To start, a Chart of Accounts is a list of all the financial accounts that your company has. A chart of accounts has no financial information. It is simply a list of names. If you pull up the chart of accounts on a computer, it will show all the accounts by name grouped by type of account. There would be no dollar amounts listed. The accounts in a chart of accounts can be assigned a number by the management, accountant or bookkeeper. Assets would be assigned a number starting with number 1 for example 101, number 2 is for liabilities accounts (people your business owes money to like loans), number 3 is for equity (what the owners put in or take out). For sales or revenue, it would be numbers starting with number 4. Expense accounts start with number 5. A General Ledger is also a list of all the financial accounts.

The difference is it will show dollar amounts associated with the different accounts. A small business will have 20 to 30 accounts that make up the General Ledger. A big business could have hundreds or thousands of accounts on their General Ledger. The number of accounts is determined by the company leadership and how much detail they want to have. For example, you can have one accounts payable account, or you can have one for each of your vendors or suppliers. The accounts that are asset accounts are generally broken into individual accounts for the different things a company owns, banking, vehicle, property. For example, an account for checking and an account for savings and an account for vehicle loans.

Each of the different accounts will also have a ledger or journal that shows the daily or monthly transactions depending on the purpose of the account. The information on the ledger or journal is transferred at a predetermined time by the bookkeeper or accountant, which could be daily, weekly, monthly, or annually to the General Ledger. Some of the accounts will have a balance, either credit or debit. Some accounts will have a zero balance. The important thing about a general ledger is that all the credits and debits should be equal. The information for generating the various financial reports comes from information contained within the general ledger.