Joomla TemplatesBest Web HostingBest Joomla Hosting
Home Ledgers 1. General Ledger or Nominal Ledger

Articles

General Ledger

The general ledger also known as the nominal ledger is one of the main books of final entry. It records all of the financial accounts of a business to which all financial transactions of a business are posted. It is for all accounts other than those for customers and suppliers.

There can only be one general ledger in a business. It records the balance sheet, income and expense accounts of the business, some examples of which are capital, reserve, fixed assets, cash, sales, rent received, purchases, wages, stationery, insurance, advertisement and more. Entries that have to be made in each account are date, particulars, folio and amount of the transaction.

The accounts in the general ledger can be grouped under the following categories:

  • Expense
  • Revenue
  • Gains
  • Losses
  • Asset
  • Liability
  • Owner's equity (capital)

Each account in the general ledger records debit transactions on the left side, and credit transactions on the right side. If the entries are entered correctly, both sides of the general ledger are in balance as the amount of each debit entry made has a corresponding credit entry of the same amount.

The general ledger is supported by subsidiary ledgers such as the sales or debtors ledger which has a separate account for each debtor and the purchases or creditor ledger has separate accounts for individual creditors. All the entries made in the subsidiary ledgers are summarized and appear in the general ledger as debtors control account, creditors control account, accounts receivable account and accounts payable account.  The debtors control account records only the total amounts of sales, discounts allowed, discounts, etc for the day. As an example, the closing balance of the debtors control account must equal the total of all the closing balances of the debtors ledger accounts at the end of an accounting period. The subsidiary accounts thus provide details of the entries in the control account, such as the debtors control account and the creditors control account.


Besides T accounts (general ledger B), the following (general ledger A) is another general ledger account presentation.

Journal entry for posting

Date Particulars Folio Debit Credit
20XX
Dec 01 Machinery GL35 3,000
Cash CB24 3,000
Being purchase of machinery by cash


General ledger (A)

Machinery Account (Page 35)

Date
Particulars
Folio
Debit
Credit Balance
20XX
Dec 01

Cash

GJ1

3,000


3,000


Cash Account (Page 24)

Date
Particulars
Folio
Debit
Credit Balance
20XX
Dec 01

Machinery

GJ1



3,000

3,000


Journal entry for posting

Date Particulars Folio Debit Credit
20XX
Dec 31 Capital 1,400
Drawings
1,400
Being transfer of drawings to capital


General ledger (B)

Capital Account

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

20XX
Dec 31




Drawings

Balance c/d



$
1,400

3,100

20XX
Jan 01




Cash



$
4,500





4,500




4,500


Drawings Account

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

20XX
Dec 31




Balance b/d




$
1,400

20XX
Dec31




Drawings



$
1,400





1,400




1,400


The drawings account shows only one figure for drawings which are the total of the drawings for the whole year, and are now journalized for year-end transfer to the debit side of the capital account.

Last Updated (Friday, 03 September 2010 13:26)