# What is a general ledger in simple terms?

A general ledger is the master record of a business's money: one place that holds the totals for every account, such as cash, sales, rent and loans. IRS Publication 583 (December 2024) puts it simply: a journal records each transaction, and a ledger contains the totals from all of your journals. A ProfitDrawer bookkeeping spreadsheet works like a simple single-entry ledger, with income and expense rows totaled by category.

How the pieces fit:

- **Journal:** the day-by-day list of transactions, for example "March 3, paid $780 rent."
- **Ledger:** the totals by account, for example "Rent expense for March: $780."
- **Accounts:** income, expenses, assets, liabilities and owner's equity (net worth).

**Single entry vs double entry.** Publication 583 describes a single-entry system as one built around the profit or loss statement, which many small businesses use. In a double-entry system every transaction is recorded twice, as a debit in one account and a credit in another, and total debits must equal total credits. The publication's example records a $780 rent payment as a debit to Rent expense and a credit to Cash.

**At year end**, income and expense accounts are closed out and start fresh, while asset, liability and net worth accounts carry over.

For a sole proprietor with simple finances, a well-kept income and expense ledger is often enough day to day. Accounting software or an accountant typically keeps a full double-entry general ledger when the business has loans, inventory, employees or several owners.

- Source: [IRS Publication 583: Starting a Business and Keeping Records](https://www.irs.gov/publications/p583)
- Updated: 2026-10-29
- Published: 2026-10-29
- Category: Bookkeeping basics
- Canonical: https://profitdrawer.com/answers/what-is-a-general-ledger-in-simple-terms.html
- Publisher: ProfitDrawer (https://profitdrawer.com)