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GENERAL LEDGER TEMPLATES
When you adopt a holistic point of view, it becomes easier to identify any advantages or issues that affect your whole organization. When applied to business, you can depend on a general ledger template for a holistic view because it contains a list of all the transactions from the beginning of your business to the present.
What is general ledger with an example?
A general ledger template is a master sheet of all of your business’ accounting. This means that it contains all of the transactions that your business has made since the beginning. One of the main purposes of this ledger is to organize these transactions so you can understand the total money that you’ve earned and the expenses that you paid.
The balance of an accounting ledger template reflects the difference of your credits from debits. You can calculate this by subtracting the number of debits from the total number of credits. The information in the ledger is essential as this will your the basis for making informed decisions.
Having a general payment ledger template is important for your business files as it organizes and records all of the payment activities between your business accounts. The information in the ledger shows you the bigger picture of the growth and finances of your business.
The money that your business spends and earns is neatly organized into the ledger. You can compare these to notebooks that you use to write your business transactions down as they occur. Then you summarize everything in a master notebook – the general ledger. Here are a few examples of this ledger:
- Accounts receivable is an asset account that shows the money owed to your business.
- Accounts payable is an expense account that shows the money your business owes.
- Cash is an equity account that shows the liquid assets that your business owns.
- Inventory is an asset account that shows the purchases or sales that affect your business inventory.
Why do you need it?
If you’re interested in making your own general ledger, there are some important reasons why this is a good idea even if you own a small business. These include:
- It provides you with an accurate record of your business’ financial transactions
- It allows you to compile a trial balance to balance your books.
- It makes filing tax returns much easier since you have your business’ income and expenses in a single place.
- It reports real expenses and revenue for you to stay on top of your spending.
- It helps you identify unusual transactions right away.
- It helps you find fraud and stop it right away.
- It aids in compiling key financial statements that are essential for evaluating your business’ liquidity, profitability, and overall financial health.
For small businesses, the most common accounting system to use together with a general ledger template is Double-Entry Bookkeeping. This is a method of managing daily transactions with a built-in error checking. You record each business transaction two times:
- When money leaves an account.
- When money enters an account.
Before setting up your financial ledger template, you must first decide first whether you will use the double-entry method or the single-entry method. The second one is rarely used and is more suited to simpler, smaller businesses where there are very few transactions that occur each month.
If you learn more about double-entry bookkeeping, it is very likely that you will often encounter the term “trial balance.” This is a financial tool specific to double-entry bookkeeping. If you decide to choose this type of ledger, you must learn how to prepare trial balances regularly.
Part of the preparation of a trial balance is to make sure that your accounting is error-free before you can come up with financial statements for a specific accounting period. The purpose of a trial balance is to tally all of your credits and debits for the accounting period and make sure they match up.
An error will result in your books getting out of balance. When this happens, you need to go back and make revisions until you come up with a corrected trial balance. Then you can use this to prepare your financial statements.
Remember that the trial balance document is not part of the ledger and it isn’t a financial report. Its function is for internal use in the process of creating business reports. Accountants and bookkeepers use a very simple formula to use:
Assets = Liabilities + Equity
The assets you’ve recorded should be equal to the sum of your equity and liabilities. If these aren’t equal, it means that your books are out of balance and you need to correct them. The formula above is very simple yet powerful and whatever accounting method you use, this equation will always apply.
What does General Ledger look like?
A general ledger template must always be in balance between the debit and credit amounts. The ledger also holds the recorded information of all your business account information over the course of its life you need for preparing financial statements.
Since the general ledger contains all of your business’s financial transactions of all its accounts, you can use it to accurately forecast your business’ financial health. You can use your financial ledger template as the main database of your business’s financial information and records with other financial documents sourced from the information provided in the ledger.
To get a better understanding of what a general payment ledger template looks consider these elements:
- Ledger Accounts
There are various categories in which you can break this ledger down into. These categories are the following accounts:
These are the resources that are the property of your business then produce value. Assets may include cash, property, inventory, equipment, patents, and trademarks.
These are the future or current financial debts that your business must pay. Current liabilities include taxes and employee salaries. Future liabilities include lines of credit, mortgages, leases, or bank loans.
This refers to the difference between the value of your business’ liabilities and assets. If your business has more liabilities than assets, you have negative equity. If you have more assets than liabilities, your business has positive equity.
Equity can include stock options, common stock, or stocks depending on whether your business is either publicly or privately owned by owners or shareholders.
This is your business’ income derived from the sales of your services or products. Revenue includes royalties, interest, sales, or any other fees that your business collects from other businesses or individuals.
These consist of the money paid by your business in exchange for a service or product. Expenses include utilities, travel, meals, and rent.
A typical ledger usually includes a front page that contains a list of the names of the accounts you have documented within. This is the “Chart of Accounts” and the documentation of a single account within the ledger is often referred to as an “Account Ledger.”
The sub-ledgers found inside an account provide details behind the entries documented in account ledgers like if they’re credited or debited by accounts payable, cash, accounts receivable, and so on.
How to make a general ledger template
Accounting is a very important part of any business. For you to determine your business’ financial health, you must maintain current and concise records. Your business’ accounting system may consist of several parts but the foundation of the system itself is the general ledger which, as discussed, is the recording of all your business’ accounts.
From these balances and accounts, you can create your business’ most crucial financial tools – the income statement and the balance sheet. Therefore, it becomes very important that your general ledger template should always be up-to-date.
Otherwise, any financial information regarding your business will be incorrectly stated and this can be very disastrous. To make an Excel business ledger template, here are some steps to guide you:
- Create the Chart of Accounts
An accounting ledger template contains a comprehensive list of all the accounts of your business. Generally, most accounting systems contain the following sections:
- Asset accounts that begin with “1.”
- Liability accounts that begin with “2.”
- Owner’s equity accounts that begin with “3.”
- Revenue accounts that begin with “4.”
- Expense accounts that begin with “5.”
For instance, one of your business’ cash accounts could get assigned with 101, accounts payable with 202, retained earnings with 301, and so on. If you have a smaller business, you can begin with 100. If you have a larger business, you can use 1000 as your starting account number.
- Create an entry for each of the accounts you have created
Each account that you have identified in your Chart of Accounts should get assigned with its own page of transactions. Providing each of your business accounts with its own page makes deleting and adding accounts faster and easier. You should enter the accounts into the ledger following the same arrangement you assigned in your Chart of Accounts.
- Assign a value to each of your accounts
Some accounts might have zero balance. For instance, if you have an account with a local electrician but you don’t know anything about their services, that account will have a balance of zero. In contrast, if you paid $800 in office supplies, your ledger will begin at $800.
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