A ledger is a book or collection of various accounts. The general ledger forms an integral part of double-entry bookkeeping, and it is a collection of accounts for your small business's assets, liabilities, capital, expenses and incomes. Specialized ledgers, such as sales and purchases ledgers, often complement the general ledger. Information from the general ledger feeds to financial reports, such as the income statement and balance sheet.

Asset Accounts

The general ledger contains accounts for various categories of assets, including fixed assets, such as buildings and machinery; intangible assets, such as patents; and current assets, such as cash and stocks. These accounts also include transactions in which other parties owe your business money. The balance sheet reflects the totals of the various asset categories. To record increases in asset accounts, you debit the account; to record decreases, you credit the account.

Expenditure Account

Expenditure or expense accounts can come in varied types, but their impact is uniform: They reduce profits. Examples of expenses include transportation, wages, utilities, repairs and depreciation, and you record each of these in separate accounts in the ledger. The profit and loss statement reflects the various expense amounts. Debit expense accounts to show increases to the account, and record credits to show decreases.

Income Accounts

Income accounts record small-business incomes that may derive from different sources. Examples of this can include rent from tenants on your property or income from investments in the stock market. You record income derived under these various sources separately under their respective accounts in the general ledger. Record all increases with a credit to the account and decreases with a debit. These amounts are carried to the profit and loss statement, which is also known as the income statement.

Liabilities Account

Your business likely incurs various liabilities during its operations. It may have failed to pay the utility company, bought machinery on credit terms or obtained a small loan from a bank. In all such events, the business generates liabilities under these respective accounts; as such, you record these amounts in the general ledger. A credit to liabilities accounts reflects an increase, while a debit reflects a decrease. You report these totals in the balance sheet.

Capital Accounts

For a small business, the capital account reflects the amount you, as a business owner, invested in your company. This amount also shows the company's reserves. When you make new investments in your company or if your business makes a profit, your capital increases. Capital decreases if you withdraw profits from the company or if the company experiences a loss. A credit to the capital account means the account increased, and a debit means the account decreased.

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