How general ledger works
Every transaction, a sale, a bill payment, a payroll run, is recorded as a journal entry and posted to the general ledger under the right account, such as cash, revenue, or rent expense. Each account keeps a running balance that updates with every entry. Each entry must balance, meaning total debits always equal total credits, which is the core rule behind double-entry bookkeeping.
At the end of a period, the balances in the general ledger are pulled together into the trial balance and then the financial statements. Because every other report depends on it, an accurate general ledger is the foundation of reliable bookkeeping. Errors here tend to show up everywhere else. A general ledger that is reviewed regularly also makes it much easier to catch a miscoded transaction before it affects several reports at once.
Example
A consulting firm bills a client $5,000. The entry debits accounts receivable $5,000 and credits revenue $5,000 in the general ledger. When the client pays, a second entry debits cash $5,000 and credits accounts receivable $5,000. Revenue now shows $5,000 earned, and cash shows $5,000 received, both correctly reflected in the ledger.
General ledger in QuickBooks Online vs Xero
QuickBooks Online keeps the general ledger behind the scenes and lets you view it through the Transaction detail by account report. Xero calls the same view the Account transactions report, accessible from each account in the chart of accounts. Both tools post entries automatically whenever an invoice, bill, or payment is recorded. Both platforms let you drill down from any report line item straight into the underlying ledger transactions that created it.
Related terms
How LedgerBPO handles general ledger
Our bookkeeping team keeps your general ledger accurate and current, posting transactions correctly and catching miscoded entries before they affect your reports. A dedicated accountant reviews the ledger against source documents each month. You get financial statements you can trust and a clean record if you are ever audited. We also correct miscoded entries as soon as they are found rather than waiting until the next close.