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Explaining the purpose of the General Ledger is perhaps a difficult task for any teacher of Accounting. One reason is because in this age of computers and information technology, the General Ledger does not any longer have an easily identifiable physical form. In early times a Ledger would have taken the form of a book see Figure 1 , and hence the term "Bookkeeping".
The purpose of such a ledger was to record transactions. The pages of the Ledger would have been ruled into columns to facilitate neatness and discipline in writing figures.
In more recent times, prior to the computer age, the General Ledger was a large loose-leaf document containing in a special adjustable binder see Figure 2. The standard format for a page in a general ledger is portrayed by Figure 3 below.
There are three columns for recording money - Debit, Credit and Balance. There is one page in the General Ledger for each Account , and typically the number of Accounts will be many, depending on the Chart of Accounts.
Provided the General Ledger is up to date, the General Ledger will show the current balance of each account. The account shows the Cash Receipts every month money coming in and Cash Payments money going out.
Perhaps the best way to explain the purpose of the General Ledger is to provide a diagram see figure 4 below. First of all, it is important to remember that the purpose of the Accounting Process is to summarise, record and make sense of, the thousands of financial transactions that occur in a year, so that Financial Reports can be produced. The General Ledger receives, on a monthly basis, summarised information from the Journals which are themselves the basic day-to-day record of transactions.
This is illustrated in Figure 3 above where you can see information being recorded on a monthly basis. At the end of the financial year, the General Ledger then provides a final balance for each account, summarising all the monthly journal postings.
Figure 1 Figure 2: Loose leaf General Ledger format The standard format for a page in a general ledger is portrayed by Figure 3 below. Format of the General Ledger Perhaps the best way to explain the purpose of the General Ledger is to provide a diagram see figure 4 below.
Figure 4 Today, in most businesses, the General Ledger is a component of Financial Accounting Software and exists in the form of an electronic database. Software for Club Treasurers. Loose leaf General Ledger format. Format of the General Ledger.