The general ledger is the central repository of all accounting information in an automated accounting world. Summarized data from various sub-ledgers are posted to GL that eventually helps in the creation of financial reports. Read more to understand the role and benefits of an effective general ledger system in automated accounting systems and ERPs.
In order for people inside and outside an organization to use financial data, transaction information is organized by the account in ledgers. A general ledger is the main accounting record of a business. Originally a paper document, a ledger is now more likely to be an electronic document containing summarized financial data and balances for all the accounts of an organization.
In automated systems like ERPs, General Ledger is the central repository for all transactions that get recorded in various supplemental books, which are known as modules or sub-ledgers. Examples of supplemental books in traditional accounting are sales books for sales, purchase books for purchases, cash and bank book for cash related transactions and general journals book to capture adjustment entries. In “Automated Accounting Packages” these supplemental transactions are recorded in modules like Accounts Payables, Accounts Receivables, Purchase, or Inventory.
The respective journals may contain additional information other than the accounting information and all activities or transactions get recorded in various Sub‐Ledgers(Especially in ERPs) irrespective of whether they have a financial impact or not. An example is the creation of PO’s in the purchasing modules irrespective of them having no financial impact. However, the same PO can later be converted into a Payables Invoice automatically, which has an accounting impact.
These subsidiary ledgers (also known as modules), send financial data to General Ledger. Data from different modules can be imported automatically using integrations with Sub Ledgers. General Ledger validates the financial data and updates the balances to the respective accounts.
In Accounting Packages or in ERP’s like Oracle and SAP, “General Ledger” is the central repository of all accounting information. Automated General Ledgers can be a comprehensive financial management solution that can provide highly automated financial processing, effective management control, and real-time visibility to financial results. It can provide internal controls that an organization needs to meet financial compliance. Some major benefits of an automated general ledger system are explained below:
In today’s complex, global, and regulated environment, finance organizations face challenges in trying to comply with local regulations and multiple reporting requirements. The Automated General Ledger system allows companies to meet these challenges in a streamlined and automated way. You can define multiple ledgers based on your needs and they can be used to cater to statutory, corporate, regulatory, and management reporting needs with the same underlying financial data. With a single entry source, multiple accounting representations can be simultaneously maintained for a single transaction. For example, a single journal entered in the main, record-keeping ledger can be automatically represented in multiple ledgers (local and global consolidated) even if each ledger uses a different chart of accounts, calendar, currency, and accounting principles.
Automated General Ledgers provides multi-currency functionalities that can help satisfy complicated global financial requirements. These features can perform currency conversion, revaluation, re-measurement, and translation in accordance with local and international accounting standards for a large number of currencies.
The general ledger is the foundation of any accounting system; it improves transaction processing and control. It collects transaction details from other applications allowing the preparation of key financial reports. Control on Journal Entries creates an auditable record of a business's complete financial history. Automated General Ledger can provide a variety of journal processing options to help organizations to capture transactions with efficiency and control. The entry of journals can be automated using journal templates or can be uploaded using a spreadsheet.
A good general ledger software application will provide management with accurate, up-to-date information in order to make short and long term business decisions. It also has inbuilt controls and processes necessary, to ensure that the correct information is reported. Income statements, balance sheets, and statements of cash flow are standard reports needed by management to judge business progress and these reports can be built using the trial balance created in General Ledger.
Organizations can enforce a common Chart of Accounts structure across different processes, modules, and entities, enabling them to manage their financial processes in an integrated manner by allowing greater flexibility and control over the journal entry process. Accounts in the chart of accounts can be secured to prevent unauthorized access and viewing of sensitive financial data. They also support account hierarchies to group accounting data.
The main purpose of a general ledger system is to record the financial activity of a company and to produce financial and management reports to help stakeholders make decisions. Every corporation needs to prepare financial statements like Balance Sheet and Profit and Loss Account. General Ledger provides detailed account balances for the formation of this financial reporting. Stakeholders can make effective decisions only when the underlying financial data is available timely on-demand and correct.
Using General Ledger Software allows for detailed report generation according to multiple report types and report parameters - facilitates better and faster decision making. The ability to access financial records by departments, cost centers, or other accounting divisions, provides visibility to understand business performance across the organization. It enables tracking critical information on the company's financial position and supplements it with various statutory and management reporting options.
Matrix Organizational Structures
In recent times the two types of organization structures which have evolved are the matrix organization and the network organization. Rigid departmentalization is being complemented by the use of teams that cross over traditional departmental lines.
Hierarchical Organization Structures
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.
GL - Accrued / Unbilled Revenue
Accrued revenues (also called accrued assets) are revenues already earned but not yet paid by the customer or posted to the general ledger. 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.
Record to report (R2R) is a finance and accounting management process that involves collecting, processing, analyzing, validating, organizing, and finally reporting accurate financial data. R2R process provides strategic, financial, and operational feedback on the performance of the organization to inform management and external stakeholders. R2R process also covers the steps involved in preparing and reporting on the overall accounts.
Reversing Journals are special journals that are automatically reversed after a specified date. 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!
As the business grows, the company may want to transition to a branch structure as branches are allowed to conduct a much broader range of activity than representative offices. Branches can buy and sell goods, sign contracts, build things, render services, and generally everything that a regular business can do. A company expands its business by opening up its branch offices in various parts of the country as well as in other countries.
Learn the typical accounting cycle that takes place in an automated accounting system. We will understand the perquisites for commencing the accounting cycle and the series of steps required to record transactions and convert them into financial reports. This accounting cycle is the standard repetitive process that is undertaken to record and report accounting.
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.
A subsidiary is a company that is completely or partly owned by another corporation that owns more than half of the subsidiary's stock, and which normally acts as a holding corporation which at least partly or wholly controls the activities and policies of the daughter corporation.
Defining Organizational Hierarchies
A hierarchy is an ordered series of related objects. You can relate hierarchy with “pyramid” - where each step of the pyramid is subordinate to the one above it. One can use drill up or down to perform multi-dimensional analysis with a hierarchy. Multi-dimensional analysis uses dimension objects organized in a meaningful order and allows users to observe data from various viewpoints.
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