General ledger.
In plain English
The general ledger is the complete set of accounts a company uses, holding every posted debit and credit along with the running balance of each account. Transactions start as journal entries and are posted to the ledger accounts they affect. Each account carries a balance that rolls into the trial balance and then into the financial statements. Subsidiary ledgers hold the detail behind large accounts, such as which customers make up accounts receivable. In modern software the ledger is a database, but the structure is unchanged from paper: accounts, entries, balances.
01Why it matters
Every number on a financial statement traces back to specific ledger entries, which is why an auditor, a lender, or a curious owner can always ask to see what is behind a line.
02The math, step by step
Say the cash account opens the month at 50,000 dollars, receives 120,000 dollars of customer deposits, and pays out 95,000 dollars. The ledger shows each entry and a closing balance of 75,000 dollars (50,000 plus 120,000 minus 95,000), which is the figure that flows to the balance sheet.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
A bank statement is the bank's record of one account. The general ledger is the company's record of every account, including receivables, inventory, and equity. The two rarely match on any given day, and reconciling the difference is a standard monthly task.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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