A Step-by-Step Introduction to Ledgers in Accounting

Ledgers help track all your financial transactions. This guide breaks down how they work and why they matter in bookkeeping.

What's included in an accounting ledger

The purpose of general ledger accounting is to create a full record of a business’s transactions, which a business can use to prepare its financial statements. The information included in an accounting ledger includes:

A journal entry number and date
A description of the transaction
Debit column
Credit column
Account balance

The general ledger also contains a chart of accounts, which contains the account names and numbers for categories such as:

Assets
Liabilities
Equity
Revenue
Expenses
Other income and expenses

How to create an accounting ledger

Making an accounting ledger is fairly straightforward. To create and format a general ledger to accurately track your business’s financial situation, follow these four steps:

Set up ledger accounts.

The five main types of accounts are assets, liabilities, equity, revenue, and expenses.

Create columns.

Use double-entry ledgers with separate debit and credit sides, each showing date, description, folio number, and amount.

Record transactions.

Record each transaction in its respective ledger, then consolidate all entries into the general ledger at the end of the period.

Create a trial balance.

A trial balance lists all debits and credits from the general ledger, and if both sides are equal, your books are balanced.

Purchase Ledger

Your purchase ledger helps track all items your business buys. If purchases are minimal, you can record them in the general ledger instead.

Date of purchase
Supplier name
Invoice or purchase order number
Amount paid
Tax paid

Sales ledger

A sales ledger is a detailed list in chronological order of all sales made. This ledger is often also used to keep track of items that reduce the number of total sales, such as returns and outstanding amounts still owed.

Date
Customer name
Invoice number
Number of items sold
Tax charged on items sold
Shipping cost

Frequently Asked Questions

A general ledger is a complete record of all financial transactions over the life of your business.

No, a trial balance is a report that lists the balances of all ledger accounts to check accuracy, while a ledger is where transactions are recorded.

Yes, keeping both helps track what you buy and sell, giving you better financial insights and accuracy.