General Ledger Terms and Definitions

When doing basic accounting, whether it be for a business or just keeping track of personal income and expenses, having a strong list of accounts can dramatically help in staying organized as well as calculating correct numbers for profits, losses and expenses. In order to get the most out of your account list, the creation of a general ledger can be a great tool.
The general ledger is used as the main accounting record to keep track of business transactions. The use of a general ledger is normally associated with double entry accounting in which there are matching entries on both the debit and credit side. The debit and credit accounts are in the shape of a "T" which is where the common term T-accounts come from. This basic setup allows for easy visual reference of what is going in and out of the account.
Main accounts that exist in the general ledger include both assets and liabilities, but are broken down further into more specific accounts for better detailing of revenues and expenses. Some of the more detailed accounts are as follows:
Assets-these are considered any resource that can be used as an economic benefit. Assets can be both tangible (equipment) and intangible (patents or copyrights).
Liabilities-these pose a future obligation that has occurred from an event in the past.
Revenue-this is the amount of money that has come into a business before interest and expenses have been taken out.
Expenses-costs that a company pays such as utilities, advertising, or building maintenance.
Owner's equity-this is the final amount that is left for the owners once all of the liabilities have been paid off. An easy way to think of this is if the company went bankrupt and everything was sold off to pay debts, this would be what is left after everything has been paid.
Profits-this is an easy number to calculate, as it is the difference between revenue minus expenses. This is the amount of money that the company is considered to make on a fiscal year basis.
Losses-the same equation to calculate profits is used to calculate losses. The only difference is if the expenses are more than the revenues, the company suffered a loss.