MODULES

GENERAL LEDGER

The general ledger is the heart of the financial function of your company. All processing you do eventually reflects in the general ledger.

General Ledger Overview

The general ledger is the heart of the financial function of your company. All processing you do eventually reflects in the general ledger. You therefore have to ensure that you implement this module in the most beneficial and efficient manner.

General Ledger Elements

The general ledger structure contains many elements. Some of these elements are common to other modules.

Accounting Periods

Time is a critical element of the general ledger. Your business activity occurs in a legislated timeframe. The time elements are a financial year and a financial period.

A financial year consists of 12 financial periods. You specify each period's dates. When you enter a transaction, you have to enter its date, and the system allocates the transaction to the relevant period.

The system keeps transactions and balances for five financial years. You can close periods to prevent processing in older periods. You can purge the first year's balances and transactions at any stage.

You can block periods you do not wish to use currently. By blocking a period, you ensure no one uses the period inadvertently. Alternatively, you can choose which agents can work in which periods.

When you start using the system, which year should you use for the current year? Usually, you would use the second year for the current year, so that you could put last year's balances in the first year. You can enter last year's balances as a single balance in the last period of the year, or as monthly balances.

General Ledger Accounts

Besides time, the other major element in the general ledger is the division of all activity into general ledger accounts. A general ledger account represents a particular business activity, such as a bank account, a sales account, an expense account, and so on.

General accounting practice classifies accounts by account types, which enable the production of legislated reports such as the income statement, the trial balance, and the balance sheet. The system takes care of all the complexities involved in producing these reports. All you have to do is allocate the correct account type to each general ledger account.

When you create a new company, you can choose a default chart of accounts from a list of standard ones. The system then creates these general ledger accounts for you. You can add, delete, or modify these accounts in any manner.

You also choose, when you create a company, whether to use account numbers or not. The system does not require the use of account numbers, but you can use them if you wish to. If you do not want to use account numbers, the system uses the account description as the account number in the standard charts of accounts.

Whenever you enter an accounting transaction, whether you are working in the general ledger module or not, the system updates general ledger accounts. If you are working outside the general ledger module, the system generates a general ledger transaction, so that you can see the source of the values in the general ledger account.

The system also keeps a balance per period for each general ledger account.

Branches

You can create branch codes and attach these to general ledger accounts. You can then produce reports by ranging on branch codes (or not).

If you do wish to use branches, you create multiple sets of general ledger accounts, each with their own branch code. You duplicate, per branch, those accounts that occur at a branch level. For example, you would usually track sales per branch. If each branch is a relatively independent entity, you may duplicate most of the general ledger structure per branch.

The use of branches is optional.

Departments

In the same way, you can create department codes that you also attach to general ledger accounts.

Branch and department codes are unrelated, which means that you can analyse your general ledger using multiple simultaneous categories. Alternatively, you can create a multi-level structure by creating departments within branches, or vice versa.

If you use both branch and department codes, you may need to create a considerable number of general ledger accounts. You should spend some time designing the account structure and account numbers, since the structure will affect how you produce your financial reports.

The use of departments is optional.

Sub-Accounts

You can group general ledger accounts under other general ledger accounts, thereby creating a reporting hierarchy. This enables you to simplify some reports considerably, while at the same time retaining the level of detail you require.

For example, you can create an account to represent motor vehicle expenses. You can then create sub-accounts beneath this account, where each sub-account represents a particular activity, such as fuel costs, servicing costs, and so on. Your financial reports can then show one total for motor vehicle expenses, which is what you want. However, you also have the ability to see expenses in more detail, which you need from the management point of view.

One way to use this feature is to combine it with the department and/or branch structure. You could create an account, say sales, and then create sub-accounts for the various branches or departments. This enables you to see the total sales in the organisation by looking at the master account, and the sales in each structure by looking at the sub-account.

The use of sub-accounts is optional.