What is a general ledger account?
In short
A general ledger account is an account in your books in which you collect all entries of one kind, for example revenue, rent, purchases or the bank account. Together, all general ledger accounts form the chart of accounts from which your balance sheet and profit and loss statement are built.
How do general ledger accounts work?
Every entry in your books ends up on at least two general ledger accounts: a sales invoice of € 1,210, for example, is booked as € 1,000 revenue, € 210 VAT payable and € 1,210 receivables. That keeps the books in balance and shows what happened on each account.
General ledger accounts come in two kinds:
- Balance sheet accounts for what you own and owe, such as the bank, receivables, inventory, payables and VAT payable.
- Profit and loss accounts for income and expenses, such as revenue, purchases, rent, wages and car expenses. Together they make up the profit and loss statement.
What is the Reference Chart of Accounts?
The Reference Chart of Accounts (RGS) is a Dutch standard list of general ledger accounts with fixed codes. If you, your bookkeeper and your software use the same codes, reports such as the annual accounts and tax returns via SBR fit together more easily, and you can compare figures with other companies. Many accounting packages come with a chart of accounts based on RGS.
What should you look out for?
Keep the chart of accounts as simple as your reports allow: a separate account for each type of cost you want to track, not one per supplier. Consult your bookkeeper before adding or merging accounts, especially in the middle of a financial year, and use cost centres or projects in your package if you want to see costs per department.
Which software helps with this?
Every accounting package works with general ledger accounts and comes with a standard chart of accounts, often based on the Dutch Reference Chart of Accounts (RGS). Check whether you can adjust the chart and whether the package supports RGS codes if your accountant works with them.