What does a general ledger contain?

A general ledger is a comprehensive record of all financial transactions within an organization. It contains all asset accounts, liability accounts, and equity accounts, which together provide a complete picture of an entity's financial position. Each account within the ledger allows for tracking the organization’s economic activities over time and is fundamental for accurate financial reporting.

The general ledger serves as the backbone of an accounting system, summarizing all entries related to a company's finances, including revenues and expenses, thereby allowing for the preparation of financial statements such as the balance sheet and income statement. This means it captures a complete catalog of every account needed to ascertain the overall financial health of the business.

In clarifying why this is the right choice, it is essential to note that a general ledger is not limited to just expense accounts or daily transaction summaries. While it may reflect the flow of transactions, it does not summarize daily activities on its own, nor does it provide financial predictions; these fall under different aspects of financial analysis and management. Thus, having a firm grasp of what a general ledger includes is vital for anyone involved in accounting and finance.