What is the primary function of the general ledger?

The primary function of the general ledger is to serve as the central repository for all financial transactions of a company, effectively containing all balances of a company's accounts. This involves recording entries related to assets, liabilities, equity, revenues, and expenses. The general ledger provides a comprehensive view of all financial data, allowing for accurate financial reporting and analysis.

By consolidating account balances, the general ledger enables businesses to maintain organized financial records, ensures clarity in the financial statements, and supports essential processes such as reconciliation and audit preparation. Having all account balances in one place streamlines the accounting process and offers insights into the overall financial health of the organization, which is crucial for decision making.

In contrast, other options like tracking external audits or separating operational and capital expenditures do not encompass the primary function of the general ledger. The ledger is also not solely focused on summarizing individual account activity, though it can provide summary information through trial balances and financial statements that derive from the data recorded within it. Thus, its role as a complete account of balances is fundamental to its purpose.