What is a General ledger?

What a general ledger contains

Every transaction the business makes, coded to an account from your chart of accounts. A single ledger line typically records:

• The date and a reference such as an invoice or bill number
• A description of what happened
• The account it belongs to
• The GST treatment
• The debit or credit amount

In Australia the ledger also has to separate GST out, because GST you collect is not revenue and GST you pay is not an expense — both sit as liabilities or assets until the BAS settles them.

How double-entry works

Every transaction affects at least two accounts, and the debits must equal the credits. If you pay $1,100 of rent including GST, the rent expense is debited $1,000, the GST paid account is debited $100, and the bank account is credited $1,100. The entry balances.

That constraint is what makes a trial balance meaningful. If total debits do not equal total credits, something is missing or on the wrong side — the ledger tells you there is a problem before any report does.

What it does not prove

A ledger that balances proves the arithmetic held. It does not prove the entries were right. A transaction coded to the wrong account balances perfectly, and so does one entered twice or omitted entirely.

That is why a bank reconciliation is a separate control. Reconciling ties your ledger to an external record — the bank statement — which is the only thing that catches transactions the ledger never knew about.

Ledger, trial balance and financial statements

The ledger is the raw record. A trial balance summarises it into one closing balance per account. From there, the revenue and expense accounts become your profit and loss statement, and the assets, liabilities and equity accounts become your balance sheet.

Your BAS figures come from the same place — G1 total sales, G11 non-capital purchases, 1A GST on sales and 1B GST on purchases are all totals of ledger accounts, which is why a coding error in the ledger becomes a reporting error on the BAS.

Key takeaways

• A general ledger records every transaction, coded to an account, using double entry
• Total debits must equal total credits — that is what a trial balance tests
• Balancing proves the arithmetic, not the accuracy; reconcile separately
• Your profit and loss, balance sheet and BAS figures are all built from it
• Australian ledgers must separate GST, because GST collected is not revenue

You can download a free general ledger template built for Australian books, with GST calculated at one eleventh and BAS labels mapped to every account. Bookkeepers and BAS agents can also join the RosterElf partner program.