Definition
The general ledger (GL) is the master record of all financial transactions in a business, organized by account. Every transaction — income, expense, asset purchase, liability — is recorded in the GL using double-entry accounting (every debit has an equal credit). The GL is the source of truth from which all financial reports (P&L, balance sheet, etc.) are generated.
Why It Matters
Without a general ledger, you have a pile of transactions with no structure. The GL organizes everything into accounts (revenue, COGS, expenses, assets, liabilities) so reports make sense. For contractors, the GL should be organized to support job costing, not just generic bookkeeping. A well-structured GL with the right chart of accounts makes tax time, bank loans, and bonding applications dramatically easier.
Field Example
A contractor pays $3,000 for lumber. In the GL, this is recorded as: Debit "Direct Materials - COGS" $3,000 / Credit "Bank Checking" $3,000. When the contractor bills the client $5,000 for the completed work: Debit "Accounts Receivable" $5,000 / Credit "Revenue" $5,000. The GL captures both sides of each transaction.
Calculation / Formula (if applicable)
Double-Entry Rule: Every transaction has equal Debits and Credits
Assets = Liabilities + Equity (the accounting equation; always holds true)
Software Application
The GL runs in the background of all bookkeeping. Users interact with it through transactions, invoices, and bills — not by editing the GL directly. Allow GL export for accountant review. Support chart of accounts customization to match the contractor's business structure.
Tooltip Version
The general ledger is the master record of every financial transaction, organized by account. It's the foundation of all financial reports — you don't edit it directly, but everything flows through it.
Related Objects
Related: