What is a general ledger account?
/A general ledger account is a record in which is recorded a specific type of transaction. These transactions can relate to assets, liabilities, equity, sales, expenses, gains, or losses - in essence, all of the transactions that are aggregated into the balance sheet and income statement. The ending balances in these accounts are then aggregated and reported in the balance sheet and income statement.
A separate general ledger account is set aside for each specific type of transaction. For example, within the general area of inventory assets, there may be separate general ledger accounts for raw materials inventory, work-in-process inventory, finished goods inventory, and merchandise (purchased) inventory.
General Ledger Account Numbering
A unique account number is assigned to each general ledger account. These numbers are usually clustered by asset type. For example, 1000-series numbers might only apply to asset accounts, while 2000-series numbers apply to liabilities, 3000-series numbers apply to equity accounts, and so forth. The exact structure of these clusters will vary by business. It is considered a best practice to leave some gaps between assigned general ledger account numbers, to leave room for the subsequent insertion of additional accounts.
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Chart of Accounts
A complete list of all general ledger accounts that a company uses is contained within the chart of accounts, which is a simple listing of account numbers and account descriptions. The chart is usually organized to show all balance sheet accounts, followed by all income statement accounts. Examples of other general ledger accounts that are commonly used are noted below.
Balance sheet accounts
Income statement accounts
Compensation expense
Payroll tax expense
Fringe benefits expense
Rent expense
Utilities expense
Advertising expense
Travel and entertainment expense
Business insurance expense
Office supplies expense
Interest expense
Gain/loss on sale of assets
General Ledger Control Accounts
A few general ledger accounts are designated as control accounts. These accounts only contain summary balances that have been posted from subsidiary ledgers. This is done in order to minimize the transaction volume cluttering the general ledger. The accounts receivable and accounts payable accounts are the most likely to be control accounts.
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