Future Business Leaders of America (FBLA) Accounting Practice Test

What is a general ledger?

1. A ledger for personal accounts

2. A ledger containing all accounts needed to prepare financial statements

3. A record of daily transactions

4. A form used to calculate payroll

The correct answer is: A ledger containing all accounts needed to prepare financial statements

A general ledger is a comprehensive record that includes all the accounts necessary to prepare a company's financial statements. It serves as the central repository for all financial data, encompassing every transaction that affects the financial position of a business. This includes asset, liability, equity, revenue, and expense accounts. The general ledger allows accountants and financial professionals to track financial transactions systematically and provides the detailed information needed to compile a complete and accurate set of financial statements, such as the balance sheet and income statement. By organizing all financial activities in one location, it simplifies the process of monitoring a company’s overall financial health and ensures compliance with accounting standards. In contrast, other options do not represent the full scope of what a general ledger encompasses. For instance, a ledger for personal accounts focuses only on specific accounts rather than all financial aspects of a business. A record of daily transactions typically refers to a journal that captures transactional data before it is posted to the general ledger. A form used to calculate payroll addresses a specific function rather than the comprehensive, multifaceted nature of a general ledger.