Bookkeeping is the practice of managing your expenses and profits within the general ledger. Historically, bookkeepers had a physical ledger—a thick book filled with pages that documented each expense, the amount, and the date. Today, bookkeepers use online spreadsheets and accounting software to track the expenses, which makes recording these data points significantly easier. Use this primer to better understand the general ledger and how tracking it can help you grow your business. What Is a General Ledger? The general ledger is a record of every single financial transaction related to your business. It covers major transactions (like investments in equipment or rent payments) and minute sources of income like credit card cash back. Each transaction in your ledger is called a journal entry. In a way, this book serves as a journal of every move your business makes. An accountant should be able to open the general ledger to understand what you spend over the course of the year and how you generate profits. General ledgers are most often used in double-entry bookkeeping, or the process of recording credits and debits twice. This bookkeeping method increases accountability and transparency. It is less likely that you will make a mistake and you are better able to understand your company’s financial situation. Who Manages the General Ledger? The burden of managing the ledger will fall to different people depending on the size of your business. If you are a sole proprietor or only have a small staff, you may be the only one available for managing the ledger. By keeping a healthy book from the start of your business, you can track your expenses better and develop good accounting habits. As your business starts to grow, you may be able to hire a bookkeeper. This person will work full-time or part-time and manage each expense. With the popularity of bookkeeping software, the time it takes to sort through expenses is significantly diminished. This makes it easier to balance your credits and debits if you can’t afford the services of a bookkeeper at this time. What Is the Difference Between a General Ledger and a Balance Sheet? The strength of the general ledger is that you can get into every detail of the business and have every record on hand in the event that your business is audited by the IRS or reviewed by a business consultant. The downside of the ledger is that it is hard to review when looking at high-level trends. This is where the balance sheet comes in. A balance sheet uses the data from the ledger and creates a snapshot of your business at any point in time. For example, you might view your monthly performance through a balance sheet or conduct a quarterly review for a big picture outlook on your business. Both ledgers and balance sheets are important for healthy business accounting. Business operations have come a long way since the days of physical ledger books. Instead of tracking your expenses and profits yourself, find a software tool that can do most of the work for you. The Lendio app will automatically export expenses and invoices, make it easier for you to bill clients, and provide transparency in your books. Give us a try today.