General Ledger Accounts 2023
General ledger accounts are used to sort and store a business’s transactions into categories. The general ledger encompasses assets such as cash, accounts receivable, land, investments, and equipment. It includes liabilities such as loans payable, accounts payable, and bonds payable. It also encompasses stockholders’ equity such as common stock and retained earnings. It features operating revenues such as sales and service fees, and operating expenses such as salaries expense, rent expense, and depreciation expense. Non-operating revenues and gains include investment income and gain on disposal of equipment. Non-operating expenses and losses include interest expense and loss on disposal of equipment.
Download Our Free Brochure →The previously listed assets, liabilities, and stockholders’ equity form balance sheet accounts, as these accounts form a balance sheet. The balances on these accounts will not be closed at the end of an accounting year and are thus referred to as permanent accounts. So, the balances on these accounts are carried into the next accounting year.
The last four categories listed under general ledger above are called income statement accounts, as these accounts form an income statement. These include operating revenues, operating expenses, non-operating revenues and gains, and non-operating expenses and losses. The balances on these accounts are closed at the end of an accounting year and are thus referred to as temporary accounts. So, the next accounting year begins with a zero balance. Balances at the end of a year in an income statement account are combined and entered into retained earnings or a proprietor’s capital account as a single net amount.
The chart of accounts lists all accounts which record financial transactions. It will include more accounts than listed in the general ledger. This is because accounts with zero balances or with no recent entries are usually left out of the general ledger until a transaction occurs. The chart of accounts follows the same layout as the general ledger: balance sheet accounts precede income statement accounts. However, the chart of accounts does not have any account balances or entries. The chart of accounts is useful because it provides the name of an account, the account number, and a concise description. It should be updated whenever changes to a business are made and when data reporting must be improved.
