What is a ledger?

Ledger (definition)

A ledger, also called a general ledger, is a record of a business’s financial transactions. It summarises 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.

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.