In any business, finance industry, or accounting firm, general ledger accounts are crucial to keep a record of business transactions. Any small business can have 4-5 general ledger accounts and a large business can end up having with 100s of general ledger accounts. In my previous article, I talked about chart of accounts, let me tell you that general ledger is similar as those found in chart of accounts. In fact, without chart o accounts, general ledger account would not exist. However, the question arises, ‘how general ledger accounts are used in bookkeeping?’ I am going to tackle the question in this article.
So, let’s start from scratch.
What is general ledger account?
In very simple words, General ledger (GL) is all about keeping record of a company’s total financial account. The accounts you will get to see in general ledger include: assets, liabilities, equity, expense, and income or revenue. You can also say that the general ledger record physical or digital record of such information in more sophisticated system of accounting software. Additionally, you can use avail virtual accounting services in phoenix for your financial needs.
Let’s talk about the main part of this article.
How general ledger account is used in bookkeeping?
To understand this, you have to understand how bookkeepers use general ledger accounts. Following are the few points that will help you understand this:
- – They use general ledger to record received and paid out payments into account categories.
- – They verify account balances through reconciliations
- – Also, the balance the books
- – Through general ledger, they prepare reports as well
In fact, as a bookkeeper if you’re using bookkeeping software, you can also print a full detailed ledger of accounts to PDF format once in a month. Let me tell you that PDF file is backup document for you. So, this is how general ledger account is used in bookkeeping. In case, you are unaware of this, make sure to hire bookkeeping services in charlotte to make work easier for you.
Let’s understand the general ledger process below
Step by step general ledger process
- 1. The process of general ledger begins with creating journal having detail of every business transactions whenever any transaction takes place.
- 2. Once journal is created, you have to categorize each transaction under a relevant account like sales, accounts payable, cash.
- 3. On regular basis, make sure to adjust the information inside these accounts
- 4. After following mentioned 3 steps, you’re done. It’s time to transfer your journal entries to the general ledger.
So, this is the complete process of general ledger account which you just read now.
Why you need a general ledger account?
If you’re still concern about the need of a general ledger account then you must keep reading below. Till, now you have read about general ledger account, the use of it in bookkeeping, and its process. Now it’s time to look at the need of having this account. So, below I’m going to enlist some compelling reasons why you need general ledger account for your small as well as large business.
- – You get an accurate record of all financial transactions
- – You can easily compile a trial balance to balance your accounting books
- – It provides you real report of revenue and expenses so that you can stay on top of your spending.
- – You can easily fill out tax returns as you have income and expenses in a single plate.
- – If there is any fraud, you can easily locate or identify it.
- – You can also spot unusual transaction taking place in the business on immediate basis.
- – Moreover, the ledger account helps in compiling key financial statements through which you can evaluate your profitability, liquidity, and overall financial health of the company.
Now that you have read this article, I hope it’s clear to you about general ledger account and it is used in bookkeeping. I would say general ledger account is very important for keeping the financial transactions of your business. In the beginning, you may find it herculean task, but with the help of virtual bookkeeping services in atlanta you can ease out this process for you and your company. No doubt, once you start using general ledger accounts, you will find it very empowering for your entire business.
In case, you have got any query, make sure to get in touch with kayabooks.