Welcome to your ultimate accounting resource


The General Ledger and Accounting Software

Before we start on the specific elements ofcurrent - within 1 year - and those that are
general ledger software, and where all thenot current - longer than a year - we are not
pieces fit, you need to understand the basicsgoing into that depth - leave that to your
of financial statement and how you can readaccountant and worry about it when you have
them.There are two main parts to yourmastered everything else)( Note - the trade
business's financial statement -Thedebtors account is only money that is owed to
accounting software will produce a Profit andus as a result of selling goods on account to
Loss, which shows your day to day incomecustomers of ours. Other monies owed to the
reflected against your expenses and thereforebusiness such as staff loans etc would be
shows what your profit, or loss, is.Theshown separately. The same with Trade
accounting software will also produce aCreditors. This is money that we owe to
Balance Sheet, which shows your businesspeople that we purchase from on an ongoing
assets against liabilities and thebasis for example - people that we buy goods
accumulated earnings of your business overfor resale from, telephone account, petrol
the years.Lets first look at how theseaccount and so on. People that we owe money
reports are arrived at -You must firstto on a longer term basis i.e. a bank loan
understand, or accept the first mainare shown separately)Regarding the bank
principle of double entry bookkeeping beforeaccount - assuming that your bank account
we start and that is -For every entry mademostly has money in it, and, therefore, it
there must be an equal and opposite entryfalls under Assets (the money is an asset
made somewhere else and when you havebelonging to your business). If the account
finished making your entries they must allis mostly in overdraft then typically it
add up to zero. Don't worry most accountingwould fall under the Liabilities section (the
software packages will make most of these daymoney is a loan from the bank and a business
to day entries for you.Sounds weird - notliability).If it fluctuates between the two
really. The whole principal is logical andsimply pick where it mostly is. It's not a
goes back to the days when all books wheremajor issue. Let's say for example you put it
done manually, because accounting softwareunder assets and then it went into overdraft
didn't exist, and by making all of theall that would happen is that it would be
entries add up to zero we knew we hadshown with brackets around it.Things to
correctly entered our numbers. We may notregularly check -(like at least once a month
have entered them into the right slot but at- more when you are starting out and going
least we had created the basis of being onthrough the learning curve) -Your customer's
the right track. And even though yourage trial balance (a list of how much your
accounting software will, in most cases, makecustomers owe you from the receivables
most of the entries for you, you mustmodule) must always equal the Trade Debtors
understand the principle behind it.Even ifaccount in the Ledger.Logical isn't it when
you enter something in the wrong 'slot' it isyou think about it. The Receivables module is
nearly always a simple process to move ittelling us that the customers owe x amount of
where it should be later on.A Profit and Lossmoney. This amount must be the same as the
report  has  five  main  elementsIncomeLedger is telling us that the customers
owe.Your suppliers age trial balance (a list
Cost  of  Salesof how much you owe your suppliers from the
Payables module) must always equal the Trade
Gross  ProfitCreditors account in the LedgerYour Stock
Value report from the Products module should
Expensesalways equal the Stock on Hand account in the
LedgerYour bank statement should regularly be
Net Profit (or loss) - sometimes called thereconciled back to the balance that the Bank
Bottom LineThe Net Profit line is also knownaccount shows in the ledger.Why should you
as The Bottom Line. You sometimes hear thecheck these balances regularly - because
expression that if we did this or that itthings can go wrong and if you only pick it
would go straight to the bottom line. Inup several months later you are only making
plain talk what this expression means isit harder for yourself to find out why they
that, say for example, we were able to dodon't balance. At least if you do it often
away with motor expenses in the above Profityou may remember if something unusual
and Loss report and incurred no otherhappened.If you find something doesn't
alternative expense in its place then thebalance - find out why as soon as possible
$3000.00 motor expenses would go straight toand fix it. If you need help get it - ask
the bottom line and increase our net profityour accountant, software trainer or some
by $3000.00A balance sheet, in veryother knowledgeable personI have been
simplistic terms, has two main elementsinvolved in all aspects of the accounting
-Assetssoftware industry for over 20 years. I run
several websites that specialize in various
Liabilities(please note that assets andsubjects including that gives advice on all
liabilities are nearly always broken up intoaspects of accounting software from choosing,
sub sections - typically those that aresetting up and using it.



1 A B C D E 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 130 131 132 133