It is fairly common for company owners to utilise a general ledger to keep a record and monitor the firm’s financial activities. This is because the general ledger acts as a centralised platform for the management to track their financial transactions and thereby assess the performance of their business.

– The reconciliation of the general ledger is a typical accounting feature that is performed by finance professionals to determine if there may be any documentation mistakes or fraudulent transactions occurring within the company.

– The process of general ledger reconciliation usually involves these few steps, namely the beginning balance investigation, the current period investigation, the reviewing of any adjustments and reversals made, as well as the ending balance review.

– All in all, reconciling the general ledger permits company leaders to gain a high-level overview of the business’s financial traction, thereby enabling them to measure the firm’s overall financial health with respect to their efforts and corporate strategies.

The general ledger reconciliation process is one of the main procedures that a company performs to ensure that the business sustains a timely and truthful bookkeeping process. This is an important process because possessing a reconciled general ledger that is completed according to the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP) rules forms the basis for business owners to gain an in-depth understanding of the firm’s financial performance. Not to mention, the general ledger reconciliation procedure is also an excellent method to help finance professionals identify errors or even pinpoint fraudulent financial transactions.

Having mentioned that, Kolleno is a smart credit control platform crafted to streamline every single aspect of the general ledger reconciliation process via automation. In particular, Kolleno’s account reconciliation software also introduces systematic controls to the general ledger reconciliation procedure, thereby ensuring that the firm employs a methodological approach to its bookkeeping process.

What is a General Ledger?

Simply put, a general ledger can be defined as an accounting record compiling every financial activity that has taken place during a business’ operations. It comprises financial transactions that have been added to the company’s books in the form of journal entries, in which these entries are raw data documenting the basic details of the business transactions and are arranged in chronological order. Besides that, the general ledger accounts may also be organised by their accounting periods or account balances.

Meanwhile, the general ledger also arranges the transactions according to their respective accounts to streamline the analysis process. Generally speaking, general ledgers would have accounted for a total of five different categories, namely equity, asset, liability, expense, and revenue/income. On top of that, each category may be further segmented based on the type of transaction it is associated with, whereby these individual accounts are termed “sub-ledger accounts” or “sub-ledgers”. For instance, the asset category may have an account receivable sub-ledger, a cash sub-ledger, an inventory sub-ledger, as well as a fixed asset sub-ledger. As a result, the general ledger enables accountants and company owners to make educated decisions for the business as they would be able to view the transactions arranged based on their nature.

With these in mind, it becomes increasingly evident that the general ledger serves as a master document for analysts to generate other types of accounting reports like the three main financial statements, namely the profit and loss statement, the balance sheet, as well as the cash flow statement.

Notable Examples of General Ledger Accounts

All in all, general ledger accounts would be separated into one out of five general categories, namely:

  • Asset accounts: Examples of such would be cash, inventory, accounts receivable, land, investments, and equipment.
  • Liability accounts: Typical examples would be accounts payable, notes payable, accrued expenses payable, and customer deposits.
  • Expense accounts: Notable expenses include rent, salaries and wages, utilities, and advertising/marketing expenses.
  • Equity accounts: These usually refer to financial activities involving third-party investors, with popular examples being common stock, retained earnings, preference shares, and treasury stocks.
  • Revenue accounts: Common examples are sales, ancillary, or service fee revenue.

How Does a General Ledger Differ from a Balance Sheet?

Crucially, the general ledger should never be viewed as an official report of the company’s performance but rather as a set of raw data that accountants utilise to provide useful business reports. By the end of the firm’s accounting period, the data stored in the general ledger will be segmented, consolidated, and compartmentalised to internal documents (such as trial balances) and external reports (such as the cash flow statement, balance sheet, and income statement).

What is a General Ledger Reconciliation?

A general ledger reconciliation is a process by which accountants verify the completeness and reliability of the account balances recorded on the general ledger of a firm by checking the details against other third-party data, systems, and/or supporting papers like audit reports and bank statements. On top of that, the reconciliation process also involves the in-depth examination of the company’s general ledger for any unusual transactions or discrepancies so that appropriate actions can be taken to rectify them.

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