Bookkeeping All-In-One For Dummies. Dummies Consumer

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Chapter 3

      The General Ledger

       In This Chapter

      As a bookkeeper, you may be dreaming of having one source that you can turn to when you need to review all entries that impact your business’s accounts. (Okay, so maybe that’s not exactly what you’re dreaming about.) The General Ledger is your dream come true. It’s where you find a summary of transactions and a record of the accounts that those transactions impact.

      In this chapter, you discover the purpose of the General Ledger. It tells you how to not only develop entries for the Ledger but also enter (or post) them. In addition, it explains how you can change already posted information or correct entries in the Ledger and how this entire process is streamlined when you use a computerized accounting system.

      The Eyes and Ears of a Business

      Of course, the book known as the General Ledger isn’t alive, so it can’t actually see or speak. But wouldn’t it be nice if it could just tell you all its secrets about what happens with your money? That would certainly make it a lot easier to track down any bookkeeping problems or errors.

      Instead, the General Ledger serves as the figurative eyes and ears of bookkeepers and accountants who want to know what financial transactions have taken place historically in a business. By reading the General Ledger – not exactly interesting reading, unless you just love numbers – you can see, account by account, every transaction that has taken place in the business. (And to uncover more details about those transactions, you can turn to your business’s journals, where transactions are kept on a daily basis. See Chapter 5 for the lowdown on journals.)

      

The General Ledger is the granddaddy of your business. You can find all the transactions that ever occurred in the history of the business in the General Ledger account. It’s the one place you need to go to find transactions that impact Cash, Inventory, Accounts Receivable, Accounts Payable, and any other account included in your business’s Chart of Accounts. (See Book I Chapter 2 for more on setting up the Chart of Accounts and the kinds of transactions you can find in each.)

      Developing Entries for the Ledger

      Because your business’s transactions are first entered into journals, you develop many of the entries for the General Ledger based on information pulled from the appropriate journal. For example, cash receipts and the accounts that are impacted by those receipts are listed in the Cash Receipts journal. Cash disbursements and the accounts impacted by those disbursements are listed in the Cash Disbursements journal. The same is true for transactions found in the Sales journal, Purchases journal, General journal, and any other special journals you may be using in your business.

      At the end of each month, you summarize each journal by adding up the columns and then use that summary to develop an entry for the General Ledger. That takes a lot less time than entering every transaction in the General Ledger.

      Book I Chapter 4 introduces you to the process of entering transactions and summarizing journals. Near the end of that chapter, this entry for the General Ledger appears:

      

Note that the Debits and Credits are in balance – $2,900 each. Remember all entries to the General Ledger must be balanced entries. That’s the cardinal rule of double-entry bookkeeping. (For more details about double-entry bookkeeping, check out Book I Chapter 1.)

      In this entry, the Cash account is increased by $2,900 to show that cash was received. The Accounts Receivable account is decreased by $500 to show customers paid their bills, and the money is no longer due. The Sales account is increased by $900, because additional revenue was collected. The Capital account is increased by $1,500 because the owner put more cash into the business.

      Figures 3-1 through 3-4 summarize the remaining journal pages prepared in Book I Chapter 4, resulting in the following entries for the General Ledger:

      © John Wiley & Sons, Inc.

       Figure 3-1: Summarizing cash transactions so they can be posted to the General Ledger.

      © John Wiley & Sons, Inc.

       Figure 3-2: Summarizing sales transactions so they can be posted to the General Ledger.

      © John Wiley & Sons, Inc.

       Figure 3-3: Summarizing goods to be sold transactions so they can be posted to the General Ledger.

      © John Wiley & Sons, Inc.

       Figure 3-4: СКАЧАТЬ