What are the 4 sections in a general ledger?
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In bookkeeping, a general ledger, is a bookkeeping ledger in which accounting data is posted from journals and aggregated from subledgers, such as accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. A ledger account is created for each account in the chart of accounts for an organization, are classified into account categories, such as income, expense, assets, liabilities and equity, and the collection of all these accounts is known as the general ledger. The general ledger holds financial and non-financial data for an organization.[1] Each account in the general ledger consists of one or more pages. An organization's statement of financial position and the income statement are both derived from income and expense account categories in the general ledger.[2] Show Terminology[edit]The general ledger contains a page for all accounts in the chart of accounts[3] arranged by account categories. The general ledger is usually divided into at least seven main categories: assets, liabilities, owner's equity, revenue, expenses, gains and losses.[4] The main categories of the general ledger may be further subdivided into subledgers to include additional details of such accounts as cash, accounts receivable, accounts payable, etc. 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.[5] Process[edit]Posting is the process of recording amounts as credits (right side), and amounts as debits (left side), in the pages of the general ledger. Additional columns to the right hold a running activity total (similar to a chequebook).[6] The general ledger should include the date, description and balance or total amount for each account. Because each bookkeeping entry debits one account and credits another account in an equal amount, the double-entry bookkeeping system helps ensure that the general ledger is always in balance, thus maintaining the accounting equation: The accounting equation is the mathematical structure of the balance sheet. Although a general ledger appears to be fairly simple, in large or complex organizations or organizations with various subsidiaries, the general ledger can grow to be quite large and take several hours or days to audit or balance.[8][citation needed] In a manual or non-computerized system, the general ledger may be a large book. Organizations may instead employ one or more spreadsheets for their ledgers, including the general ledger, or may utilize specialized software to automate ledger entry and handling. When a business uses enterprise resource planning (ERP) software, a financial-features module produces subledgers and the general ledger, with entries drawn from a database that is shared with other processes managed through the ERP. The general ledger is a master of all accounts of your business and is primarily used for monitoring your business’s financial activity. It details all business accounts and account activity during a period. The general ledger report contains the account summaries, including details of every transaction going in and out of your accounts. It is organized not only by date but also by account type. What this article covers: What Is the Purpose of a General Ledger?Before computers, when record-keeping was done by hand, accountants would maintain three journals: accounts receivable, accounts payable, and payroll. The summaries of these journals would be recorded in the general ledger. The books would balance if the information was accurate and all the entries were correct. The general ledger reports are used by businesses that use the double-entry accounting system, which means that the transaction affects two general ledger accounts. Each entry has a debit and a credit transaction. What Are the Types of Ledger?The general ledger report lists the general accounts in the chart of accounts. Here are the main types of general ledger accounts:
The expenses and revenues can be divided into operating and non-operating revenues and expenses. These accounts are debited and credited to record transactions throughout the year. How to Read a General Ledger Detail Report?The accounts in a general ledger report are listed with their account numbers and transaction information, including date, client, and notes. Here is a general ledger template in debit and credit format. Source: https://support.freshbooks.com/hc/en-us/articles/360006980031-What-is-the-General-Ledger-Report- There are 5 sections in the general ledger report, including assets, liabilities, equity, income, and expenses. These are divided into monthly sections, beginning and ending monthly balances. What Is the Importance of a Ledger?Since the general ledger contains a database of information about accounting transactions, it is mainly used by accountants and auditors for investigating accounts. Here are some of the other reasons why accountants use a general ledger report:
The general ledger is a comprehensive summary of the different parts of your accounting. It’s the source of all your other financial reports, such as your profit and loss and balance sheet. You can check how your expenses have changed from one period to another. The differences can help you locate unprofitable products, negotiate for better prices with vendors and locate embezzlement. If you’re using accounting software to create a general ledger report, you can filter the report by a custom date range and currency and also export the report to excel or get a printout. What are the contents of general ledger?Contents of a General Ledger
The general ledger is comprised of all the individual accounts needed to record the assets, liabilities, equity, revenue, expense, gain, and loss transactions of a business. In most cases, detailed transactions are recorded directly in these general ledger accounts.
What are the four columns in a ledger account form?The four-column ledger account form has spaces to enter the account name, the account number, the date, a description of the entry, and the post- ing reference. It also has four columns in which to record dollar amounts: Debit, Credit, Debit Balance, and Credit Balance.
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