Blog

As a supplement to the general ledger, your chart of accounts lists the account names and purposes of all your sub-ledgers. While the above accounts appear in every general ledger, other accounts may be used to track special categories, perform useful calculations and summarize groups of accounts. For example, cash and account receivables are part of the company’s assets. Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors.

A general ledger account (GL account) is a primary component of a general ledger. The transactions are related to various accounting elements, including assets, liabilities, equity, revenues, expenses, gains, and losses. In bom acct meaning this instance, one asset account (cash) is increased by $200, while another asset account (accounts receivable) is reduced by $200. The net result is that both the increase and the decrease only affect one side of the accounting equation. The GL is a big part of your company’s overall financial picture, acting as an important repository of all your accounting data.

General Ledgers and Double-Entry Bookkeeping

If you use accounting software, the software itself should guide you through the process of reconciliation. (If you work with an accountant, they’ll perform the same process using whichever accounting software their firm works with.) Generally speaking, you’ll follow these steps to reconcile your ledger. In this guide we’ll walk you through the financial statements every small business owner should understand and explain the accounting formulas you should know. These codes are sometimes called an “account number.” In this example, all puppet-making-material purchases are coded 205, all sales revenue is coded 103, and so on.

Cost Per Invoice CalculatorCost of Invoice Processing

You may include individual assets and accounts like accounts payable and receivable, liabilities, inventory, and investments. This information is used to prepare financial reports, monitor finances, track cash flow, and prevent accounting errors or fraud. When expenses spike in a given period, or a company records other transactions that affect its revenues, net income, or other key financial metrics, the financial statement data often doesn’t tell the whole story. In the case of certain types of accounting errors, it becomes necessary to go back to the general ledger and dig into the detail of each recorded transaction to locate the issue. At times this can involve reviewing dozens of journal entries, but it is imperative to maintain reliably error-free and credible company financial statements.

Is a General Ledger Part of the Double-Entry Bookkeeping Method?

With journal corrections in mind, balances in the general leger adobe acrobat pro dc with e are compared against financial data, such as bank statements. If discrepancies are found, reconciliation requires investigating for unusual transactions, or otherwise explaining the error. In that case, to get the job done—creating a chart of accounts, creating trial balances, and producing monthly financial reports—you should consider talking to a bookkeeper. The money your business earns and spends is organized into subsidiary ledgers (also called sub-ledgers, or general ledger accounts).

The expense side of the income statement might be based on GL accounts for interest expenses and advertising expenses. The GL serves as the basis for a company’s income statements, balance sheets, and cash flow statements. By keeping your general ledger up-to-date, stakeholders, investors and analysts can accurately assess the company’s performance. Double-entry bookkeeping is the most common accounting system for small businesses.

If you decide to research double-entry bookkeeping, you’ll probably come across the term “trial balance” often. Trial balances are a financial tool specific to double-entry bookkeeping. If you choose to set up a double-entry ledger, you should be ready to prepare trial balances regularly. To maintain financial health, your total debit balances must equal your total credit balances. Rather than combing through your bank statements, credit statements, and invoices when looking for one transaction, any stakeholder can just check the general ledger and see all accounting records in one place. In accounting, the terms debit and credit differ from their commonplace meanings.

If your business is busy, and you find it hard to keep your books organized with this template, it may be time to consider double-entry bookkeeping. If you’re more of an accounting software person, the general ledger isn’t something you use but an automated report you can pull. Your software of choice will probably have an option to “View general ledger,” which will show you all the journal entries you’ve entered (for a given time frame). As a document, the trial balance exists outside of your general ledger—but it is not a stand-alone financial report. Think of your general ledger as growing the wheat before you make the bread that is your financial statements. It provides bookkeepers with the information they need to generate any reports.

1. That’s because all of your company’s financial reporting—including its balance sheet—are prepared using information in the general ledger.
2. It’s available to download in Google Docs, Google Sheets, XLS, DOC, and PDF, making it easier to see your business finances at a glance.
3. This ensures that financial records remain accurate and up-to-date, allowing for timely decision-making and financial reporting.
4. This information is used to prepare financial reports, monitor finances, track cash flow, and prevent accounting errors or fraud.

Accounting software automates some of the most tedious aspects of general ledger reconciliation, such as automatically generating journal entries and streamlining bank reconciliation. General ledger reconciliation is the process of making sure your GL is accurate. You (or your accountant) will check the transactions recorded in your general ledger against primary documents like receipts, tax documents, invoices and other records. You’ll make sure every transaction is accurate and has been correctly recorded as both a credit and debit in the appropriate accounts.