General (or Nominal) Ledger
(frequently known as “The Nominal” in the UK, or "Chart of Accounts" in software)
All Accounting is done in "Accounts". Put simply these are “boxes” or “cells” or “pockets” designed so that similar transactions can be grouped together.
Here are some examples:
• All stationery purchases appear in the "Stationery Account"
• Insurance costs appear in the "Insurances Account"
• Sales go in the "Sales Account"
• Bank transactions (in and out) go in the "Bank Account"
Sometimes, businesses like to have one account which groups together a wider range of transactions eg. a "Printing Postage & Stationery Account" - so these are similar enough to be grouped together in one Account. Other businesses will split these into separate Accounts if they prefer it - there are no rules on this.
Some businesses have one Sales Account, but others will have a Sales Account for each Product Group, or even for each Product. So some businesses like sales all lumped together, while others like to separate them out so that they can analyze them better. If your business is a larger business trading overseas, there may be a government requirement to report these sales separately, so it would be a good idea to set up your computer software to do this automatically.
You can have as many or as few Accounts as you want - and you can call them what you want. The only thing to bear in mind is who might read the reports and will they understand them, especially the tax authorities. If your annual accounts have to be filed publicly (for example limited companies in the UK) then there certain rules for categorizing the various accounts and transactions so that they can be commonly understood.
Also, in modern software, Accounts can be separated into Sub-Accounts, which can be a big help for categorizing and grouping together.
All the Accounts, when grouped together are the General Ledger or Nominal Ledger or Chart of Accounts.
And into these Accounts go the transactions, that is the bills, the payments, the debts, the investments etc.
These all entered as debits or credits.