Key takeaways
- Every transaction lands in at least two GL accounts under double-entry bookkeeping.
- Each account in the GL keeps its own history and running balance.
- The trial balance is a summary of all GL balances, used to check that total debits equal total credits.
- Each GL line should trace back to a receipt or invoice, which is the backbone of your audit trail.
What is a general ledger?
If the chart of accounts is the list of folders, the general ledger is the folders with everything filed inside them. Open the “Office expense” account and you see every office purchase for the year, in date order, with a running total.
Most small businesses never see the GL directly. Accounting software builds it in the background. But it’s still useful to know how it works, because it explains where your receipts end up and why a wrong category affects your reports.
Capture clean expense data for your ledger with the Manage Receipt app.
How it works
- Source documentYou buy printer ink and get a $64.99 receipt.
- JournalThe purchase is recorded as a journal entry: debit Office expense, credit Business card.
- General ledgerEach side is posted to its account and the balances update.
- Trial balanceAll account balances are listed; debits must equal credits.
- ReportsIncome and expense accounts feed the profit and loss statement; the rest feed the balance sheet.
Sample entries
Here’s what one expense account looks like in the GL for a month:
| Date | Description | Ref | Debit | Credit | Balance |
|---|---|---|---|---|---|
| Sep 3 | Printer ink, office store | J-101 | $64.99 | $64.99 | |
| Sep 12 | Desk organizer, online order | J-108 | $28.50 | $93.49 | |
| Sep 20 | Partial refund, damaged item | J-114 | $12.00 | $81.49 | |
| Sep 27 | Shipping boxes, post office | J-121 | $19.75 | $101.24 |
The same $64.99 ink purchase also appears in the 2000 Business credit card account as a $64.99 credit, increasing what you owe. That’s the second half of the double entry.
The “Ref” column points back to the journal entry, and the journal entry points back to the receipt. That chain is what lets you, an accountant or an auditor trace any number in your reports to the document behind it.
General ledger vs journal
| Journal | General ledger | |
|---|---|---|
| Organized by | Date | Account |
| Shows | Each transaction in full, with all accounts it touches | Each account’s history and balance |
| Recorded | First | Second, posted from the journal |
| Useful for | Seeing what happened on a given day | Seeing how much you spent on one thing |
Employees see a piece of the GL too. Many employers ask for a GL code on each line of an expense report, so the cost lands in the right account and department. If you’re unsure which code a receipt belongs to, ask once and note it for next time.
Errors in the GL usually come from the journal: a receipt categorized to the wrong account, entered twice or not at all. A monthly bank reconciliation catches most of them.
Hand over categorized data, not a shoebox
Manage Receipt captures the vendor, date, total and category for each receipt, then puts them into expense reports with the receipt images attached. You or your bookkeeper can post those totals to the right ledger accounts and still trace each line back to the original receipt.
Explore AI Expense ReportsFrequently asked questions
What is the difference between a general ledger and a trial balance?
The general ledger holds every transaction, organized by account. A trial balance is a one-page summary listing each account’s ending balance at a point in time. It checks that total debits equal total credits before financial statements are prepared, which catches many posting errors.
What is a GL code?
A GL code is the account number used to identify a general ledger account, such as 6250 for office expense. Employers often ask employees to add a GL code to each expense report line so finance can post it to the right account without guessing.
Do small businesses need a general ledger?
If you use double-entry accounting software, you already have one; the software builds it automatically. Very small businesses using single-entry records may not keep a formal GL, but they still need organized records of income and expenses backed by receipts.
How do I fix a wrong entry in the general ledger?
Don’t delete it. Record a correcting journal entry that reverses the wrong amount and posts it to the right account, with a note explaining why. This keeps the audit trail intact so anyone reviewing the books can see what changed and when.