Accounting ledger and ledger management easily explained
The accounting ledger contains all accounting transactions. All posted business transactions are recorded chronologically. The classification is based on business years. In your accounting software, all documents such as incoming and outgoing invoices, cash receipts and account statements are classified. The so-called account book is the book from which all transactions can be obtained. The cash ledger records every cash transaction. It is the general ledger and is created from the cash on hand or how much it changes compared to the previous day. The accounts ledger, where the individual accounts receivable and payable to customers and suppliers are listed, is also useful for your overall accounting. While the account book shows the chronological course of the transactions, the general ledger with the G/L accounts provides their content structure. Account book and account sheets of G/L accounts in the general ledger are the two main pillars of accounting.
Accounting entry in the accounting ledger
First and foremost, the fiscal year is started in the accounting ledger. The current movements in the account book then start at this point. Chronological transactions then correspond to the principles of double-entry bookkeeping. This record keeping is automated in the software. This means that all outgoing invoices are invoiced in the invoice program and from there recorded in the relevant accounts – which is important for your entire accounting system.
Annual financial statements for your company
The end of the financial year is approaching. All closing entries in the balance sheet accounts must now be prepared and processed. First, the balances of all accounts are determined and posted. The account balances have already been recorded in a closing balance in the accounting ledger. This provides an overview of the economic situation at the end of the fiscal year in a closing account. This account is not a balance sheet account, but an auxiliary account. It’s for overview purposes only. For example, if the value of an account has not changed during the year, there are no entries in the account book for that account. Then the closing balance corresponds to the opening balance in the fiscal year. Once completed, it is no longer possible to post within the closed year and in the corresponding account book.