A ledger, also called a general ledger, is a record of a business’s financial transactions. It summarizes all the revenue and expenses of the business, plus the debts owed and assets owned.
The transactions in a general ledger are organized into five main types; assets, liabilities, equity, revenue, and expenses.
Transactions are entered into the correct account in order to produce the financial reports.
What is recorded in a general ledger
- Assets – the value of things that the business owns, or part owns, eg, inventory
- Liabilities – the amount of what the business owes, eg, bank loans
- Equity – funds introduced into the business and drawings by the owner(s)
- Revenue – money coming into the business through sales, interest or dividends
- Expenses – money paid out to keep the business running, eg, rent
How a general ledger drives reporting
This information in a general ledger is used to produce a trial balance, balance sheet, profit and loss (P&L) statement, cash flow statement, and other financial reports. These reports reveal the financial health of a business.
General ledger example
The general ledger summarizes the credit and debit transactions for each account.
See related terms
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.