What does a general ledger summarize?

A general ledger is a critical component of accounting, as it serves as the main accounting record for a business. It summarizes all transactions that have been recorded in various journals over a specified period, categorizing them by account. This means that the general ledger includes all debits and credits associated with each account, providing a comprehensive view of the financial activities of the business.

By summarizing accounts from journals, the general ledger facilitates the generation of financial statements, which are essential for assessing the financial health of a company. However, it is distinct from financial statements themselves, as the ledger is the source from which those statements are ultimately derived. In this sense, it provides detailed transaction-level data, whereas financial statements offer an overview of that information for stakeholders.

While auditing processes and tax obligations might be derived from the general ledger, they do not directly summarize the transactions therein. The primary function of the general ledger is to organize and summarize the financial activities recorded in journals, making option C the correct and most descriptive answer.