What Should Be In Your Company’s General Ledger
As your business grows, collecting receipts in a folder and logging expenses in a notebook just doesn’t cut it anymore. You’ll have to create the general ledger for your company, which is a financial tool that’s essentially a master list of every financial action made within your business. Your general ledger should include your assets, liabilities, and equity accounts, and any changes to these accounts should be listed as they happen. It includes every transaction throughout your company’s lifetime.
How do I format my general ledger?
Your ledger will be divided into two columns - debit balance and credit balance. Each transaction should have a description of what it is. At the end of the month, your debit and credit columns should be equal. This is also known as the double-entry method.
What can your general ledger tell you?
Your general ledger is more than a piece of paper or busy work. It gives you information on your company from all angles. Your ledger alerts you of seasonal changes in revenue, increased bad debt, profit growth, and new or increased expenses. Then you act accordingly, whether it be changing your cash management strategies or reinvesting in your business.
You’ll also be using your general ledger to construct every other financial document, like income statements, balance sheets, and cash flow statements to name a few.
What should be in your general ledger?
You’ll be using your Chart of Accounts to create your general ledger since you need to list all of the accounts your business has. These will be divided into five categories: assets, liabilities, equity, revenue, and expenses.
Your general ledger will only give back what you put in. Keeping it up-to-date keeps your company in the know. Adding to your general ledger just once a month is enough to keep it updated. You can also list entries in your general ledgers that allow you reclassify amounts, correct any accounting errors, or close any accounts at the end of the fiscal year. In addition, you can track and monitor sales of goods, costs of products, inventory, projects, and vendors.
If you need help setting up your company’s general ledger, contact your bookkeeper/accountant or us. We’d be happy to help!