General ledger accounts are used to post the economic activities. Posting is the name of transferring accounts from the book of prime entry to related ledger accounts. When all the transactions for a given period have been Journalized, the next step is to classify them according to the account affected. Ledger is a Book of Account that keeps separate record for each account. Ledger is the book of secondary entry. An account in its simplest form is a T-shape. It should be noted that journal contains a chronological record while Ledger contains a classified record of all economic activities.
Types of General Ledger
There are two types of ledger accounts
1. Standard General Ledger
Since the ledger keeps record of transactions that affect one head of account, therefore, it should provide all the information that a user may need. Usually the ledger is required to provide following information.
(a) Account # (b) Title of Account (c) Page # (d) Date
(e) Description (f) Reference (g) Amount
2. Running Balance General Ledger
An alternative ruling of a ledger, which is generally adopted by commercial banks and some other business houses, is the entire ledger us divided into six columns.
>>> Practice General Ledger Examples
General Ledger Posting Process
The process of posting is simple and involves following Four Steps:
- The debit part of journal entry is recorded on the debit side of the relevant account by credit account name (Source).
- The credit part of Journal Entry is recorded on the credit side of the relevant account by debit account name (Source).
- In the reference column of the general journal the code or page number of ledger account are noted.
- In the reference column of the ledger account the page number of the journal is noted.
Balancing General Ledger Account
This is Four Step process for Standard General Ledger Format.
- Find the total of debit side and find the total of credit side. Put bigger value both sides in Total.
- Calculate the difference between the two sides. This is the Balance (The balancing figure between the two sides).
- Write the balance on the smaller side with key words “Balance c/d”. However, the balance will be known by the larger side i.e. if the debit side is greater than the credit side, the balance will be known as debit balance and vice versa.
- Bring down the debit balance on the debit side writing the words in Description column “Balance b/d”. Similarly, bring down the credit balance on the credit side be writing the words in the Description column “Balance b/d”.
>>> Normal Balance using for Debit and Credit Treatment.
>>> Practice Multiple-Choice Questions specially design for General Ledger conceptual practice…
General Ledger Example
Post following entries to Cash Standard Ledger Account and Cash Running Balance Ledger Account:
Solution 1. Cash Standard General Ledger Account:
Solution 2. Cash Running Balance Ledger Account: