A general ledger is a company’s financial command center, where all the penny that comes in and goes out is recorded thoroughly. Frankly, from purchases to bill payments, people consider it more as the heartbeat of a business’ financial operations.
But what exactly is it? And why should you even care about it? The reasons are many. Read along to find out all the questions you’ve ever had about the GL.
A General Ledger is a record of a company’s total financial accounts. However, the general ledger definition is much larger than just record keeping.
Why? Because there are multiple accounts recorded in a GL, and all of them are independently vital. The accounts usually recorded in the general ledger are:
These are the essential components that you need for efficient financial management.
There is just another thing you should know about. People often confuse between subledger vs general ledger. While they share the same last name, “ledger”, it doesn’t mean they have identical meanings. It’s quite the opposite, actually.
While a subledger is a comprehensive record of particular transaction types, a general ledger is a detailed overview of an organization’s financial standing and key performance.
Speaking of record keeping of transactions, we will take a slight detour here to look at GL codes.
A General Ledger or GL code is a unique alphanumeric string assigned to every financial entry in an organization’s ledger.
Consider this: Your business’ financial transactions are stored in a library. In this case, a GL code acts as the library call number.
That means it has a unique tag attached, which tells you where a specific book belongs and helps you find precisely what you are looking for. That “call number” is what a General Ledger Code is.
General ledger codes are typically used in accounting for classifying and recording every business transaction. These help enterprises record information about purchases, sales, and other transactions.
What else? GL codes show essential information, including debit or credit by location. An example would give you a clearer image. Let’s say there’s a number that reads “GL 531100”. In this case, 5 represents expense transactions, 53 would be operating supplies, 531 is federal supplies, and 5311 refers to office supplies.
