General Ledger Concepts

This article discusses the concept of accounting calendar and accounting periods. Learn why different companies have different accounting periods. Understand some of the commonly used periods across different organizations and the definition & use of an adjustment period.

In most of the automated financial systems you can define more than 12 accounting periods in a financial year.  This article will explain the concept of adjustment period and the benefits of having adjustment periods. Adjustment periods have their inherent challenges for the users of financial statements and there is a workaround for those who don’t want to use adjustment periods.

Currency is the generally accepted form of money which is issued by a government and circulated within an economy. Accountants use different terms in context of currency such as functional currency, accounting currency, foreign currency and transactional currency. Are they the same or different and why we have so many terms? Read this article to learn currency concepts.

A chart of accounts (COA) is list of the accounts used by a business entity to record and categorize financial transactions. COA have transitioned from the legacy accounts, capturing just the natural account, to modern day multidimensional COA structures capturing all accounting dimensions pertaining to underlying data enabling granular level of reporting. Learn more about role of COA in modern accounting systems.

This article explains the process of entering and importing general ledger journals in automated accounting systems. Learn about the basic validations that must happen before the accounting data can be imported from any internal or external sub-system to the general ledger. Finally understand what we mean by importing in detail or in summary.

In this tutorial we will explain what we mean by posting process and what are the major differences between the posting process in the manual accounting system compared to the automated accounting systems and ERPs. This article also explains how posting also happens in subsidiary ledgers and subsequently that information is again posted to the general ledger.

Review and Approval mechanisms ensure that the accounting transaction is reasonable, necessary and comply with applicable policies. Understand why we need review and approval processes, what are they and how they are performed in automated general ledger systems. Learn the benefits of having these mechanisms in place.

Period End Accruals, Receipt Accruals, Paid Time-Off Accruals, AP Accruals, Revenue Based Cost Accruals, Perpetual Accruals, Inventory Accruals, Accruals Write Off, PO Receipt Accrual, Cost Accrual etc. are some of the most complex and generally misconstrued terms in context of general ledger accounting. In this article we will explore what is the concept of accrual and how it impacts general ledger accounting.

In this article we will describe how to determine if an account needs adjustment entries due to the application of matching concept.Learner will get a thorough understanding of adjustment process and the nature of the adjustment entries. We will discuss the four types of adjustments resulting from unearned revenue, prepaid expenses, accrued expenses and accrued revenue.

Understand what we mean by GAAP to STAT adjustments. This article discusses the different standards that are used for multiple representations of the financial results for global organizations. Understand the meaning of US GAAP, Local GAAP, STAT, IFRS and STAT. Finally understand why accounting differences arise and how they are adjusted for different financial representations.

This article will explain the concept of accrued expenses/accrued liability. Discusses the need to record accrued liabilities and why they require an adjustment entry. Understand the treatment for these entries once the accounting period is closed and learn to differentiate when the commitments become liabilities.

Understand what we mean by the terms accrued revenue, accrued assets and unbilled revenue. Explore the business conditions that require recognition of accrued revenue in the books of accounts and some industries where this practice is prevalent. Finally understand the accounting treatment and how unbilled revenue is different from account receivable.

Learn the concept of prepaid expenses. Understand the accounting treatment for prepaid expenses. Understand the concept by looking at some practical examples and finally learn the adjusting entry for these expenses. Also look at the accounting entries that will be performed in the ERPs or automated systems.

Learn the concept of unearned revenue, also known as deferred revenue. Gain an understanding of business scenarios in which organizations need to park their receipts as unearned. Look at some real life examples and understand the accounting treatment for unearned revenue. Finally look at how the concept is treated in the ERPs or automated systems.

Explore the concept of journal reversals and understand the business scenarios in which users may need to reverse the accounting entries that have been already entered into the system. Understand the common sources of errors resulting in reversal of entries and learn how to correct them. Discuss the reversal of adjustment entries and the reversal functionalities in ERPs.

Understand the difference between accruals and reversals. Recap the earlier discussion we had on accruals and reversals and see the comparison between these two different but related accounting concepts. Understand how the action of accruing results in reversals subsequently in the accounting cycle.

A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries.See an example of reversing journal entry!

Understand the concept of recurring journals and the characteristics of recurring journals. Learn the various methods that can be used to generate recurring journals. See some examples and explore the generic process to create recurring journals in any automated system.

Understand what is the meaning of allocation in accounting context and how defining mass allocations simplifies the process of allocating overheads to various accounting segments. Explore types of allocations and see some practical examples of mass allocations in real business situations.

After reading this article the learner should be able to understand the meaning of intercompany and different types of intercompany transactions that can occur. Understand why intercompany transactions are addressed when preparing consolidated financial statements, differentiate between upstream and downstream intercompany transactions and understand the concept of intercompany reconciliations.

In this article we will do a recap of the double entry accounting systems and will learn what we mean by trial balance. Understand the importance of trial balance and why it is balanced. Learn how it is prepared, what the format is, how to analyze trial balance and what the benefits of taking a trial balance are.

Modern business organizations are complex, run multiple product and service lines, operate globally, leverage large number of registered legal entities and have varied reporting needs. These complexities create need for advanced general ledger systems providing new functionalities. A discussion on the complexities faced by designers of modern GL systems.