounting entries, recorded sequentially by date.

  2. Description: Each transaction will include a brief description.

  3. Debit and credit columns: Every transaction in the general ledger will be labeled as either a debit or credit.

  4. Balance: Each time a new debit or credit is posted to the account, you'll need to update the balance. This ensures your business's financial records are up to date.

Businesses use general ledgers as part of the accounting process. Without a detailed general ledger, your accounting can quickly become disorganized and inac-curate. Inaccurate financial records cause significant problems down the road.


A general ledger provides the information necessary to create a balance sheet or cash flow statement. It also gives you a quick overview of your organization's financial health.


For instance, if your business applied for a PPP loan in 2020, you probably used the information in vour general ledger to create financial statements for vour bank. A general ledger also creates a comprehensive audit trail, which will be helpful if you ever get audited.


Source: https://www.business.com/articles/general-ledger-accounting/

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