General Ledger

Because a business needs one place where every financial fact is recorded the same way, so that a number in a report can always be traced back to the event that produced it.

The general ledger is the thing everything else in finance reconciles to. Its value is not that it stores numbers — spreadsheets do that — but that it is complete, balanced and immutable, which is what makes a figure in the financials defensible. Auditors do not check whether the numbers look right; they check whether every number traces to something that happened.

• Every entry must balance: total debits equal total credits, always, with no rounding plug.
• A posted entry is immutable. Corrections are new, opposite entries — never edits.
• Every entry carries a date, an account, an amount and a reference to the document that created it. An entry you cannot trace to a source document is unexplained.
• The ledger is the single source of financial truth. When a sub-ledger and the general ledger disagree, one of them is wrong and it is usually not the ledger.

It gets used as an adjustment layer. When a sub-ledger will not agree, someone posts a journal to force it, and the books balance at the cost of the explanation. Do that for a year and the control accounts are correct in total and meaningless in detail — which is discovered, invariably, during an audit, by which time the trail is cold.

• Multi-currency, where the ledger holds both the transaction currency and the reporting currency, and revaluation moves one without the other.
• Inter-company transactions, which must eliminate on consolidation but stay visible in each entity's own books.
• Period-end accruals reversed automatically in the next period — correct, and a frequent source of confusion when someone sees the reversal in isolation.
• Opening balances at migration, which arrive as a journal entry with no operational document behind them and therefore need unusually good narration.