Ever feel like your business finances are a tangled mess of receipts, invoices, and numbers scribbled on the back of napkins? Don’t worry; you’re not alone! Enter the general ledger—your trusty sidekick in the wild world of bookkeeping. Think of it as the ultimate financial organizer, the Marie Kondo of your company’s money matters (minus the folding techniques). It’s where all those bits and pieces from journals and sub-ledgers—like accounts receivable, cash, fixed assets, accounts payable, purchasing, projects, and more—come together for a financial family reunion. In this article, we’ll dive deep into general ledger examples and the types of general ledger accounts. Buckle up; it’s going to be an enlightening (and dare we say, entertaining) ride!

Related: Net Profit Margin Examples and Interpretation

General Ledger Explained

Think of the general ledger as the ultimate diary of your company’s financial life—minus the embarrassing high school photos. It’s a record-keeping system that tracks every penny flowing in and out, using a double-entry system of debits and credits. This isn’t just any old notebook; it’s the backbone of your entire accounting system. Accountants rely on it to store and organize all the financial data needed to whip up your company’s financial statements. Essentially, the general ledger holds all the account information required to prepare those crucial reports. It meticulously records every single financial transaction that occurs throughout your company’s journey—from your first dollar earned to that questionable expense from the office coffee machine.

General ledger example

Within the general ledger, financial transaction data is sorted like books in a library (but way less dusty). They’re categorized into accounts for assets, liabilities, equity, expenses, and revenues. Each transaction gets posted to its own sub-ledger account, as defined by your company’s chart of accounts—think of it as the master playlist of all your financial tunes.

Once transactions are snug in their respective accounts, they’re summarized in the general ledger. Then comes the exciting part: generating a trial balance. This report serves as a snapshot of each ledger account’s balance. But hold your applause—the trial balance needs to be checked for errors. If any discrepancies pop up, accountants step in to make adjusting entries (cue the superhero theme music). Once everything balances out, the adjusted trial balance is used to create the company’s financial statements. Voilà!

Businesses that use the double-entry bookkeeping method (and trust us, you want to be in this club) rely heavily on the general ledger. Every financial transaction affects at least two sub-ledger accounts—meaning each entry has at least one debit and one credit. It’s like the yin and yang of accounting. Debits are posted on the left, credits on the right, and the total of both sides must match perfectly. If they don’t, well, someone might have fat-fingered a number, and it’s time to investigate.

In a nutshell, the general ledger is crucial because it compiles all the transaction details used to produce financial statements like the income statement, statement of cash flows, and balance sheet . These statements help management, accountants, analysts, investors, and other stakeholders assess your company’s performance. So, yeah, it’s kind of a big deal.

See also: Deferred revenue journal entry with examples

Types of General Ledger

1. Nominal Ledger
2. Private Ledger

Yes, even ledgers have types—who knew accounting could be so diverse? There are two types of general ledgers: the nominal ledger and the private ledger. The nominal ledger spills the beans on income, expenses, depreciation, insurance—you know, the usual suspects. Meanwhile, the private ledger is like a VIP section, accessible only to certain folks and containing hush-hush info on capital, salaries, and wages.

Nominal Ledger

The nominal ledger is the main hub where all your company’s financial transactions strut their stuff. It’s like the main stage at a concert, but instead of rock stars, you’ve got numbers and accounts stealing the spotlight. This ledger contains records of all payments, expenses, assets—basically everything you need to compile financial reports like the profit & loss statement and the balance sheet.

Often used interchangeably with “general ledger,” the nominal ledger includes a chart of accounts. Imagine it as the index of a book, guiding you to different subcategories like assets, liabilities, and shareholders’ equity. It’s all about keeping things organized so you can find what you need without pulling your hair out.

One of the star roles of the nominal ledger is performing bank reconciliation. Fancy term, but it simply means making sure your company’s bank transactions match up with its accounting records. It’s like playing detective to ensure there are no discrepancies—or worse, sneaky frauds and cash manipulations.

Here’s a peek at what a nominal ledger looks like:

Date	Description	PR	Debit	Credit
Jul 03	Taxes and licenses expense	501	$2,000
	Cash	101		$2,000
	To record taxes and licenses expense

Source: YouTube

Private Ledger

If the nominal ledger is the main stage, the private ledger is the backstage area with a “Do Not Enter” sign. It’s where accounts of a confidential nature are recorded—think capital, salaries, drawings, and other sensitive info that you wouldn’t want just anyone to access. Only selected individuals can enter this exclusive club.

The private ledger doesn’t contain all types of accounts, just those that require an extra layer of security. It’s like the secret recipe vault of your business finances, ensuring that prying eyes don’t get a glimpse of the ingredients that make your company special.

Related: Unearned Revenue Examples and Journal Entries

General Ledger Example (Format)

A general ledger isn’t just a random collection of numbers; it has a specific format—kind of like the sheet music of your company’s financial symphony. The ledger has two sides: the debit side (left) and the credit side (right). Each side has four columns:

1. Date
2. Particulars or Description
3. Journal Folio (the reference number of the page from where the entries are taken for posting)
4. Amount

Here’s how the general ledger format looks:

GENERAL LEDGER

Account title: Cash Account No: #1

Date	Description	Ref	Debit amount	Date	Description	Ref	Credit amount

This format includes the date and description of each transaction, along with debit and credit sides creating a “T-account” visual. Some general ledgers also use a different format that includes a balance column:

GENERAL LEDGER

Account title: Cash Account No: #1

Date	Description	Ref	Debit amount	Credit amount	Balance

Now that we’ve seen the formats, let’s talk about how to prepare a general ledger without losing your sanity:

• Open a separate individual account in the general ledger book for each account. Entries should be posted accordingly.
• Write the name of the account at the top of the page to make it easy to find later (no need for a treasure map).
• Add the account numbers for each account to keep things organized.
• Record transactions in chronological order. It keeps your financial records neat and makes finding specific items by date a breeze.
• Use the description column wisely. Record the transaction details to keep track of all financial activities.
• Remember the debit and credit rules: Assets and expenses increase on the debit side and decrease on the credit side. Equity, liabilities, and revenue increase on the credit side and decrease on the debit side.
• While posting transactions, it’s common practice to use “To” and “By” in the description column. “To” is used on the debit side, and “By” is used on the credit side.
• Ensure the general ledger balances. The total debits and credits must be equal. If not, it’s time to play detective and find the missing pieces.

See also: Credit Sales Journal Entry Examples

General Ledger Account Examples and Types

• Assets
• Liabilities
• Equity
• Revenue
• Expenses
• Other Income Accounts

A general ledger account is created for each account in your company’s chart of accounts. These accounts are grouped into categories like income, assets, expenses, liabilities, and equity. The whole collection is what we proudly call the general ledger. Your company’s balance sheet and income statement are derived from these accounts. It’s like baking a cake—the ledger provides the ingredients, and the financial statements are the delicious result.

Accounts in the general ledger are arranged with balance sheet accounts appearing first, followed by income statement accounts. They can be further subdivided into sub-ledgers like cash, accounts receivable, accounts payable, etc. The balances of these accounts are used to create a trial balance, ensuring that total debits equal total credits. Balance achieved, universe aligned.

Asset Accounts

Asset accounts record what your company owns—anything that provides economic benefit now or in the future. When assets enter the company, the asset accounts are debited; when assets leave, the accounts are credited. Simple, right? Examples include:

• Accounts receivable
• Prepaid rent
• Cash
• Land
• Inventory
• Investments
• Equipment
• Prepaid expense

Liability Accounts

Liability accounts record what your company owes—financial obligations and debts. When your company takes on more debt, these accounts are credited; when it pays off debt, they’re debited. Examples include:

• Accounts payable
• Notes payable
• Accrued expenses
• Customer deposits

Equity Accounts

Equity accounts, also known as shareholders’ or owner’s equity, record the residual interest in the assets of the company after deducting liabilities. In simpler terms, it’s what’s left for the owners after all debts are paid. Examples include:

• Common stock
• Retained earnings
• Treasury stock
• Accumulated other comprehensive income

Revenue Accounts

Revenue accounts record the income your company earns from its business activities—like selling goods or providing services. When revenue is earned, these accounts are credited because they increase on the credit side. Examples include:

• Sales revenue
• Service revenue

COGS Accounts

Cost of Goods Sold accounts record all the direct costs involved in producing your product or service: materials, direct labor overhead.

Expense Accounts

Expense accounts record the costs incurred in earning revenue. Basically, they capture the cost of doing business. When expenses occur, these accounts are debited because they increase on the debit side. Examples include:

• Salaries
• Supplies expense
• Advertising
• Depreciation expense

Non-Operating or Other Income Accounts

These accounts report income that’s unrelated to your company’s core business operations. Think of them as the side hustles of your business. Examples include:

• Gain on sale of assets
• Interest earned
• Loss on disposal of assets

General Ledger Example (for Types of Accounts)

Let’s bring all this theory to life with an example. Suppose ABC Inc. sells laptops and computers. On 01/04/2020, the company sold 100 laptops at $150 each, totaling $15,000. They received interest of $50 on 31/03/2021 and incurred rent expenses of $1,500 and electricity expenses of $300. Here’s how these transactions would look in journal entries and then how they’d be posted to the general ledger:

Journal entry to record sale of laptops:

Date	Account	Debit	Credit
01/04/2020	Cash	$15,000
	Sales		$15,000

Date	Account	Debit	Credit
31/03/2021	Cash	$50
	To Interest income		$50

Date	Account	Debit	Credit
31/03/2021	Rent expense	$1,500
	Electricity expense	$300
	Cash		$1,800

From these journal entries, we post the transactions to the respective general ledger accounts (we have cash account as an example):

GENERAL LEDGER

Account title: Cash Account No: #1

Date	Description	Ref	Debit amount	Date	Description	Ref	Credit amount
01/04/2020	Sales		$15,000	31/03/2021	Rent expense		$1,500
					Electricity expense		$300
					Transferred to Trial Balance		$13,200
	Total		$15,000		Total		$15,000

Related: Cash Sales Journal Entry Examples

General Ledger Examples (Calculations on How to Prepare a General Ledger)

Let’s dive into a more detailed example. Meet Mr. Peter, the sole owner of a business. Here are his transactions for August 2022:

• Aug 3 – He reinvested cash of $80,000 and furniture worth $20,000 into the business.
• Aug 5 – Made cash sales of $10,000 and credit sales of $12,000.
• Aug 6 – Purchased goods worth $60,000 from ABC Ltd., paying $15,000 cash and issuing a note payable for the remaining $45,000.
• Aug 9 – Bought office equipment worth $99,000 from XYZ Co., paid $19,000 cash down payment, and agreed to pay the balance in four installments starting on Aug 30.
• Aug 21 – Credit customer returned goods worth $12,000.
• Aug 30 – Paid the first installment of $20,000 to XYZ Co.

First, we’ll record these transactions in a general journal:

Date	Description	PR	Debit	Credit
Aug 3	Cash		$80,000
	Furniture		$20,000
	Equity			$100,000
	To record reinvestment
Aug 5	Cash		$10,000
	Accounts receivables		$12,000
	Sales			$22,000
	To record cash and credit sales
Aug 6	Inventory		$60,000
	Cash			$15,000
	Notes Payable			$45,000
	To record goods purchase
Aug 9	Equipment		$99,000
	Cash			$19,000
	Accounts payable			$80,000
	To record equipment purchase
Aug 21	Sales		$12,000
	Accounts receivable			$12,000
	To record return of goods
Aug 30	Accounts payable		$20,000
	Cash			$20,000
	To record installment payment

Now, let’s post these journal entries to the general ledger (cash account for example):

GENERAL LEDGER

Account title: Cash Account No: #1

Date	Description	Ref	Debit amount	Date	Description	Ref	Credit amount
Aug 3	Equity		$80,000	Aug 6	Purchase		$15,000
Aug 5	Sales		$10,000	Aug 9	Equipment		$19,000
				Aug 30	Accounts payable		$20,000
					Balance c/d		$36,000
	Total		$90,000		Total		$90,000

Balance carried down (balance c/d) from these accounts is used to create a trial balance—a report that ensures total debits equal total credits. Here’s how the trial balance looks:

Trial Balance

As of August 2022

Trial Balance

S/N	Account	Ref	Debit	Credit
1	Cash		$36,000
2	Furniture		$20,000
3	Owner’s Equity			$100,000
4	Accounts Receivable		$0
5	Sales			$22,000
6	Purchases		$60,000
7	Notes Payable			$45,000
8	Office Equipment		$99,000
9	Accounts Payable			$60,000
10	Sales Return		$12,000
	Total		$227,000	$227,000

See also: Net Profit Margin Examples and Interpretation