What is a general ledger?

A general ledger is a comprehensive collection of accounts that records all financial transactions for a business in chronological order. It serves as the primary bookkeeping record, which provides the details needed to prepare financial statements, including the balance sheet and the income statement. Each transaction is recorded in the general ledger according to the double-entry accounting system, which means that every entry has a corresponding and opposite entry in another account to ensure the accounting equation (Assets = Liabilities + Equity) remains balanced.

The general ledger encompasses various accounts such as assets, liabilities, equity, revenues, and expenses, where each transaction affects at least two accounts. This systematic approach allows businesses to track their financial activities efficiently and maintain accurate financial records, ultimately enabling them to assess performance and fulfill reporting requirements.

While the other options provide related financial concepts, they do not define the general ledger accurately. A summary of all financial statements refers to a higher-level overview and does not capture the detailed transactions. A report analyzing financial performance typically analyzes data from the general ledger but does not represent the ledger itself. A type of adjusting entry relates to adjustments made at the end of an accounting period and is part of the overall accounting process but is not the entirety of the general ledger's function.