HomeProductsAccountingWhat is General Ledger? Get to Know the Benefit for Companies!

What is General Ledger? Get to Know the Benefit for Companies!

Recording transactions that occur in a certain period is the most important thing for a company. Without any transaction record, a company cannot notice the transactions that happen in a certain period. If a company does not know about any transactions in a certain period, there might be fatal consequences such as corruption crimes to the company bankruptcy. Therefore, a company may use a general ledger as a medium to record transactions. Did you know what the meaning of a general ledger is? This article will provide information to the readers about the definition and benefit of general ledger.

Definition of General Ledger

general ledger
Source: Rawpixel.com

A general ledger can be defined as a medium to record financial transactions, both debit or credit accounts, that appear in a certain period. In other words, a general ledger can be said as a book owned by a company that contains company transactions records.

One of the experts from Indonesia, Ahmad Manarul Hakim expressed his opinion on the definition of a general ledger. According to him, a general ledger is a book or special form used to record all financial transactions chronologically that refer to the transaction date, involving the transaction details such as name, account type, and nominal of balance in both debit or credit columns.

Also read: Financial Statements: Definition, Functions, and Examples

Principles in the Making of General Ledger

Several principles are important to know in the making of a general ledger. In making a ledger, it is necessary to identify the company financial transactions proof such as invoices and receipts. Also, in general ledger must separate the accounts and categorize them into several different types like capital, debt, or property.

In a general ledger, there should be a determination for debit and credit accounts related to the transactions. The most important thing in making a ledger is to record all transactions to a ledger with reference to all the transactions proof.

The Benefit of General Ledger

A general ledger has provided variety of benefits for the company. Through a general ledger, a company will get information about the change of an account. A company can know the debit and credit balance.

The presence of a general ledger can also provide information about the balance amount that will be record in one or more accounts. A general ledger can also be a reference to find out whether a transaction has been posted to the ledger or not.

The Function of General Ledger

There are several general ledger functions such as informative, historical, instruction, recording, and analyze functions. These are the overview of every function of a general ledger.

Informative function

General ledger provides many information and explanations of the transaction recording by a company.

Historical function

All transactions that a company conducts are recorded in a general ledger based on the transaction date. General ledger provides transaction records of a company every day continuously.

Instruction function

The inputting data process into the ledger can be said as an instruction function in a general ledger. The recording in a ledger is not only a recording of transaction documents but also a debit or credit command.

Recording function

In a general ledger, all transactions that occur in the company must be recorded. It is essential to record first the wealth, costs, changes in capital, and income into a ledger. This is aims to make comprehensive financial statements.

Analysis function

Talking about this function, in general ledger, there is a transaction recording resulting from transactions analysis in the form of debits and credits that are affect. The results of this analysis include the classification of account names, debit or credit records, and the amount of transactions.

Several Steps in Compiling General Ledger

To compile a ledger, a company must follow several steps to get ease on it. Collecting the proof of transactions is the first step in compiling a general ledger. The period of transaction proof can be within a month or in a certain period.

Then, analyze all the company transactions. Where in this analysis aims to get information about the influence of transactions. Also, this analysis aims to make basic accounting equations. In compiling a ledger, it is also necessary to make adjustments of transactions made by a company.

Example of General Ledger

This is the example of a general ledger that a company use in recording all transactions:

general ledger
Source: accountancyknowledge.com

Conclusion

A general ledger is a recording transaction media that is use by a company. Through a ledger, a company can know all the transactions in a certain period. A general ledger also provides various functions to give convenience for a company in recording transactions. One of the examples is informative function.

HashMicro provides convenience for your company to automatically make a general ledger with Accounting Software that supported by top features. Nowadays, many companies are trusting HashMicro to increase the company’s effectiveness. Contact us immediately to get the best offer and free demo.

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