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General Ledger Basics

The general ledger in accounting software includes five major account categories: assets, liabilities, equity, revenue, and expenses. The general ledger is governed by two basic accounting formulae, one relating assets to liabilities and equity, and the other relating income to expenses and profit. There are two major reports in the general ledger: the balance sheet, which uses the assets-liabilities-equity formula to summarize the value of a business at a point in time, and the income statement, which uses the income-expenses-profit formula to summarize business performance over a period of time.

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52 views1 page

General Ledger Basics

The general ledger in accounting software includes five major account categories: assets, liabilities, equity, revenue, and expenses. The general ledger is governed by two basic accounting formulae, one relating assets to liabilities and equity, and the other relating income to expenses and profit. There are two major reports in the general ledger: the balance sheet, which uses the assets-liabilities-equity formula to summarize the value of a business at a point in time, and the income statement, which uses the income-expenses-profit formula to summarize business performance over a period of time.

Uploaded by

Chenta Florish
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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General Ledger Basics

Five Accounting Categories

The software's General Ledger is delivered with the five major accounting categories built right in. (We refer to them as Accounts) They are: 1. Assets (what you own), 2. Liabilities (what you owe), 3. Equity (the value of your business), 4. Revenue (money you bring in), and 5. Expenses (money you pay out).
Two Basic Accounting Formulae

All General Ledger accounting is governed by these two basic accounting formulae: Formula 1: Assets (what you own on a specific date) - Liabilities (what you owe on a specific date) = Equity (the value of your business on a specific date) Formula 2: Income (money you bring in over a specified period) - Expenses (money you pay out over the specified period) = Profit (changes to the value of your business over the specified period)
Two Major GL Reports

There are two major General Ledger Reports: 1. Balance Sheet (which summarizes the value of your business at a certain instant in time using Formula 1). You may print a Balance Sheet any time, for any date since you started using the software. 2. Income Statement (which summarizes how the business did over a given period of time using Formula 2). You may print an Income Statement at any time, for any period since you started using the software. Most businesses, of course, print the two major reports at the end of each month, quarter, and fiscal year.

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