Accounting - General Ledger

The general ledger is the basis of any company’s financial records. These account for the central “books” of your system, and every transaction flows through the general ledger. These records are kept as a permanent track of the history of all financial transactions since the beginning of your company.

Your accounting system will have numerous subsidiary ledgers (called subledgers) for items such as cash, accounts receivable, and accounts payable. All the entries that are inputted (called posted) to these subledgers will transact through the general ledger account. For example, when a credit sale posted in the account receivable subledger gets transformed into cash due to a payment, the transaction will be entered to the general ledger and the two (cash and accounts receivable) subledgers as well.

There are times when items will go straight to the general ledger without any subledger posting. These are mainly capital financial transactions that have no operational subledgers. These may comprise items such as capital contributions, loan proceeds, loan repayments (principal), and proceeds from sale of assets. These items will be associated with your balance sheet but not to your profit and loss statement.

There are two main issues you must be familiar with when setting up the general ledger. One is their relation to your financial reports, and the other is the setting up of opening balances.

The two fundamental financial documents of any company are their balance sheet and the profit and loss statement, and both of these are retrieved directly from the company’s general ledger. The order of how the numerical balances are shown is determined by the chart of accounts, but all entries that are inputted will be shown. The general ledger accrues the balances that constitute the line items on these reports, and the variations are reflected in the profit and loss statement as well.

The opening balances that are enrolled on your general ledgers may not always be zero as you might assume. The asset side will show all tangible assets (the value of all machinery, equipment, and inventory) that is available as well as any cash that has been invested as working capital. The liability side will show any bank (or stockholder) loans that were used, as well as trade credit or lease payments that you may have procured in order to begin the company. You will also push forward your stockholder equity in the amount you have invested, but not loaned to, the business.

The General Ledger accounting software module is crucial to any accounting system. The chart of accounts and a company's income statement and balance sheet are kept in the General Ledger. Due to the flexibility of the General Ledger accounting software module, it can be used by any business.

The accounting periods are user defined and may be kept open as long as needed with multiple periods open at the same time. Any transaction may be set right until the period is closed. The flexible up to 64 digit alphanumeric account number format enables companies to enter any existing chart of accounts which serves in setting-up of the General Ledger record.

General Journal Entries of the General Ledger permits interactive entry, editing and posting of general journal transactions. General Ledger accounting software module interacts with other Modules whenever necessary. General Ledger is updated by all of the other modules as data is processed, enabling “real-time” reporting.