Accounting Fundamentals Certification (AFC) Practice Test

What is the primary ledger that contains all balances for balance sheet and income statement accounts?

1. Accounts receivable ledger

2. General ledger

3. Trial balance

4. Cash ledger

The correct answer is: General ledger

The general ledger serves as the primary financial record-keeping system for a business. It encompasses all accounts that summarize a company's financial transactions, ultimately reflecting the balances for both balance sheet and income statement accounts. The balance sheet accounts represent a company's assets, liabilities, and equity, while the income statement accounts cover revenues and expenses. By maintaining these records within the general ledger, businesses can ensure they have a comprehensive view of their financial position and performance. When transactions occur, they are first recorded in a journal. Subsequently, these entries are transferred to the respective accounts in the general ledger, where the overall balances are maintained. This allows for the aggregation of information necessary for preparing financial statements. Other options, such as the accounts receivable ledger, focus on specific areas of the business, like money owned by customers, and do not encompass the full scope required for balance sheet and income statement accounts. The trial balance, on the other hand, is a report that summarizes the balances of the accounts in the general ledger but does not serve as the repository of those balances. Lastly, the cash ledger is specifically concerned with cash transactions and does not include all balance sheet and income statement accounts. Thus, the general ledger is the essential document for maintaining a complete and accurate financial