General Ledger - Introduction and Use Cases

Created by Shujaat Khan from Asaan Retail, Modified on Thu, 01 Sep 2022 at 02:30 PM by Shujaat Khan from Asaan Retail

TABLE OF CONTENTS


General Ledger - Introduction

The general ledger is a master accounting document providing a complete record of your business's financial transactions (accounts receivable and accounts payable). It helps you look at the bigger picture. Accounts include assets (fixed and current), liabilities, revenues, expenses, gains, and losses.

This guide will give you some important reasons that make it mandatory to track your financial transactions in the general ledger and a few key concepts that will help you better understand the general ledger and how it works in Asaan Retail. Some may find them slightly overwhelming, but overall they’re pretty straightforward.

Reasons Why You Need a General Ledger?

It’s always up to you (or your financial advisor) to decide what suits you as a business owner. You may be fine without a General Ledger, accounting software, or even an accounting system. But, just because we want to help you cover all your bases, here are seven compelling reasons why you must track record of your finances in Asaan Retail's General Ledgers:

  • It provides an accurate record of all financial transactions
  • It helps you compile a trial balance, so your book balance
  • It makes filing tax returns easy because all expenses and income are in one place
  • It reports actual revenue and expenses so that you can stay on top of spending
  • It helps you spot unusual accounting transactions immediately
  • It enables you to identify (and stop) fraud
  • It aids in compiling critical financial statements, which are crucial for evaluating your profitability, liquidity, and overall financial health. These include the cash flow statement, income statement, trial balance, and balance sheet.


Double Entry Account in Asaan Retail

Regardless of what you decide works for you and your business, general ledger accounts use the double-entry accounting method or financial reporting: An entry to one account requires an opposite entry to another account. Rephrased: Every time you enter a debit on a general ledger account, you must also enter a credit on another general ledger account or vice versa.

A debit is an accounting entry that increases: 

  • an asset, 
  • expense, or 
  • dividend account

A debit is an accounting entry that decreases: 

  • a liabilities or
  •  owner’s equity account

Alternatively, credits increases: 

  • Liability,
  •  revenue, 
  • and equity accounts, 

Alternatively, credits decreases:

  • an asset, 
  • expense, or 
  • dividend account


Sub Ledgers or Journals in Asaan Retail

Financial transactions are first recorded in sub-ledgers or journals before they’re transferred to a general ledger. So if a ‘general ledger’ is the master of all financial reports for looking at the bigger picture, ‘journals’ are the documents for analysing the finer details of your business.

Journal entries are usually recorded daily; as with general ledger accounts, you’ll have a credit and a debit for each entry.

There are 3 types of journals in Asaan Retail - Customer Ledger, Supplier Ledger, and Expenses:

  • The Customer Ledger is for recording sales and refunds to the customers.
  • The Purchase Ledger is for recording purchases made by your business from suppliers.
  • The Expenses Ledger is for keeping a record of all your business expenses

More About Customers Ledger

The Customers ledgers consist of all transactions relating to every customer, i.e. all invoices raised and paid for from day one. Customer ledgers list customers with detailed transaction information and outstanding balances per customer. The top of the report provides debit, credit, and balance totals.

Learn how to create and manage a customer ledger in Asaan Retail

More About Suppliers Ledger

The Supplier ledgers consist of all transactions relating to every supplier, i.e. all invoices raised and paid for from day one. Supplier ledgers list suppliers with detailed transaction information and outstanding balances per supplier. The top of the report provides debit, credit, and balance totals.

Learn how to create and manage a supplier ledger in Asaan Retail

More About Expense Ledger

An expense ledger keeps a detailed record of all the expenses incurred by a business or a person. These expenses include all your expenditures necessary to keep the business operational.

Learn how to create and manage an expense ledger in Asaan Retail

 

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