What is the Difference Between GL and Chart of Accounts?
In accounting, terms like “general ledger” and “chart of accounts” are often used interchangeably – but they are not the same. Both are essential to keeping your financial records organized, but they serve distinct purposes.
Let’s break down the difference.
What is a Chart of Accounts (COA)?
The chart of accounts is simply a list – a categorized index – of all the accounts a business uses to track financial activity. It acts like a roadmap for your bookkeeping system.
Each account is given a unique code and grouped into major categories like:
- Assets (e.g., Cash, Inventory)
- Liabilities (e.g., Loans, Credit Cards)
- Equity (e.g., Owner’s Draw, Retained Earnings)
- Income (e.g., Sales, Service Revenue)
- Expenses (e.g., Rent, Utilities, Marketing)
Example of a Chart of Accounts Entry:
| Account Name | Account Type | Account Number |
|---|---|---|
| Bank of America Checking | Asset | 1001 |
| Advertising Expense | Expense | 6001 |
What is a General Ledger (GL)?
The general ledger is the detailed, chronological record of all transactions posted to the accounts listed in your chart of accounts. While the COA is a list of “what” you track, the GL is “where” the activity happens.
Each GL entry includes:
- Date
- Description
- Debit and credit amounts
- Account affected
Your trial balance, income statement, and balance sheet all pull data from the general ledger.
Key Difference
- Chart of Accounts = Structure
- General Ledger = Activity
The COA defines your bookkeeping system. The GL is the actual financial data recorded under that structure.
Test Case Example
A retail business hires a new bookkeeper who enters expenses without setting up a proper chart of accounts. As a result, the general ledger becomes messy – with overlapping or mislabeled accounts like “Ad,” “Ads,” and “Advertising.”
RemoteBooksOnline steps in, cleans up the COA, and reclassifies historical transactions in the GL. Now, reports are clean, accurate, and easy to interpret.
Why It Matters for Small Businesses
- A well-organized COA ensures consistent categorization
- A clean GL gives you visibility into where your money is going
- Errors in either can lead to inaccurate reports, missed deductions, and IRS red flags
- Clean GL = easier tax filing and better business decisions
FAQs
Can I change my chart of accounts later?
Yes, but do it carefully. Reclassifying accounts can impact historical reporting and tax calculations.
What happens if my GL and COA don’t match?
You’ll likely have inconsistent reports. RemoteBooksOnline can help audit and align them properly.
Do I need accounting software to manage GL and COA?
While software like QuickBooks makes it easier, you can manage them manually – though it’s riskier and more time-consuming.
What’s the best chart of accounts for my business?
It depends on your industry. RemoteBooksOnline offers industry-specific COAs to match your business type.
Think of your chart of accounts as the skeleton of your bookkeeping system, and your general ledger as the muscle. Together, they keep your business financially strong and tax-ready. If you’re unsure how yours is set up – or if your reports don’t make sense – it may be time for a professional review.
Need help setting up or cleaning your GL and COA?
Get started with RemoteBooksOnline’s expert bookkeeping today.
Wondering about GL vs. Chart of Accounts? Our GL vs. Chart of Accounts guide explains the difference and how each plays a role in accurate bookkeeping.
Explore the Standard Chart of Accounts-our guide to the standard chart of accounts explains its structure, categories, and how to tailor it for your business efficiency.
