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How to Prepare a General Ledger


When preparing a General Ledger, the accuracy of prior account entries is key. If the normal transaction procedures and information are not valid, inclusion in the General Ledger will portray an improper financial status of the business. If the entries are accurate, preparing a General Ledger becomes a relatively easy task to complete.

Subsidiary Ledgers

The five subsidiary ledgers are generally: Assets, Liabilities, Owner’s Equity, Revenue, and Expenses. These ledgers use a dual- or double-entry accounting system. When there is a change to one ledger’s balance, an equal but opposite entry is made on another ledger, thereby maintaining a balanced picture.

For example, ABC Company received goods from your company. The total bill to ABC was $1500.00. ABC Company paid $1000.00 of that bill. The Accounts Receivables ledger would reduce the outstanding $1500 debt to $500, and the Revenue ledger would note the receipt of the $1000 paid; the ledger entries balance.

However, only the subsidiary ledgers use the double-entry system. Because General Ledger summarizes subsidiary information, do not use double-entry practices on this document.

General Ledger Structure

A General Ledger comprises summary entries of five major itemized sub-areas of business accounting, and the Ledger reflects subsidiary ledgers’ summarized information.

The General Ledger’s physical entries delineate four categories plus the summary’s activity date. Therefore, the General Ledger page presents five columns

Transaction Date: When the transaction took place. For most General Ledger entries, this annotates major event date-when deposits are made, not when payments arrive; when payroll is computed and paid, not when wages are earned, etc. The itemized date of transaction is included in the specific subsidiary ledger of the transaction type for that month.

Description: A brief narrative that accurately labels the entry.

Debits: This entry always precedes the Credit entry and outlines expenses for the Ledger month. Individual debits are not entered here; only the total by expense type-payroll, maintenance, equipment purchase or fees, etc.

Credits: Monies received or overpayments made, by major event date and type.

Balance: Line balances from left to right. Subtract debits from credits to compute line balance entries. General Ledger balance is the net total from the Balance column entries and should always equal zero.

Troubleshooting Imbalances

Sub-areas should be double-checked for entry accuracy if the General Ledger does not balance. Common mistakes are transposing digits, wrong activity date, and double entries not balancing internally. If the imbalance is not found in those areas, you may need an audit performed.



Bragg, Steven M., Barry J. Epstein, and Ralph Nach. Wiley GAAP 2010: Interpretation and Application of Generally Accepted Accounting Principles (Wiley Gaap (Book & CD-Rom)). Revised edition ed. New York, NY: Wiley, 2009. Print.

Schaeffer, Mary S.. Accounts Payable Best Practices (Wiley Best Practices). New York, NY: Wiley, 2004. Print.

Tracy, John. Accounting For Dummies (Accounting for Dummies). 4 ed. New York: For Dummies, 2008. Print.

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