Light's general ledger is the central accounting system where all financial transactions are recorded. This article explains the ledger structure, how documents flow through it, and its relationship to other modules.
What is a General Ledger?
The general ledger (GL) is the master record of all financial transactions:
- Every debit and credit is recorded
- All transactions are linked to ledger accounts (chart of accounts)
- It's the source of truth for financial reporting and compliance
- All transactions are immutable once posted
The GL is where AP invoices, AR invoices, payments, journal entries, and other documents ultimately post as transactions.
Ledger Accounts (Chart of Accounts)
Every ledger account has a 6-digit account code and one of five classifications:
Asset Accounts - What you own
- Cash, Bank Accounts, Accounts Receivable, Inventory
Liability Accounts - What you owe
- Accounts Payable, Loans, Accrued Expenses
Equity Accounts - Owner's stake
- Contributed Capital, Retained Earnings
Revenue Accounts - Money earned
- Revenue, Non-Operating Income, Interest Income
Expense Accounts - Money spent
- Personnel Costs, Cost of Sales, General and Administrative Expenses
The chart of accounts is your company's GL structure. All posting flows through these accounts.
Account Hierarchy
Ledger accounts come in three categories that structure the chart of accounts:
Standard accounts - Regular accounts that transactions are posted to
Header accounts - Organizational headings only; no transactions can be posted to them
Sum accounts - Aggregate the balances of a range of account codes for summary reporting
Header and sum accounts serve reporting purposes only, allowing both detailed and summary views.
Ledger Transactions
Transactions in the ledger record the actual debit and credit:
Components:
- Account - Which GL account (e.g., a 6-digit code like Cash 100000)
- Debit amount - Increases asset and expense accounts
- Credit amount - Increases liability, equity, and revenue accounts
- Date - When the transaction occurred
- Reference - Link to the source document (invoice, payment, etc.)
Transactions follow the fundamental equation: Debits = Credits (double-entry bookkeeping)
Entry Status
When viewing ledger transactions, you can toggle the Entry status to control which transactions are displayed:
- Simplified - Shows only transactions that have a net impact on the ledger, filtering out all reversed transactions. This is useful for a cleaner view of active, meaningful entries.
- All - Shows all transactions, including reversed entries. Use this when you need the complete transaction history for audit or investigation purposes.
Document Flow to Ledger
Financial documents flow through Light and post to the ledger:
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Domain modules create documents:
- AP creates Invoice Payable (bills)
- AR creates Invoice Receivable (customer invoices)
- Payments module creates bank payments
- Users create manual Journal Entries
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Documents are drafted - Created in DRAFT status, can be edited freely
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Documents are posted - Status changes to POSTED, generates GL transactions
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Transactions become immutable - Once in the ledger, they cannot be changed (only reversed)
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Reporting pulls from ledger - Reports query GL transactions for financial data
Multi-Currency Posting
When posting a document in a foreign currency:
Document amount - The amount in the document's original currency (e.g., 1,000 EUR)
Local amount - Converted to company entity's local currency using daily rates
Group amount - Converted to corporate group currency for consolidated reporting
Light stores all three amounts, allowing reporting in any currency.
Tax Handling
Tax calculations occur during posting:
- Line-level taxes - Each invoice line may have different tax rates
- Tax amounts - Separated into tax GL accounts (liability)
- Net vs. gross - Lines can be specified as net (tax calculated and added) or gross (tax already included)
Tax is automatically calculated during posting and posted to dedicated tax accounts.
Ledger Accounts Features
Advanced ledger account capabilities:
Account classifications - Asset, Liability, Equity, Revenue, Expense
Account types - Granular types within each classification (e.g., Bank, Accounts Receivable, Cost of Sales, Personnel Cost)
Reconciliation accounts - Accounts Payable and Accounts Receivable accounts used for clearing open documents
Header and sum accounts - For hierarchy and roll-up reporting
Active/Inactive - Disable accounts no longer in use
Posting Rules
When documents post, several rules apply:
Period must be open - Cannot post to a closed accounting period
Required fields - All document fields must be complete before posting
GL accounts must exist - All accounts referenced must be in the chart of accounts
Amounts must balance - Total debits must equal total credits
Document type rules - Certain document types have specific posting requirements
If any rule is violated, posting fails with an error message.
Document Status and Ledger Impact
Document status affects GL interaction:
DRAFT - No GL impact. Can be freely edited.
APPROVAL_PENDING - Awaiting approval before it can be posted. No GL impact.
APPROVED - Approved and ready to be posted. No GL impact.
POSTED - GL transactions created. Immutable. Cannot edit directly.
PARTIALLY_CLEARED - Some GL entries have been cleared/matched. Cannot modify without reversing first.
CLEARED - All GL entries have been cleared/matched.
ARCHIVED - Removed from active lists but remains in GL.
Immutability and Audit Trail
The ledger is immutable by design:
- Posted transactions cannot be changed - Ever
- Reversals instead of edits - If you need to undo a posting, create a reversing entry
- Audit trail - Every change to a document is logged
- Accountability - You can always see who posted what and when
This prevents fraud and ensures financial data integrity.
Clearing and Reconciliation
Transactions in the ledger can be "cleared" as part of reconciliation:
- Bank reconciliation - Bank transactions cleared against GL entries
- Payment clearing - Invoices cleared when paid
- Customer clearance - AR invoices cleared when collected
Clearing links transactions but doesn't modify them—they remain as posted.
Ledger Reporting
Financial reports pull directly from the ledger:
- Balance sheet - Balances of asset, liability, equity accounts
- Income statement - Balances of revenue and expense accounts
- Trial balance - All accounts with their balances
- General ledger report - Transaction-level detail
Reports are always current and reflect the latest posted transactions.
Company Entities and Ledgers
Each company entity has its own ledger:
- Entity-level accounts - Each entity has its own chart of accounts (or shared)
- Entity-level transactions - Transactions are always posted to a specific entity
- Consolidation - Corporate pulls together entity-level GL for group reporting
Reports can be generated at entity level or consolidated across the group.
Accounting Periods
The ledger is organized into accounting periods:
- Period status - Open (accepting posts), Closed (no new posts)
- Period dates - Start and end date of the period
- Year-end - Special processing at year-end for closing entries
Periods control when transactions can be posted and when closing entries are created.
Key Features
Light's ledger includes:
- Real-time posting - Documents post immediately, GL updates instantly
- Multi-currency support - Automatically converts and tracks FX
- Tax integration - Automated tax calculation and posting
- Workflow integration - Documents can't post until approved
- Audit trail - Complete history of all changes
- Customization - Custom GL accounts and properties
- Reporting - Flexible GL-based reporting
Best Practices
- Use consistent account coding - Train staff on proper GL account selection
- Validate before posting - Review document details before posting
- Post promptly - Don't delay posting; timely data is critical
- Review GL regularly - Look for unusual or suspicious transactions
- Archive old periods - Keep recent GL data online, archive older data
- Maintain chart of accounts - Keep GL structure aligned with reporting needs
Related Articles
- Accounting document types and lifecycle
- Viewing and searching journal entries
- Creating manual journal entries
- Immutable ledger and audit trail
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