General Ledger Definition And Accounting

In the accounting we call ledger a group of accounts used by the business for the accounting purposes. We can find two types of ledgers:

  1. general ledger

  2. subsidiary ledger



General Ledger

Coming further through General Ledger tutorial, first of all let us start from definition of General Ledger. We can understand General Ledger as a principal ledger (sometimes called Nominal Ledger) used together with subsidiary ledgers that contains all of the balance sheet and income statement accounts. So General Ledger is a list of accounts showing changes in them during the accounting period and final balances in the accounts at the end of that particular period.

It can contain large number of different accounts. Each account has its purpose, name and number to distinguish it from the other accounts.

Below you can find en example list of accounts:

  • Plant and machinery – cost (fixed asset)

  • Plant and machinery – accumulated depreciation (reduction in fixed asset)

  • Vehicles – cost (fixed asset)

  • Vehicles – accumulated depreciation (reduction in fixed asset)

  • Inventories (current asset)

  • Accounts Receivable (current asset)

  • Cash (current asset)

  • Owner’s equity (Equity)

  • Retained Earnings (Equity)

  • Accounts Payable (liability)

  • Long-term loans (liability)

  • Sale revenue (income)

  • Cost of goods sold (expense)

  • Operating Expenses (expense)

As a part of General Ledger tutorial, this is a sample short list of accounts. In practice you can find a lot of accounts in a particular business for the purpose to account for business transactions and prepare financial statements.

Subsidiary Ledger

Continuing with General Ledger tutorial, let us explore the concept of Subsidiary Ledger. This is a ledger containing individual accounts with a common features and characteristics. Examples can be Accounts Receivable ledger, Accounts Payable ledger and other.

Subsidiary Ledgers specify in more detail the accounts of a General Ledger and in the picture below you can see how the data from Subsidiary Ledgers relates to the data in the General Ledger.


You can see that definitions of both types of ledgers include Account concept. Reminding what is Account, it is a form used to record additions and deductions for each individual asset, liability, owner’s equity, revenue and expense.