General Ledger Concepts

2.0 General Ledger

Concepts

Technofunctional Body of Knowledge

Chartered Technofunctional Institute

2.0 GENERAL LEDGER CONCEPTS 2012

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2.0GeneralLedgerConcepts

Chartered Techno functional Institute brings to you Techno functional Body of Knowledge

series on General Ledger under the process area of Finance.

This tutorial is brought to you by www.technofunc.com , a website dedicated to the profession of

Techno Functional Professionals, helping technical experts gain functional and business expertise. All

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In this tutorial we will learn the important concepts used in General Ledger and their role in I T

Projects/E R P’s. Understand the building blocks of a good and effective General Ledger system. This will

provide us with the understanding of the key functional areas of any General Ledger System and will be

beneficial to any professional working on a project that includes General Ledger.

The intended audience for this tutorial is anybody who wants to understand the GL Concepts

irrespective of their IT background. This will be helpful to everyone who wants to understand the basics

of any effective accounting systems. For Information Technology professionals this overview lesson

relates the GL concepts to automated accounting systems and will help them understand the

requirements more effectively, while working on financial technology projects.



TechnoFunc is on a mission to create “Technology Independent Expertise”.

Let’s start the lesson and move to first topic on GL Concepts and what we will be learning in this tutorial.

2.1GLConcepts:

In this part of this series we will focus on GL Concepts in detail to build strong conceptual foundation.

During this tutorial we will be doing a deep dive into the following concepts to help you understand

what they mean:

1. Accounting Periods and Calendars.

2. Adjustment Period.

3. Currency – Functional and Foreign.

4. Chart of Accounts.

5. Journals – Entry and Import.

6. Posting & Balances.

7. Review and Approval.

8. Accruals and Reversals.

9. Recurring Journals.



10. Allocations.

11. Intercompany.

12. Trial Balance.

This tutorial is intended to give those of you who are not familiar with the operation of a general ledger,

basic knowledge about its operation and functionalities, as well as some explanation of commonly used

accounting concepts. We have purposefully abstained from the basic double‐entry book keeping

concepts in this tutorial and will focus on key functionalities expected out of any automated general

ledger system.

This tutorial focuses on these concepts from the perspective of an I T professional who is expected to

work on any project involving design, build or interface to an automated GL system, rather than a

student of accounting.

At the end of this chapter, combined with the functional knowledge acquired in Chapter 1 on General

Ledger Fundamentals, you will acquire a basic understanding of GL Functionalities, GL Processes,

Understanding of Steps in GL Processes and what activities they do supplement with some important

concepts in GL and Accounting. We will close this chapter by making you understand what a trial

balance is and in the next chapter we will have a deep dive on some key accounts that make the

foundation of accounting as well as any General Ledger system. Any good technical or techno‐functional

consultant will be able to understand the major GL Setups of any automated accounting package after

this foundation. Our later chapters will enable you to acquire mastery in these concepts as we explain

each one of them in greater detail.

We hope that understanding these concepts in detail will help you truly understand the business

requirements and equip you with the necessary functional knowledge to build effective and sustainable

I T solutions.

Let’s move to next topic to understand Accounting Periods and Accounting Calendars.



2.2AccountingPeriodsandCalendars:

Accounting Period in bookkeeping is the period with reference to which accounting books of any entity

are prepared. It is the period for which books are balanced and the financial statements are prepared.

Natural Calendar: Generally, the accounting period consists of 12 months and might follow the natural

calendar. Natural Calendar follows the natural sequence of months from January to December.

Special Calendar: Any calendar not following the natural months is “Special Calendar”, for example, like

the special calendar from “April to March” in some countries. In some countries the beginning of the

accounting period differs according to the jurisdiction. For example in India the prescribed accounting

year is from April to March. The Australian government's financial year begins on July 1 and concludes

on June 30 of the following year. The Financial Year in Costa Rica spans from October 1 until September

30 of the following year.

Fiscal Calendar: The International Financial Reporting Standards allows up‐to period of 52 weeks as an

accounting period also known as “Fiscal Calendar”. Large number of companies use 52 weeks fiscal

calendar for their reporting and financial tracking purposes. Many companies find that it is convenient

for purposes of comparison and also for accurate stock taking to always end their fiscal year on the

same day of the week, where local legislation permits. Thus some fiscal years will have 52 weeks and



others 53. Fiscal years vary between businesses and countries. Fiscal year may also refer to the year

used for financial reporting or for Income Tax Reporting.

4–4–5 Calendar: It is another method of managing accounting periods. It is common calendar structure

for some industries, like retail, manufacturing and parking industry. 4–4–5 calendar divides a year into 4

quarters. Each quarter has 13 weeks which are grouped into two 4‐week "months" and one 5‐week

"month". The grouping of 13 weeks may be set up as 5–4–4 weeks or 4–5–4 weeks, but the 4–4–5 is the

most common arrangement. Its major advantages over a regular calendar is that the end date of the

period is always the same day of the week, which is useful for shift or manufacturing planning, and in

this calendar every period is the same length. Each accounting period for one business year corresponds

to the same accounting period in the previous year, and the next year. This helps in comparative analysis

and provides a review and forecast tool for management.

52–53‐Week Fiscal Calendar: It is a variation of the 4–4–5 calendar. It is used by companies that want

their fiscal year to end on the same day of the week. Any day of the week may be used as the ending

day, and use of Saturday and Sunday is common as this facilitates counting inventory and other year end

accounting activities due to business holiday. Some major drawbacks for non‐calendar periods are:

These calendars result in 364 days (13 periods X 4 weeks X 7 days per week) and there are 365

days in a year. This shortfall of 1 day each year needs adjustment.

Bank statements are usually done on a monthly basis and can make the bank reconciliations

process a little complicated.

Some expenses are billed on a monthly basis. You might need to make adjustments for these

types of expenses.

Transaction Calendar for Average Balancing: Some industries like banking needs to maintain their

average daily balances. They need to define their transaction calendars specifying each valid business

days for which the average balances needs to be calculated and maintained in General Ledger.

Calendar Adjustments: Large corporations conduct their businesses across the globe spanning multiple

countries. In some jurisdictions or countries, the accounting books needs to be maintained as per the

rules prescribed by the local laws of that country. Parent company being the owner of the subsidiary

units operating in different countries, need to consolidate its results for reporting in its base country of

registration. As the units, that are part of the same group of businesses, are not maintaining the same

fiscal year in their local books, consolidating company need to adjust for transactions between units

with different fiscal years. This adds complexity to consolidation processes and automated general

ledgers help manage these complicated adjustments.

E R P tools provide you with the flexibility to define more than 12 accounting periods in a financial year.

As a best practice companies using automated general ledgers define adjustment periods in their

accounting calendars. They put one accounting period as "Year Open" period to clear carried over

balances from last financial year and last period as "Year Close" where adjustment transactions are

made for the same financial year. These periods are generally known as “Adjustment Periods”. We will

discuss the concept of adjustment periods in detail in the next page.



2.3AdjustmentPeriod:

In most of the automated financial systems you can define more than 12 accounting periods in a

financial year. They put one accounting period as "Year Open Period” to clear “carried over balances”

from last financial year and last period as "Year Close Period" where adjustment transactions are made

for the same financial year. These periods are generally known as “Adjustment Periods”, sometimes are

also referred to as “Zero Periods”. Most E R P’s provide the functionality to define adjustment periods.

Benefits of Adjustment Periods:

“Opening Adjustment Period”: Adjustment period at the beginning of the year helps tracks opening

balances and transactions. At the beginning of the year you can create journals to transfer all your

opening balances for the current year. Generally there is an overlap between the opening of the new

financial year and finalization of audit of the previous year. This results in creation of many adjustment

entries in the previous year that has an impact on the opening balances of the current year. You can

capture those adjustments in a separate “opening adjustment period” to keep a complete track of your

normal and adjustment entries. The starting period “Zero” is used to store the starting balance for each

balance sheet account.



“Closing Adjustment Period”: Similarly, defining an adjustment period at the close of the year helps

track closing balances and adjustment transactions. Multiple closing periods allow production of

financial statements reflecting various stages of closing and are helpful in providing complete audit trail.

This helps controlling any back dated entries in the main accounting periods.

Tracking Errors & Omissions: Errors and Omissions discovered after the year close, can be corrected by

passing relevant entries in the Adjustment Period once the main period has been closed as per the

company yearend policy.

Stat to Management Reconciliation: Adjustment Period can also be used to track reconciliation entries.

Large corporations need to pass many reconciliation entries to tally their Statutory and Main

Consolidation Books. Adjustment period is useful in tracking the entries made to reconcile the

consolidation books with the Local Country Books.

Exclusion for Management Reporting: After the close of the books, a large number of entries like

accounting entries for accrual or provisions need to be made in the accounting books to comply with the

accounting standards and legal regulations. Management however is generally interested in operational

data to do their planning and forecasting activities. By limiting adjustment and statutory entries to

adjustment period management reports can be driven from same accounting books by excluding

adjustment periods from the reports.

Challenges: Adjustment periods have some inherent challenges.

Automated Accounting Packages comes with many standard reports. You might need to

evaluate the impact of adjustment periods on these reports.

While reversing journal entries; users need to take precaution to select the period in which they

want the reversals to happen. E R P’s by default might select the adjustment period.

You may need to decide whether adjustment period should be included or excluded in your

comparative reports.

Similarly you may need to decide whether adjustment period need to be included in any

management reports, especially the ones that can be compared with your statutory published

results.

Diagram: Figure at the right gives a pictorial representation of a calendar with 13 effective periods

having one adjustment period at the year end. While reporting your financial results you need to include

your beginning of the year adjustment period with the first calendar period and your last adjustment

period with the last reporting period.

Alternate Solution: Defining adjustment periods is totally optional and decision must be based on

company’s requirement on the factors discussed above. Alternate solution to defining adjustment

periods could be to define a separate cost center (department, division, profit center etc.). All year‐end

adjustment entries are made using this cost center and this unit is included for statutory consolidation

but excluded for management reporting.



2.4Currency:

What is Currency?:

Currency is the generally accepted form of money which is issued by a government and circulated within

an economy. Currency is used as a medium of exchange for goods and services. Every nation has its own

currency and global trade results in exchange of currencies of different countries. Currency is the basis

for trade and when the trade involves two different countries, generally two different currencies come

to play. To obtain another country’s currency, it is necessary to buy it using the appropriate exchange

rate and the price of a currency compared to another is called the exchange rate.

What is Exchange Rate?.

Exchange Rate is the price of one country's currency expressed in terms of another country's currency.

In other words, the rate at which one currency can be bought or exchanged for another currency. For

example, the higher the exchange rate for one Euro in terms of one Dollar, the lower is the relative value

of the Dollar. Exchange rates are determined by the foreign exchange market, where continuous

trading happens between a wide range of different types of buyers and sellers. There are different types

of rates that get referenced with respect to General Ledger. The Spot Exchange Rate refers to the

current exchange rate. The Forward Exchange Rate refers to an exchange rate that is quoted and traded



today but for delivery and payment on a specific future date. Historical Exchange Rate refers to the

exchange rate prevalent on the date of the original transaction.

What is Accounting Currency and Functional Currency?:

Accounting Currency is the monetary unit used while recording transactions in company's financial

books. “Accounting Currency” is also known as “Functional Currency” and is the main currency used by

a business entity. It is the monetary unit of account of the principal economic environment in which an

economic entity operates. This is the environment in which an entity primarily generates and expends

cash.

The accounting currency may not necessarily be same as the transacting currency. “Transacting

Currency” is the currency which customers see and deal with when conducting a transaction, such as a

sale. Companies are likely to use their home country's currency (Accounting Currency) when recording

transactions, even if the sale was denominated in some other currency (Foreign Currency)

For example, a US Company conducting business in India will most likely use “US Dollar(USD)” as the

accounting currency, even if sales transactions are conducted using the “Indian Rupee(INR)”. In this

scenario US Dollar is the accounting currency and Indian Rupee is the transacting currency.

For companies having operations in different countries across the globe, managing multiple currencies

could be a complicated task due to the interplay of foreign exchange rates and need to make

conversions from one currency to another. Whenever the business entities enter into transactions

(sales, payments, etc.) in multiple currencies, for the purposes of accounting, these items needs to be

converted into accounting currency (functional currency) at an appropriate exchange rate. Transactions

are often converted at the spot rate, i.e., the rate of exchange between the transacting currency and the

functional/accounting currency on the date of the transaction. Sometimes local laws/corporate policy

determine the exchange rate to be used for this conversion.

What is Foreign Currency?:

From business perspective “Foreign Currency” is the currency of another country. From accounting

systems perspective any Currency other than the Accounting Currency is a Foreign Currency. For a

company that maintains its accounting books in US Dollars any other currency apart from US Dollars is a

foreign currency and needs to be converted to US Dollars for recording transaction in the financial

books.

Multi‐Currency Concepts.:

Applicability of multi‐currency creates a need to understand some foreign currency concepts like

Conversion and Translation, Revaluation and Foreign Currency Exchange Gain and Loss. These concepts

require broader discussion and have been covered in our tutorial on Multi‐Currency Concepts.



2.5ChartofAccounts.:

A chart of accounts (COA) is list of the accounts used by a business entity to record and categorize

financial transactions. COA is used to organize the finances of the entity and to segregate expenditures,

revenue, assets and liabilities in order to give interested parties a better understanding of the financial

health of the entity.

In ERP’s COA’s are captured using a defined segmented structure. Segmented COA Structure enables a

business entity to record other accounting dimensions pertaining to financial transaction. Examples of

accounting dimensions are Company, Cost Center, Department, Product etc. Figure on the right shows

an example of the Segmented Chart of Accounts Structure using some of the commonly used business

dimensions.

Thorough planning and evaluation of financial needs is perquisite to designing a good COA Structure. We

have created separate tutorial on GL Accounts that helps you understand the concept of Natural

Accounts and some key GL Accounts. There is a full tutorial on the understanding COA in detail and best

practices to define an effective COA Structure.



2.6Journals:Entry&Import:

Journals can either be directly entered in General Ledger or can be imported from Sub Ledgers. Most of

the journals are created along‐with business transactions like sales, purchases, receipts and payments

and get recorded in respective sub‐ledgers. From sub‐ledgers they need to be imported to general

ledger for financial recording and reporting.

While importing journals from Sub Ledgers, journals can be clubbed together for same accounts and

posted in General Ledger as summarized. This prevents too many transactions in GL Accounts and

transactions get clubbed based on GL or Transaction Source.

ERP’s has built in validations during the import process to ensure that the data is correct and complete.

Journal Entries can also be created manually in the General Ledger by entering all the relevant

accounting information. ERP’s can also automate certain type of Journal Entries like recurring, reversing

or allocating journals.

Most ERP’s and Automated Accounting Systems provide ability to upload journals using the MS Excel

worksheet. You can create journals in Excel Template and upload directly to General Ledger.



2.7Journals:PostingandBalances:

Journal Postings is the process to update (post) the details of transactions into the database, perform

calculations and update account balances impacted from the transaction(s).

During the posting process most accounting systems validates the Journal Entry for completeness and

accuracy. Example of validations performed are – Correct Accounting Period, Balanced JE (Debit=Credit)

or Valid Accounts

During the posting process the system applies the values in the journal entry to the database resulting in

accounting data getting appended to the numbers in the database. Journals once posted cannot be

edited or modified. Ideal business process is to reverse these entries if any corrections need to be made.

In the example above in the first box the journal is entered. Once the journal is entered, it is available in

the systems for Review, Approval and Posting. As this point current balances in the accounts are not

impacted. Next three boxes depict that as the journal gets posted, the current balances are updated to

show the impact of the entered transaction. Hence posting is the process to update account balances

with the transaction amount.



2.8Journals:Review&Approval:

Internal Control principle of “Segregation of Duties” requires all the Journal Entries to be reviewed and

approved by competent authority, other than the person creating the entry. Review and Approval must

happen before the journal is posted and balances are updated.

ERP Systems provide review capabilities by providing a workflow framework to route these transactions

to appropriate used based on the rules defined in the system. Automatic notifications are sent to the

person who needs to take action.

Review and Approval mechanisms ensure:

The transaction is reasonable, necessary and comply with applicable policies

The amounts are correct, allowable for the account, allocable, and properly coded

Charges are appropriately documented and are recorded in a consistent manner

Funds are available in the account being charged

Reduces the risk of error, waste, or wrongful acts or inappropriate, unauthorized or fraudulent

activities



2.9AccrualsandReversals:

ACCRUALSThere are two commonly used methods of accounting ‐ Cash Basis and the Accruals Basis. In cash basis

of accounting income is recognized in books when it is received in cash, and expenses are offset when

they are actually paid.

Contrary to Cash Basis Accounting, in Accrual Basis Accounting, financial items are accounted when they

are earned and deductions are claimed when expenses are incurred, irrespective of the actual cash flow.

Accrual accounting method measures the financial performance of a company by recognizing accounting

events regardless of when corresponding cash transactions occur. Accrual follows the matching principle

in which the revenues are matched (or offset) to expenses in the accounting period in which the

transaction occurs rather than when payment is made (or received).

Accrual accounting is considered to be the standard accounting practice for most companies and is the

most widely used accounting method in the automated accounting system. This method provides a

more accurate picture of the company's current condition, but as all income and expenses need to be

recognized based on their occurrence and matching, it is relatively complex when compared to cash

accounting, which recognizes transactions only when there is an exchange of cash. The need for this



method arose out of the increasing complexity of business transactions and investor demand for more

timely and accurate financial information.

To help you understand this concept let’s look at an example. A company has sold merchandise on

credit to a customer who is credit worthy and there is absolute certainty that the payment will be

received in the future. The company earns a profit of $500 on the total sales price of $2000. The

accounting for this transaction will be different in the two methods. The revenue generated by the sale

of the merchandise will only be recognized by the cash method when the money is received by the

company which might happen next month or next year. However in the Accrual Method the revenue

will be recognized in the same period, an “Accounts Receivable” will be created to track future credit

payments from the customer.

Based on the above discussion now let’s take a look at some accrual/deferral related concepts:

Accrued revenue is an asset, such as unpaid proceeds from a delivery of goods or services, when

such income is earned and a related revenue item is recognized, while cash is to be received in a

latter period.

Accrued expense, in contrast, is a liability with an uncertain timing or amount, but where the

uncertainty is not significant enough to qualify it as a provision.

As an accounting practice expense and revenue accruals are reversed in the next accounting

period to prevent double booking of expenses/revenues when they gets settled in cash.

REVERSALSAt the beginning of each accounting period, there is an accounting practice to use reversing entries to

cancel out the adjusting/accrual entries that were made to accrue revenues and expenses at the end of

the previous accounting period. Use of Reversing Entries makes it easier to record subsequent

transactions by eliminating the possibility of duplication.

Reversing entries are made on the first day of an accounting period in order to offset adjusting

accrual/provision entries made in the previous accounting period.

Reversing entries are used to avoid the double booking of revenues or expenses when the

accruals/provisions are settled in cash.

A reversing entry is linked to the original adjusting entry and is written by reversing the position

of debits with credits and vice versa.

Net impact of Original Entry and Reversing Entry on the accounting books is always zero.

In Automated Accounting Systems, it is not possible to delete transactions once the posting has

been made. In such systems reversals is the recommended way to correct the erroneous

entries. An example is that one interface feed has been posted by mistake twice. This has

inflated many income expense accounts. A reversing entry with opposite debit and credit

amounts to all the impacted accounts will nullify the impact of the mistake.



2.10ReversingJournalEntry:

This is a simple example of a reversing entry:

The business has taken premises on rent. The rent payable for each month is $200 and invoice is raised

by the landlord on 15th of the subsequent month. Accounting department takes 5 days to process the

payment and deposit the amount in the Landlord’s account. December is the close of the accounting

year and invoice of rent for the month of December will be received by the company on 15th of January

and payment will be made by 20th of January.

Closing Books: On 31st of December, the accounting department passes the rent accrual accounting

entry, debiting the “Rent Expense” and crediting the “Rent Payable Account”. This entry records the rent

for the month of Dec and creates a liability for “Rent Payable” to landlord next month. At the beginning

of next accounting year, on the day one this entry is reversed by debiting the “Rent Payable” and

crediting the “Rent Account”.

Making Payment: Once the payment for Rent is made on 20th January (Again by Debiting “Rent

Expense” and Crediting “Bank Account”) this reversal will ensure that the rent for last year is not

impacting the current year financials as the net impact on the “Rent Expense” account will be zero.



2.11RecurringJournals:

What is a Recurring Journal?.

A “Recurring Journal” is a journal that needs to be repeated and processed periodically. Recurring

Entries are business transactions that are repeated regularly, such as fixed rent or insurance to be paid

every month.

Recurring entries allow for common repeatable transactions to be saved in a template and created in

multiple accounting periods upon request, making it unnecessary to retype the entire transaction

thereby improving productivity. Auto generation of recurring accounting entries minimizes the

occurrence of errors and omissions. Systems allow generation of recurring entries at weekly, monthly or

any other frequency.

Characteristics of Recurring Journals:

Needs to be entered periodically

Same set of accounts are included every period

Same number of Journal Lines



Recurring Journals can be created by having:

Same Account Combinations with no amounts:

o This is useful when same accounts needs to be used every period however the amounts

get changed every time. In this scenario the template is defined with no amounts and

amounts are entered manually every accounting period for which the entry needs to be

generated.

Same Account Combinations with fixed amounts:

o This is useful when both accounts and amounts can be pre‐determined. A good example

for this scenario is fixed rent payable each month on a specific date. In this case the

template is defined with actual amounts and journals are created and posted for

relevant accounting periods.

Same Account Combinations with mathematical logic to calculate amounts:

o This is useful when accounts can be pre‐determined and amounts will be based on some

logic or pre‐defined formula. A good example for this scenario could be defining

salesmen accounts as the pre‐determined accounts. Commission is to be paid to these

salesmen as a fixed percentage of sales made by each salesman during the month and

sales for each salesman are recorded in separate accounts. A recurring journal can be

defined that can look for the balance in respective sales accounts at the end of period

and automatically calculate commission and create the required accounting entry for

commission payable.

Examples of Recurring Journals

Fixed Rent to be paid every month

Fixed Insurance to be paid every month

Leasing Payments

Amortization Expenses

Fixed Expenses

Payroll Expenses

Based on Usage – Like departmental allocation of rent based on space utilized

Generic Process to Create Recurring Journals:

1. Define Accounts, Amounts or Formula or Logic

2. Create Recurring Template

3. Define the accounting periods for which the recurring journals need to be created

4. Generate Journals by Running automated recurring journals creation program

5. Enter missing data in case of Skelton journals – missing amounts

6. Review, Edit, Approve and Post recurring journals



2.12Allocations:

Allocation is the act of distributing according to a plan.

Examples of Allocation:

Distributing rent to departments based on area

Distributing common project costs to various cost centers

Distributing head office expenses to sales offices based on volume of sales

In the example shown here we have a company which has taken a 1000 square feet office space on rent.

The expenses for rent are borne by the head‐office and payment to the landlord is also made by the

head office. To know the true profitability of each of the departments (Department A, B & C) the rent

needs to be allocated to each one of them.

Each department occupies different area and company has taken the measurement of the areas

occupied by each of the department. In the example shown here, the rent is being allocated to different

departments based on their usage factor. This is an example of the concept of allocation and automated

accounting systems help handle complex allocations programmatically.



2.13Intercompany:

Intercompany transaction is a transaction that occurs between two units of the same entity. An

intercompany transaction occurs when one unit of an entity transacts with another unit of the same

entity. It is a transaction between two associated companies who file a consolidated tax return or

financial statement.

These transactions can occur for a variety of reasons, and normally occur as a result of the

normal business relationships between the units of the entity.

An intercompany transaction is recognized in the financial records of both units of the entity as

if it were an arm’s‐length transaction with an unrelated party.

These transactions might or might not be cash settled.

From the consolidated entity’s perspective, the transaction is initially unrealized because

unrelated parties are not involved; therefore, certain intercompany transaction needs to be

eliminated from the consolidated financial statements.

We have a detailed tutorial on intercompany and those interested in understanding intercompany

concepts in more detail should refer to the tutorial on Intercompany.



2.14TrialBalance:

Double Entry Accounting System: In the double‐entry accounting system, each accounting entry results

in two nominal accounts being debited and credited with equal amounts. Practice of recording of same

debit amount to one account and an equal credit amount to another account, results in total debits

being equal to total credits for all accounts in the general ledger. If the accounting entries are recorded

without error, the aggregate balance of all accounts having positive balances (Debit Balances) will be

equal to the aggregate balance of all accounts having negative balances (Credit Balances).

What is a Trial Balance: Trial Balance is the compilation of balances of all accounts in the general ledgers

into debit and credit columns. Trial Balance is usually drawn at the end of every reporting period. Trial

Balance becomes the basis for advanced reports like Balance Sheet and Profit and Loss Accounts. In

double entry accounting system the total debts equal the total credits hence a compilation of all the

accounts will be balanced, that is Sum of Debits will be equal to sum of credits.

Concept of “Balancing” and “Suspense Posting” ensures that Journals in an ERP are always balanced

resulting in a balanced trial balance. Trial Balance is used for financial reporting, management reporting,

consolidation process and reconciliation process.



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General Ledger Concepts

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Transcript of General Ledger Concepts