General ledger account

What is a general ledger account?

A general ledger records all income and expenditure of a company. This is done by classifying them by type in one of the various general ledger accounts. General ledger accounts are either of the balance sheet account type or of the income statement account type.

What is a general ledger account used for?

The general ledger provides information on the state of the balance sheet and income statement after all transactions of a financial year. Every element of assets, liabilities, costs and income, such as fixed assets or depreciation, has one or more (sub)accounts of its own. Together they form the general ledger. For example, you book the purchase of a meeting table to the general ledger account “office expenses”, while the purchase of new stock ends up in the general ledger account “inventories”.

General ledger accounts therefore offer the advantage that the business manager sees the cost items at a glance. You immediately see how much fitting out an office cost, what amount went to staff costs and whether the electric company bike stayed within the planned budget.

Which general ledger account number should you use?

The Belgian government imposes a detailed chart of general ledger accounts, each with its own number. This makes Belgium unique, because all balance sheets become transparently comparable, without the quirks that make quite a few foreign balance sheets, for example, difficult or even impossible to understand.

If you wish, you can further detail the general ledger accounts with sub-accounts, for example to better reflect your characteristic activity. The number of each account follows a structure. Based on the first digit, each group of accounts forms an account class; accountants therefore speak of the six and seven accounts: all cost accounts start with a six, the income accounts (revenue) with a seven. The main classification:

0 – Rights and commitments not included in the balance sheet

1 – Equity, provisions for risks and charges, and debts due after more than one year

2 – Formation expenses, fixed assets (intangible, financial, tangible) and receivables due after more than one year

3 – Inventories and contracts in progress

4 – Receivables and debts due within one year

5 – Investments and cash

6 – Costs (but also other elements from the income statement and appropriation of results)

7 – Income (but also other elements from the income statement and appropriation of results)

Further subdivision is done by adding digits within a class. An example within class ‘2’:

20 – Formation expenses

21 – Intangible fixed assets

22 – Land and buildings

23 – Plant, machinery and equipment

In this way, an account can be detailed further and further. An example in the same class with three digits:

220 – Land

221 – Buildings

An example with four digits:

2211 – Office buildings

2212 – Production buildings

2213 – Commercial premises