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From Manual To Automated Accounting

Jumat, 08 April 2011

To really learn the complete concept of bookkeeping, it is necessary that each student begin with manual processes before graduating to automated accounting programs.

The general ledger is the core of your company's financial records and every transaction flows through this ledger. Each account of this core is eventually finalized to a Profit and Loss statement or Balance Sheet.

The accounting system will have a number of sub ledgers for items such as cash, accounts receivable and accounts payable. Every item posted in a sub ledger necessitates transacting to the main ledger as well.

There are times when items will go directly to the general ledger without any sub ledger posting. These are primarily transactions that will have no operational sub ledger such as capital contributions, loan proceeds and proceeds from the sale of an asset. They will be linked to the Balance Sheet but not to the Profit and Loss Statement.

With a computerized accounting program such as QuickBooks this process is handled automatically. With a manual system all the sub ledger items must be added up at the end of an accounting period and the totals transferred to the main ledger.

There are two specific points to understand when setting up the sub ledgers in your company's business books. One is their linking to financial reports and the other is establishing opening balances.

We know that the two primary financial documents of a company are their balance sheet and profit and loss statement and both of these are taken directly from the general ledger.

Every company has a chart of accounts which determines the order in which all entries will appear. They are handled on an accrual basis and the balances that make up the line items are transferred to the profit and loss statement.

The opening balances that are established are made up of the assets and liabilities that the company has acquired in order to start the company.

A lot of small businesses have their annual business books closing times based on the end of a quarter. For instance their year may end March 31st, June 30th, Sep 30th or Dec 31st. Whatever the case, the beginning of a new year and the ending of the old year involves some extra bookkeeping.

If a business uses a manual system for all of their bookkeeping, new files have to be created for the upcoming year of business operation. With a spreadsheet program this can be very time consuming and with handwritten pages it can consume even more time.

Therefore, the best, most efficient, less time consuming and less error creating accounting programs are - Electronic Accounting Programs such as QuickBooks, where everything input to a company's business books is carried out automatically.

Eleanor McCallum is a creator of information products and a designer of websites. My interests also encompass niche affiliate marketing and audio products.

http://grannyblogger.com

Article Source: http://EzineArticles.com/?expert=Eleanor_McCallum

Article Source: http://EzineArticles.com/5993550

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