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General Ledger and Trial Balance: A Plain-English Guide

What the general ledger and trial balance are, how journal entries feed them, and what a trial balance that refuses to balance is really telling you. With a worked month for a Lagos business.

By Flux Editorial TeamPublished 4 min read

Illustrative example with fictional data.

The general ledger is the complete record of every transaction a business has made, sorted by account. The trial balance is a one-page summary of it that proves the books are arithmetically sound. Owners rarely read either directly, but every profit and loss and balance sheet they do read is built from them, so it helps to know what they are and what they can and can't tell you.

Three ideas to hold first

Every transaction touches at least two accounts. When a customer pays you ₦1,343,750, your bank goes up and the amount the customer owes you goes down. This is double entry: one side is a debit, the other a credit, and they're always equal.

Debit and credit are directions, not good and bad. Debits increase assets and expenses. Credits increase liabilities, equity and income. That's all the words mean.

The chart of accounts is the list of accounts. The ledger is what's been written in them.

Journal entries: how transactions arrive

A journal entry is the instruction that records a transaction: which accounts, which side, how much, when and why. Here is October for Adebayo & Co. Logistics, an Ikeja haulage business that started the month with ₦5,000,000 of share capital sitting in the bank.

1. Invoice to Lekki Heights Montessori, ₦1,250,000 plus 7.5% VAT

Account Debit Credit
Trade receivables ₦1,343,750
Haulage revenue ₦1,250,000
VAT payable ₦93,750

The VAT goes to a liability, not to revenue: it's money held for the tax authority. See VAT in Nigeria.

2. The customer pays in full by bank transfer

Account Debit Credit
Cash at bank ₦1,343,750
Trade receivables ₦1,343,750

3. Diesel for the Trans-Amadi depot, paid by voucher

Account Debit Credit
Fuel and diesel ₦410,000
Cash at bank ₦410,000

4. October salaries: ₦2,000,000 gross, ₦180,000 PAYE and ₦120,000 employee pension deducted, ₦1,700,000 paid to staff

Account Debit Credit
Salaries and wages ₦2,000,000
PAYE payable ₦180,000
Pension payable ₦120,000
Cash at bank ₦1,700,000

In each entry, the debits equal the credits. The payroll figures are illustrative; how PAYE itself is worked out is covered in our guide to PAYE under the Nigeria Tax Act 2025.

The general ledger: the same entries, sorted by account

The ledger takes those journal lines and files them under each account, with a running balance. The bank account for October looks like this:

Date Detail Debit Credit Balance
01 Oct Opening balance ₦5,000,000
14 Oct Receipt · Lekki Heights Montessori ₦1,343,750 ₦6,343,750
20 Oct PV · diesel, Trans-Amadi ₦410,000 ₦5,933,750
28 Oct October net salaries ₦1,700,000 ₦4,233,750

Every account has a page like this. When someone asks "why is fuel so high this month?", the answer is in the fuel account's ledger page: each line, its date and the entry that put it there.

The trial balance: the books on one page

At month-end, list every account's closing balance in two columns, debits and credits:

Account Debit Credit
Cash at bank ₦4,233,750
Trade receivables ₦0
Fuel and diesel ₦410,000
Salaries and wages ₦2,000,000
Share capital ₦5,000,000
Haulage revenue ₦1,250,000
VAT payable ₦93,750
PAYE payable ₦180,000
Pension payable ₦120,000
Total ₦6,643,750 ₦6,643,750

The columns agree, because every entry had equal debits and credits. The financial statements come straight from here: income and expense accounts make the profit and loss, and the rest make the balance sheet.

When it won't balance

If the totals differ, something was entered one-sided. Work through these in order:

  1. Halve the difference and look for an amount of that size posted to the wrong side. A ₦205,000 difference often means a ₦102,500 debit was entered as a credit.
  2. Divide the difference by 9. If it divides exactly, look for transposed digits: ₦410,000 typed as ₦401,000 leaves ₦9,000.
  3. Look for the whole difference as a single missing line.
  4. Re-add the columns. Spreadsheet ranges that miss a row are a classic cause.

What a balanced trial balance doesn't prove

This is the part that catches people out. A trial balance proves the arithmetic, not the accounting. It will still balance if:

  • a transaction was never recorded at all, such as an invoice raised in Word but never entered;
  • an entry went to the wrong account of the right type, such as fuel posted to vehicle repairs;
  • the same transaction was entered twice;
  • an amount was wrong on both sides, such as ₦1,250,000 recorded as ₦125,000 throughout.

That's why the month-end close reconciles the ledger to outside evidence, such as bank statements and supplier statements, rather than relying on the trial balance alone.

How Flux helps

Today, Flux holds your chart of accounts (create it, import it from Excel, export it) and the transaction records produced by your payments and vouchers, with approvals and an audit trail behind each one, and Tax & Reporting covers VAT, WHT and payment exports. The general ledger, journal entries, trial balance and period close described in this guide are on the roadmap, not available yet. See what's planned on the Finance & Accounting page and ask to be notified when they ship.

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