What is a General Ledger (GL)? – Guide for Businesses

General Ledger (GL) – Definition. “GL” is another name for general ledger or Principal Book of Accounting System. A general ledger is an ... Skiptocontent × FreshBooks OfficialApp Free-GooglePlay Getit AllArticles Accounting Taxes Startup Estimates Productivity Expenses Other Leadership Reports Invoicing Payments Marketing Insurance ProjectsManagement Finance ResourcesforYourGrowingBusiness SIGNMEUP Articles AllArticles Accounting Taxes Startup Estimates Productivity Expenses Other Leadership Reports Invoicing Payments Marketing Insurance ProjectsManagement Finance ResourcesforYourGrowingBusiness SIGNMEUP 4Min.Read WhatisaGeneralLedger? Hub Accounting WhatisaGeneralLedger? June25,2021 Therearemanywaystotrackfinancialtransactionsforyourcompany.Manysolopreneursandsmallbusinessesstartwithasimplepettycashbooksystemforrecordingprofitsandlosses.  GLsaremorecommonwithbiggercompaniesbutcansmallbusinessesalsobenefitfromthem?ThisarticlewillexplorethedifferentscenarioswhereswitchingtoaGLmightbeworthitforyouasasmallbusinessowner.  Here’sWhatWe’llCover: GeneralLedger(GL)–Definition HowDoesaGLAccountWork?  GeneralLedgervs.TAccount–KeyDifference HowToCreateaGeneralLedger ShouldIUseaGLformySmallBusiness?  UsingGeneralLedgersinYourBusiness MoreAccountingResourcesforBusinesses GeneralLedger(GL)–Definition “GL”isanothernameforgeneralledgerorPrincipalBookofAccountingSystem.  Ageneralledgerisanextensiverecordofabusiness'screditanddebittransactionsoveraperiod.Thesetransactionsareorganizedbyaccounts,togetherwiththeirdatesanddescriptions—enoughinformationtogiveyouabird's-eyeviewofyourbusiness’sfinancialhealth.  HowDoesaGLAccountWork?  You'denterbalancesheetaccountslikeyourassets,equities,andliabilities,followedbyincomestatementaccountslikerevenuesandexpenses.  Thesedatasetscomefromyourjournalswhicharethefirstpointsofentryforbusinessfinancialtransactions.Mostsmallbusinesseskeepfourjournalsforrecordingsales,cashinflowandoutflow,andpurchases.However,asyouscale,youmighthaveupto7journals.  Whenit'stimetobalancethebooksforfinancialstatements,youwillorganizealltheinformationinyourjournalentriesintothegeneralledgeraccounts.Andusethesedetailstocreateatrialbalance.Thetrickismakingsurethebalancesinyourcreditcolumn,anddebitcolumnareequal;that'showyouknowyou'venailedit.   GeneralLedgervs.TAccount–KeyDifference AgeneralledgerandTaccountarenotthesame.     AGLisanaggregationofthedifferentfinancialaccountsofabusiness,includingitsassets,liabilities,andexpenses.ATaccountisagraphicrepresentationofthedebitsandcreditfromadouble-entryaccountingsystem.TaccountspickthedebitandcreditsummariesfromaGLandturnthemintosimplet-shapedvisualstructuresthatareeasytoread.  HowToCreateaGeneralLedger Thetraditionalmethodofcreatingaledgeristodrawuponeonpaper,whichistime-consuming.Withtechnology,smallbusinesseshaveotheroptions.Youcaneitheruseaspreadsheetoroptforgeneralledgeraccountingsoftware,allowingyoutoautomatetheentireprocess.  Hereisastep-by-stepguideonhowtocreateaGL:  Createatableforyourchartsofaccountsentries—assets,liabilities,revenues,equities,andexpensesaccounts.Feedininformationforindividualaccountsfromyourjournalentry.Dependingonthesizeofyourcompany,youcanuseasubsidiaryledger,whichisaccountsreceivableandaccountspayable.IncludetheGLcodeofeachjournalentryintheledger’snumbercolumn.Ageneralledgercodehelpsyoutotrackeachtransactionandorganizeyouraccountsappropriately. Debitandcredittheaccountsandrecordtheirrunningbalances.  ShouldIUseaGLformySmallBusiness?  Ifyoucanfitallyourfinancialrecordsintoasingleentryaccount,whydoyouneedageneralledger?Thisisthemillion-dollarquestionforsmallbusinesses.  Useasingleentryaccountif;   You'reasmallbusinesswithlessthanfivemilliondollarsingrosssales.Youcannotaffordanaccountantorbookkeepingservices.You'reanewbusinesskeenontrackingyourprofitsandlossesclosely. Yourunaservice-basedbusiness.   Supposeanyoftheseapplytoyou,thenVoila!There'slittleornoneedtoswitchtoageneralledger.However,onceyoustepoutofthesecategories,considerdouble-entrybookkeeping.  AGLcomesinhandywhenyouwantto;  Secureasmallbusinessloanfromthegovernmentorprivatelenders; Sortoutbusinesstransactionsandbalanceyourbookseffectivelyand; Prepareforanauditofaccountingrecords. Createvariousbusinessfinancialstatementslikeabalancesheet,incomestatement,andastatementofcashflows.  UsingGeneralLedgersinYourBusiness Ageneralledger(GL)isoneoftheessentialtoolsformakingintelligentbusinessdecisions.Itprovidesaneasywayforbusinessownerstokeeptabsontheirbusinessperformance,managecashflows,andimprovetheirfinancialhealth.  MoreAccountingResourcesforBusinesses WhatisUnleveredFreeCashFlow?WhatisOvertimePay?HowAccountingPayrollSystemsWork RELATEDARTICLES WhatIsInventoryCarryingCost&HowtoCalculateIt? 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