A general ledger records, stores, and summarizes the transactions that take place in a company's accounts. Generally, accounts include assets, liabilities, owner's equity, revenue, and expenses.
Transactions taking place in business accounts are recorded in a general ledger, with an equal debit and credit amount which always keeps the general ledger balanced. This is the function of a double entry accounting system and as a result the following equations will always hold true:
Assets = Liabilities + Owners Equity
Net Income = Income - Expenses
Tracking Account Balance helps businesses prepare their financial statements such as the income statement and the balance sheet. Additionally, historical records in a general ledger summarize past transactions and can help file taxes, comply with government regulation, and analyze business trends.
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