Definition: The General Ledger is a comprehensive record of all financial transactions, providing detailed information by account.
Importance: It serves as the main accounting record, essential for generating financial reports and ensuring accurate bookkeeping.
Usage: Accountants and auditors refer to the General Ledger for detailed transaction history and accuracy verification of financial statements.
Example:
During January, "Sweet Treats" records transactions in its General Ledger:
- January 5: Sale of $1,000 (debit Cash, credit Sales Revenue).
- January 10: Payment of $500 for flour (debit COGS, credit Cash).
The accountant uses the General Ledger to ensure all transactions are correctly captured before generating the financial statements.