How GL Works
This post is for small to mid-sized companies who may be vetting general ledger accounting software.
The following is sourced from Wikipedia. We hope you find it useful:
“A general ledger contains all the accounts for recording transactions relating to a company’s assets, liabilities, owners’ equity, revenue, and expenses.
In modern accounting software or ERP, GL works as a central repository for accounting data transferred from all subledgers or modules like accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects.
The general ledger is the backbone of any accounting system which holds financial and non-financial data for an organization.
The collection of all accounts is known as the general ledger. Each account is known as a ledger account. In a manual or non-computerized system this may be a large book.
The statement of financial position and the statement of income and comprehensive income are both derived from the general ledger.
Each account in the ledger consists of one or more pages. The GL is where posting to the accounts occurs.
Chart of Accounts
Posting is the process of recording amounts as credits (right side), and amounts as debits (left side), in the pages of the ledger. Additional columns to the right hold a running activity total (similar to a checkbook).
The listing of the account names is called the chart of accounts. The extraction of account balances is called a trial balance. The purpose of the trial balance is, at a preliminary stage of the financial statement preparation process, to ensure the equality of the total debits and credits.
The general ledger should include the date, description and balance or total amount for each account. It is usually divided into at least seven main categories.
These categories generally include assets, liabilities, owner’s equity, revenue, expenses, gains and losses. The main categories of the GL may be further subdivided into subledgers to include additional details of such accounts as cash, accounts receivable, accounts payable, etc.”
With 35 years of business and accounting experience, Passport Software provides comprehensive yet easy to use general ledger accounting software for small businesses and medium sized companies.
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