The central or general ledger works like a central repository that keeps records of transactions of a company’s assets and liabilities, revenues, expenses, owner’s equity etc. In modern day Enterprise Resource Planning software this ledger will be the central ledger containing data sent from modules such as accounts payable, cash management, accounts receivable, projects and fixed assets. It therefore acts as the backbone for any accounting system and will bear both the organization’s financial data and non-financial data. Every account in this ledger is referred to as a ledger account.
The central ledger is the source of financial position details and income statements. Every account will have a couple of pages and the entries are referred to as journal entries that include both credits and debits. Any firm will have hundreds of accounts and many journal entries every year. This general ledger will generate the income statement and this is why it is significant. It will give the details of cash flow and the balance sheet for the company. So, it is vital to keep the central ledger completely error-free and safe.