The General Ledger is the core of accounting, where all financial transactions are finally recorded. It helps businesses track income, expenses, assets, and liabilities in one place. Interviewers often ask general ledger questions to test basic accounting knowledge, accuracy, and understanding of how accounts are maintained. These questions are commonly asked for junior accountants, accounts executives, and finance roles.
Important General Ledger Interview Questions and Answers
1. What is a general ledger?
A general ledger is the main accounting record of a business where all financial transactions are recorded. It contains different accounts such as assets, liabilities, income, expenses, and capital. Every transaction from journals is posted into the general ledger. It helps in preparing final accounts and financial statements.
2. Why is the general ledger important?
The general ledger is important because it shows the complete financial position of a company. It helps track how money is earned, spent, owned, or owed. All financial reports are prepared using ledger balances. Without a general ledger, proper accounting is not possible.
3. What types of accounts are included in the general ledger?
The general ledger includes asset, liability, capital, income, and expense accounts. Each account records transactions related to a specific category. This classification helps in better understanding and reporting of finances. All accounts together form the accounting system.
4. What is a ledger account?
A ledger account is an individual account maintained in the general ledger. It records all transactions related to a particular item, such as cash, sales, or rent. Each ledger account has debit and credit sides. It helps determine the balance of that account.
5. What is posting in accounting?
Posting is the process of transferring journal entries into the ledger accounts. Each transaction recorded in the journal is posted to the relevant ledger accounts. Posting helps classify transactions properly. It is an essential step in the accounting process.
6. What is the difference between a journal and a ledger?
The journal records transactions in chronological order as they occur. The ledger records transactions account-wise after posting. A journal is the first book of entry, while the ledger is the main book of accounts. Both work together in accounting.
7. What is a debit entry?
A debit entry is recorded on the left side of an account. It increases assets and expenses while decreasing liabilities and income. Debit entries follow accounting rules. They always have a corresponding credit entry.
8. What is a credit entry?
A credit entry is recorded on the right side of an account. It increases income, liabilities, and capital while decreasing assets and expenses. Credit entries balance debit entries. Both are required for double-entry accounting.
9. What is a debit balance?
A debit balance occurs when the debit side of an account is greater than the credit side. Asset and expense accounts usually show debit balances. It indicates money spent or resources owned. Debit balances are common in cash and expense accounts.
10. What is a credit balance?
A credit balance occurs when the credit side of an account is greater than the debit side. Income, liabilities, and capital accounts usually have credit balances. It shows income earned or amounts payable. A credit balance reflects financial obligations or earnings.
11. What is a trial balance?
A trial balance is a statement showing all ledger account balances. It is prepared at the end of an accounting period. The main purpose is to check arithmetic accuracy. Total debit and credit balances should match.
12. Why is a trial balance prepared?
A trial balance is prepared to check the correctness of ledger postings. It helps identify calculation and posting errors and also acts as a base for preparing financial statements. This will also save time during final accounting.
13. What happens if the trial balance does not tally?
If the trial balance does not tally, it indicates accounting errors. Errors may be due to wrong posting or calculation mistakes. A suspense account may be created temporarily. Errors must be identified and corrected.
14. What is a suspense account?
A suspense account is used to temporarily record differences in the trial balance. It is opened when errors cannot be located immediately. Once errors are found, the suspense account is closed. This will help to proceed with the final accounts.
15. What is rectification of errors?
Rectification of errors means correcting mistakes made in accounts. Errors may occur during posting or calculation. Rectification entries are passed to correct balances. It ensures accuracy in financial records.
16. What is an opening balance?
The opening balance is the balance brought forward from the previous accounting period. It appears at the start of a new financial year. Assets and liabilities usually have opening balances. This maintains continuity in accounting records.
17. What is a closing balance?
Closing balance is the balance at the end of an accounting period. It is carried forward to the next period and shows the final position of an account. Closing balance helps in preparing financial statements.
18. What is reconciliation in the general ledger?
Reconciliation means comparing ledger balances with external records. For example, a bank ledger is compared with a bank statement. It helps identify differences and errors. Reconciliation improves accuracy and control.
19. What is a control account?
A control account summarizes detailed accounts in one balance. Examples include debtor and creditor control accounts. It helps track totals easily and reduces workload and errors.
20. What is a subsidiary ledger?
A subsidiary ledger contains detailed information related to a control account. It supports the general ledger. Customer and supplier ledgers are common examples. It will also help to maintain detailed records.
21. What is accrual accounting?
Accrual accounting records income when it is earned and expenses when incurred. Cash movement is not necessary for recording. It provides a true financial picture. Most companies follow this method.
22. What is cash accounting?
Cash accounting records transactions only when cash is received or paid. Income is recorded on receipt and expenses on payment, and is simple to maintain. However, it may not show true profit.
23. What is an adjusting entry?
Adjusting entries are passed at the end of an accounting period. They update account balances for accuracy. Examples include outstanding expenses and prepaid income. They ensure correct profit calculation.
24. What is an expense account?
An expense account records costs incurred by a business. Examples include rent, salary, and electricity. Expenses reduce profit. They usually have debit balances.
25. What is an income account?
An income account records the earnings of a business. Examples include sales and service income. Income increases profit. These accounts generally have credit balances.
26. What is a capital account?
The capital account records the owner’s investment in the business. It also includes profits and drawings, and it normally has a credit balance. This will represent the owner’s equity.
27. What is a drawing account?
The drawing account records money withdrawn by the owner. It reduces capital and also has a debit balance. This is also closed to the capital account at period end.
28. What is a bank ledger?
Bank ledger records all bank-related transactions. It includes deposits and withdrawals. In addition, it also helps track bank balance, and it can be used for bank reconciliation.
29. What is a cash ledger?
Cash ledger records all cash transactions. It shows cash received and paid, and it always has a debit balance or zero. This will help control daily cash flow.
30. What is the outstanding expense?
Outstanding expense is an expense incurred but not yet paid. It belongs to the current accounting period, and it is treated as a liability. Adjusting entry is also required.
31. What is a prepaid expense?
Prepaid expense is an expense paid in advance. It benefits future accounting periods and is treated as an asset. Adjustment is made at period end.
32. What is depreciation?
Depreciation is a reduction in the value of fixed assets. It occurs due to usage or time and is treated as an expense. So, it reduces asset value in books.
33. What is a provision?
Provision is an estimated amount set aside for future expenses. The exact amount is not known. It is charged as an expense and also ensures financial safety.
34. What is a reserve?
Reserve is profit retained for future use. It strengthens financial position. It is not an expense; it appears under equity in the balance sheet.
35. What is a balance sheet?
A balance sheet shows assets, liabilities, and capital. It is prepared at the end of a period. This will show the financial position of a business. Ledger balances are also used.
36. What is a profit and loss account?
The profit and loss account shows income and expenses. It calculates net profit or loss, for a specific period. This will help to measure performance.
37. What is the double-entry system?
The double-entry system records two effects of every transaction. One debit and one credit are recorded. It ensures accuracy in accounting.
38. What is narration in a journal entry?
A narration is a short note with each journal entry that explains the purpose of the entry.
39. What is an error of omission?
An error of omission occurs when a transaction is completely missed. It is not recorded in a journal or ledger. The trial balance may still tally. So, rectification is required.
40. What is an error of commission?
Error of commission occurs due to wrong posting. The amount may be posted to the wrong account. The trial balance may still match. But a correction entry is needed.
41. What is an error of principle?
An error of principle occurs when accounting rules are violated. Here, the wrong account type is used. Example: capital expense treated as revenue. Note that the trial balance still tallies.
42. What is an error of duplication?
Error of duplication happens when a transaction is recorded twice. It increases balances incorrectly. The trial balance may still match. But correction is required.
43. What is an audit trail in a ledger?
Audit trail tracks changes made to entries. It shows who made changes and when. This will improve transparency. It is very useful during audits.
44. What is ledger balancing?
Ledger balancing is finding the difference between debit and credit. It determines the account balance. Balance is carried forward. It helps prepare a trial balance.
45. What is a journal voucher?
Journal voucher supports journal entries. It contains transaction details, and it will also help to verify records. This is very important for audits.
46. What is a posting reference?
Posting reference links journal and ledger entries. This will help to track the source of entries. It ensures accuracy.
47. What is a contra entry?
Contra entry affects both cash and bank. Example: cash deposited into the bank. Both debit and credit occur. It is recorded in a cash book.
48. What is an accounting period?
An accounting period is the time for which accounts are prepared. It is usually one year. All transactions are recorded within this period. Financial results are measured.
49. What is ledger scrutiny?
Ledger scrutiny means checking ledger accounts carefully. It helps find errors or irregularities. This is a part of internal control. It can improve accuracy.
50. What skills are required to handle the general ledger?
Handling the general ledger requires accounting knowledge. Accuracy and attention to detail are very important. Also, basic software knowledge is needed. Time management also matters.
Conclusion
General ledger interview questions focus on basic accounting concepts and practical understanding. A clear understanding of ledger entries, balances, and error handling is very important. Practicing these questions will improve confidence during interviews. Strong fundamentals help build a successful accounting career. If you are weak in these fundamentals, you can strengthen your skills by joining specialized accounting courses in Kerala offered by Finprov Learning, a renowned institute.
