Accounting & bookkeeping
General Ledger Accounting: Read Balances and Trace a Reference
A general ledger organizes accounting activity by account. Reading it means checking each opening balance, movement and closing balance, then following the source reference when something is unclear. The exercise below starts with populated accounts; it does not ask you to construct journal entries or post them.
Read the account and its balance direction
OpenStax describes a ledger as the account-organized record used after journal recording. In this original fictional example, cash and receivables carry debit balances and payables carry a credit balance. All amounts are teaching currency units, with no tax or interest. The three accounts are an extract, not the complete books.
For an asset account here, debits increase the balance and credits decrease it. For the payable, credits increase what is owed and debits decrease it. Read the column labels before treating every positive-looking entry as an increase.
Try the populated-ledger exercise
Calculate each closing balance and name the record you would inspect for the unexplained 450 payable movement. References identify source entries, not proof that the entry was correctly classified.
Original ledger extract
Cash: opening debit 4,200; debit receipt R-14 of 900; credit payment P-22 of 650; reported closing debit 4,450.
Accounts receivable: opening debit 1,200; debit invoice S-18 of 700; credit receipt R-14 of 900; reported closing debit 1,000.
Accounts payable: opening credit 800; credit journal J-37 of 450, description missing; debit payment P-22 of 650; reported closing credit 600.
Check the arithmetic, then the evidence
Cash closes at 4,200 + 900 − 650 = 4,450. Receivables close at 1,200 + 700 − 900 = 1,000. Payables close at 800 + 450 − 650 = 600. All three reported balances agree with their stated movements.
That agreement does not explain J-37. Inspect the referenced journal and its supporting document, confirm the counter-account and review status, and record what remains unresolved. Do not rename it a purchase merely because it increases payables. A balanced extract can still contain a wrong classification or unsupported amount.
Explain the result clearly
A useful practice answer separates arithmetic from confidence in the source. It does not declare the complete business records correct based on three account extracts.
Original explanation
“The movements reconcile to all three reported closings. The payable includes an unexplained 450 credit referenced J-37. I would trace that reference and its support before concluding that the liability is valid; the arithmetic alone does not resolve it.”
Avoid the two common shortcuts
Do not add cash, receivables and payables as though their signed totals form a complete trial balance. Other accounts are absent. Also avoid changing a correct closing number to make a description look plausible. Preserve the observed balance while investigating the source.
For another practice round, replace the reported receivable closing with 1,100. The same movements support 1,000, leaving a 100 discrepancy to report. That identifies a mismatch; it does not identify its cause.
Questions, answered
Is a ledger the same as a journal?
The ledger groups activity by account; the journal records entries in transaction order.
Does a matching balance prove an entry is correct?
No. J-37 reconciles arithmetically but still needs supporting evidence.
Sources and examples
ResumizeAI team. Examples are fictional teaching material, not customer results. Replace sample details with your own facts.
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