What Goes Into a General Ledger?
The general ledger tracks five categories. These categories are: Assets, Liabilities, Owner's Equity, Revenue, and Expenses. Here's a breakdown of each of these categories:
Assets - Assets are those things that add value to your company. There are fixed assets, like property, and there are assets that change in value like your bank account. Assets are your resources. They can be used to purchase necessary goods.
Liabilities - A liability is something you owe money on, a financial obligation that has come about through past transactions. Liabilities include loans and credit cards.
Owner's Equity - Owner's equity is the amount that will appear on your balance sheet that determines the value of your business. Equity is equivalent to company assets less company liabilities.
Revenue - Revenue is the income a company generates through its various business activities. You may hear revenue referred to as "top line" since on a company's income statement, it occurs on the first line.
Expense - Expenses are the outflows of money that come about when you pay payroll, utilities, or purchase office supplies. They differ from liabilities in that they are not the whole debt (but payment on debts might go under expense).
In addition to these five basics of a general ledger, there are subsidiary ledgers with amounts that wind up in a general ledger:
Accounts Receivable - This is the register of outstanding invoices for money that is expected to come in.
Accounts Payable - This is the register of outstanding invoices for money expected to go out.
Petty Cash/Cash - This tracks cash spent
By keeping accurate records, you can ensure that the business finances will be on track.