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A general ledger template is an important document used by businesses for a holistic view. This document includes a list of all the transactions from the starting of your business to the present.
What is general ledger with an example?
It is basically a master sheet of all your business’ accounting. This indicates that it includes all of the transactions that your business has made since the starting. The main purpose of this document is to organize these transactions. This way, it becomes easier for you to know the total money that you’ve earned and the expenses that you paid.
The difference of your credits from debits is reflected by the balance of an accounting ledger template. This can be calculated by taking the difference between the numbers of debits from the total number of credits. In the ledger, the information is essential. This is because it will your the basis for making informed decisions. Furthermore, the ledger indicates the bigger picture of the growth and finances of your business. You may also see the account statement template.
When do you require it?
If you are going to make your own general ledger, then there are some essential reasons that why this is a good idea;
- It gives you with the right record of your business’s financial transactions.
- To balance your books, it allows you to compile a trial balance.
- Since you have your business’ income and expenses in a single place, it makes filing tax returns much easier.
- To stay on top of your spending, it reports real expenses and revenue.
- It assists you in determining unusual transactions right away.
- It assists you in finding fraud and stop it right away.
- It helps in compiling key financial statements. These are important to assess your business’ liquidity, profitability, and overall financial health.
The elements of a general ledger:
You can use the general ledger to accurately forecast your business’ financial health as it contains all of your business’s financial transactions of all its accounts. This document can also be used as the main database of your business’s financial information. The basic elements of general ledger are;
You can break this ledger down into various categories. Here are the categories;
- Assets: these are the property of your business and resources then produce value. They may involve cash, property, inventory, equipment, patents, and trademarks.
- Liabilities: your business must have to pay them, they are the future or current financial debts. Current liabilities contain taxes and employee salaries. Lines of credit, mortgages, leases, or bank loans are included in future liabilities.
- Equity: it indicates the difference among the value of your business’ liabilities and assets. You have negative equity in case your business has more liabilities than assets. Conversely, your business has positive equity if you have more assets than liabilities. Stock options, common stock, or stocks are included in inequity on the basis of whether your business is either publicly or privately owned by owners or shareholders.
- Revenue: from the sales of your services or products, this is your business’ income derived. Revenue contains royalties, interest, sales, or any other fees that your business has gathered from other businesses or people.
- Expenses: in exchange for a service or product, these consist of the money paid by your business. Expenses contain utilities, travel, meals, and rent. It generally contains a front page that has a list of the names of the accounts you have documented within.
- Sub-ledgers: this section is found in accounts that give information regarding the entries documented in account ledgers.
In conclusion, there must be a balance in between the debit and credit amounts in a general ledger template. The general ledger is the foundation of your business’ accounting system. You have to maintain current and concise records in order to determine your business’ financial health.