What's the Difference Between a General Ledger and a Profit & Loss Report? (2024)

FAQs

What's the Difference Between a General Ledger and a Profit & Loss Report? ›

What's the difference between GL and P&L? The GL is a detailed record-keeping tool, while the P&L (profit and loss) or the income statement reports a company's profit during a period.

Scope of Information: The GL report provides a comprehensive, transaction-level view of all financial activities, whereas the P&L report presents a summarized view of revenues, expenses, and profits for a specific period.

General liability covers physical risks, such as bodily injuries and property damage. Professional liability insurance covers more abstract risks, such as errors and omissions in the services your business provides.

It details all business accounts and account activity during a period. The general ledger report contains the account summaries, including details of every transaction going in and out of your accounts. It is organized not only by date but also by account type.

A general ledger, or GL, is a means for keeping record of a company's total financial accounts, and most businesses use general ledger software to manage the data. Accounts typically recorded in a GL include: assets, liabilities, equity, expenses, and income or revenue.

What's the difference between GL and P&L? The GL is a detailed record-keeping tool, while the P&L (profit and loss) or the income statement reports a company's profit during a period.

General ledgers, also referred to as accounting ledgers, are the physical or digital record of a company's finances. They can include liabilities, assets, equity, expenses, and revenue. The main record of your business's financial standing is an accounting ledger.

No. A balance sheet is a snapshot of a company's net worth—its assets, liabilities, and equity—at a specified point in time, while a general ledger is a master list of all company transactions, itemized by account type. Companies use general ledgers to produce balance sheets.

There are three types of General Ledger accounts that can be created: Asset, Revenue, and Liability.

A general ledger comprises all the combined balances of accounts. Whereas, a ledger contains the balance of each account.

What gets recorded in the general ledger? ›

A general ledger is used to record every financial transaction made by an organization and serves as the basis for various types of financial reports. It provides details about finances such as cash flows, assets, liabilities, inventory, purchases, sales, gains, losses, and equity.

It records all the financial data that is required to prepare financial statements of company. An account typically recorded in GL included: assets, liabilities, expenses, equity, and income or revenue. The examples may be salary account, account receivable account, furniture account etc.

A general ledger summarizes all the transactions entered through the double-entry bookkeeping method. Under this method, each transaction affects at least two accounts; one account is debited, while another is credited. The total debit amount must always be equal to the total credit amount.

7 Reasons You Need a General Ledger

It provides an accurate record of all financial transactions. It enables you to compile a trial balance, so your books balance. It makes filing tax returns easy because all expenses and income are in one place.

A general ledger, also known as “the book of final entry,” is a record of a company's financial transactions. They are listed as debits or credits, known as a double-entry system and validated by a trial balance.

The general ledger tracks all of a company's accounts and transactions and serves as the foundation of its accounting system. It's typically divided into five main categories: assets, liabilities, equity, revenue, and expenses.

Profit and Loss (P&L) Statement

A P&L statement, more commonly labeled "statement of income" or "income statement," is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period, usually a fiscal year or quarter.

The bank statement is more of a snapshot of the account's activity during a specific period, while the ledger account provides a comprehensive and ongoing record.

A profit and loss statement (P&L), also called an income statement or statement of operations, is a financial report that shows a company's revenues, expenses and net profit or loss over a given period of time. The time period can be of any length, but it is usually a month, quarter or year.

Profit & Loss Account reflects business incomes and expenses, summarizes financial activities. It measures performance. Steps to prepare Profit & Loss include ledger accounts, trial balance, and trading account. Components include revenue/income, COGS, operating expenses, operating profit, net income.