General Ledger: Definition, Template, and Best Practices

Managing your financial accounts effectively – whether using complex software or simple spreadsheets – is key to business success. The general ledger provides a summary of all revenue and expenses for your business, providing the foundation for accurate financial reporting.

In this guide, you’ll learn:

• What Is a General Ledger?
• Components of a General Ledger
• Essential Features of General Ledger Templates
• Benefits of Using Account Ledger Templates
• Step-by-Step Guide to Using a General Ledger Template
• Common Mistakes to Avoid
• General Ledger Template Example
• Setting Up Your General Ledger in QuickBooks
• Frequently Asked Questions

What Is a General Ledger?

The general ledger is a central record of all financial transactions within a business. With the data in a general ledger, you can generate any financial statements, balance sheets, and income statements requested by investors and other stakeholders. 

Ledger data can be also used to track expenses and revenue, identify errors, and make informed financial decisions. Whether you're using sophisticated software or a basic ledger template in Excel, the general ledger helps you maintain accurate financial records.

What Does a General Ledger Include?

A general ledger typically includes the following components: 

1. Journal Entries: Each transaction receives a unique identifier and date
2. Transaction Descriptions: Clear explanations of each financial event
3. Debit and Credit Columns: To follow double-entry bookkeeping principles
4. Running Balance: Updated after each transaction

General ledgers should contain every account that will be on financial statements after an accounting period. These are known as general ledger accounts or GL accounts.

A professional general ledger template will include five main types of GL accounts:

• Assets
• Liabilities
• Equity
• Revenue/Income
• Expenses

Key Features of a General Ledger Template

A well-designed general ledger account template should include:

• Clearly defined columns for dates, descriptions, and reference numbers
• Separate debit and credit columns
• Automated balance calculations
• T-account template sections for easy transaction tracking
• Customisable categories for different account types
• Built-in formulas for error checking
• Compatibility with tools like Excel and QuickBooks accounting software
• Flexibility to adapt to various industries

Benefits of Using a General Ledger Template

There are several advantages of using a General Ledger template. Some of these include:

Organisation and Accuracy

By using a pre-formatted accounting ledger template, you can track every financial movement in your business and ensure that your accounts are always up-to-date. A well-designed template makes it easy to categorise transactions and produce reliable financial statements.

Time-Saving Benefits

Ready-made ledger templates reduce manual errors and save time. You won’t need to create layouts from scratch, and can instead focus on analysing your data.

Facilitating Audits and Compliance

With a professional ledger, you can easily prepare for audits by maintaining a clear, organised audit trail. A professional general ledger allows auditors to quickly trace transactions, which speeds up audits and shows your business is complying with regulations.

Improved Financial Analysis

To get a picture of your business performance, you need clear data. An accounting ledger template makes it easy to monitor spending and find places to cut costs. This level of detail improves decision-making at all levels of your business.

Enhanced Transparency

Stakeholders are looking for clear and accessible financial data. By using a general ledger account template, you can generate easy-to-read records for investors, partners, and employees.

How to Use a General Ledger Template

Here's how to use a general ledger template effectively:

1. Set Up the Ledger: Create separate ledgers for each account type.
2. Enter Account Details: Add the account name and number.
3. Define the Period: Specify the reporting month.
4. Record Transactions: Input dates, descriptions, and journal references.
5. Post Debits and Credits: Record amounts in their respective columns.
6. Update Balances: Automatically or manually calculate running totals.
7. Reconcile Accounts: Ensure all transactions match source documents.
8. Generate Reports: Compile data into financial statements as needed.

Download our free General Ledger template below.

Common Mistakes to Avoid

Avoid these common pitfalls when using a general ledger:

• Inconsistent Data Entry: Ensure all fields are filled accurately, and double-check entries for typos. Inconsistencies can lead to incorrect balances and affect overall financial reporting.
• Neglecting Reconciliation: Regularly match ledger entries with bank statements and source documents to ensure accuracy. Reconciling helps identify discrepancies early and prevents costly errors down the line.
• Ignoring Adjusting Entries: Record adjustments promptly to reflect your business’s true financial position. This includes correcting errors, accounting for accrued expenses, or deferring revenue as needed.
• Improper Account Categorisation: Use the correct account types for transactions to maintain clarity. Misclassifying entries can lead to confusion, inaccurate reports, and potential issues during audits.
• Overlooking Regular Updates: Update the ledger frequently to avoid backlog and ensure real-time accuracy. Delayed updates can cause confusion and impact decision-making.

General Ledger Example

To better grasp how a general ledger functions, consider this example of the cash account for a retail store:

This is a cash account and provides a snapshot of transactions for January 2025. The general ledger displays all journal entries affecting the account, offering insights into cash flow for the period.

Key Observations:

• The opening balance on 1 January 2025 is $80,000, which aligns with the closing balance from December 2024.
• Debits and credits are logged in separate columns for clarity.
• On 2 January, the company purchased inventory for $10,000, reducing the cash account balance. This transaction is recorded as a debit to inventory and a credit to cash (Journal Entry #1). The corresponding entry appears in the inventory account ledger.
• On 9 January, a customer payment of $6,000 was received, increasing the cash balance.

At the end of the month, the general ledger shows the final cash balance as $76,000 after accounting for all debits and credits.

This example highlights the systematic approach of a general ledger in tracking account balances and identifying the impact of each financial transaction.

How can I set up a General Ledger in QuickBooks?

QuickBooks Online streamlines the complex task of managing a general ledger by automating data entry, categorisation, and report generation. With its intuitive platform, QuickBooks allows you to:

• Seamlessly integrate all of your business accounts into a single, centralised system, eliminating the need for manual data consolidation.
• Generate precise, detailed financial statements such as income statements, balance sheets, and cash flow statements with just a few clicks, ensuring that you always have accurate information at your fingertips.
• Maintain a comprehensive audit trail that supports compliance with regulatory requirements.
• Save time and reduce errors by automating calculations and updates in real-time, making financial management more efficient.
• Customise and export reports tailored to your specific business needs, so that you can share insights with stakeholders and track performance over time.