THE GENERAL LEDGER
Whenever you make any accounting entry you always visualize how it will affect the General Ledger. The General Ledger (or GL for short) is the heart of the accounting system. The GL shows each item in the Chart of Accounts. For each item it shows:
· the beginning amount,
· each entry whether debit or credit,
· and the ending amount.
You can look at the financial statements with confidence because you know that each line item in them can be explained by the GL.
Depending on the software, the GL report may not show all of the detail. It may just give you a summary with a code to tell you where to get the details. When this happens, you may have to go to the Purchase Journal, the Cash Disbursements Journal, or even the General Journal for the specific transaction.
Whether the report is detailed of summarized, know that where the data comes from. It comes from everywhere! Every transaction that gets entered into the Accounts Receivable, the Accounts Payable, Cash Receipts, Cash Disbursements, or anywhere else transactions get entered all make it into the General Ledger. This means that this is the place to look to see everything that has gone on.
The first thing you should always look for when you examine a GL is the period it covers. Typically, a report may cover only one month at a time. This is because when the financial statements are printed, the accountant should want a copy of the GL to answer questions about the numbers came to be.
The trade-off is that you need to look at past month’s reports to get the full story about an account. This is why in the workbook (where you keep the reports) you like all of your GL Reports together in one tab.
Software usually allows you to print out GL reports for the entire year.
A big problem with GL Reports occurs when the accountant makes entries to prior periods after the GL is printed. Unless the GL is reprinted for each month after the entry is made, they won’t match up to what is in the system.
It is better to print out the GL before printing the financials. You go down each account and make a check mark to show that you’ve at least looked at it. Yes, this can use a lot of paper and ink but you catch a lot of mistakes that way. Then you print the financials, the final reports (including the final GL) and close out the month.
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