What is a general ledger? A guide for small businesses | Run your business

Summary

In this Quickbooks video, Astrid Danniella Galvez discusses the importance of the General Ledger for small business owners. She explains how it records all financial transactions and categorizes them into assets, liabilities, capital, expenses, and income. The General Ledger is crucial for making informed business decisions, as it provides clarity on financial health and facilitates the preparation of financial statements. Quickbooks' online platform simplifies this process by tracking business activity in real time, offering immediate access to financial insights and statements.

Takeaways

• 📚 The general ledger is crucial for small business accounting, recording all financial transactions.
• 🔍 It is a tool for tracking money in and out, aiding in business decision-making.
• ✅ Accounting software like Quickbooks simplifies the process of managing a general ledger.
• 🗂️ The journal records transactions chronologically, while the general ledger categorizes them by account.
• 📊 General ledger accounts are itemized, providing clarity on the net result of each account.
• 🔑 It facilitates easy location and identification of transactions, which is essential for financial reporting.
• 💼 There are five main categories of general ledger accounts: assets, liabilities, capital, expenses, and income.
• 🚗 Asset accounts include tangible items like vehicles, inventory, equipment, and property.
• 💵 Liabilities accounts cover debts such as bank loans, creditors, and accounts payable.
• 💼 Capital accounts reflect the capital introduced into or withdrawn from the business by the owner.
• 💸 Expense accounts encompass the costs of running the business, including rent, payroll, and advertising.
• 💹 Income accounts track revenue from sales, interest, and other business activities.
• 📈 Quickbooks online offers real-time tracking and easy access to financial statements like the balance sheet.

Q & A

What is the main focus of the video presented by Astrid Danniella Galvez?

The video focuses on the importance of the general ledger in accounting and how it helps small business owners track their finances using Quickbooks.

What does Astrid use to track her day-to-day activities?

Astrid tracks her daily activities, such as the miles she runs during her morning jog, similar to how business owners track their finances.

What is a general ledger, and why is it important?

A general ledger is a record where each financial transaction is categorized and duplicated for specific accounts. It helps business owners better manage their accounts and improve decision-making by offering a detailed financial overview.

What is the role of the journal in accounting?

The journal records all financial transactions in chronological order. However, it can be hard to locate specific transactions, which is why the general ledger is used to categorize each transaction for better tracking.

How does the general ledger differ from the journal?

While the journal records transactions in chronological order, the general ledger categorizes them based on accounts, making it easier to find specific information and compile financial reports.

What are the five categories of general ledger accounts?

The five categories are: asset ledger, liabilities ledger, capital ledger, expense ledger, and income ledger.

What does the asset ledger account track?

The asset ledger tracks a business’s assets, including vehicles, inventory, equipment, and property.

What is recorded in the liabilities ledger?

The liabilities ledger records the business's debt obligations, such as bank loans, creditors, and accounts payable.

What does the capital ledger account represent?

The capital ledger account outlines the capital brought into or withdrawn from the business, including owner contributions.

How does Quickbooks help with general ledger accounting?

Quickbooks tracks business activities in real-time and provides easy access to financial insights, including financial statements and balance sheets, making it easier for business owners to manage their accounts.

Outlines

00:00

📚 Introduction to General Ledger

Astrid Danniella Galvez introduces herself and her partnership with Quickbooks to provide tips on running a small business. She emphasizes the importance of the general ledger in accounting, which is a record of all financial transactions. The video encourages viewers to read an article for more information and to subscribe to the Quickbooks channel for similar content. The general ledger is described as essential for understanding the financial health of a business, with accounting software like Quickbooks making the process easier. It records all money in and out of the business in a journal and duplicates transactions for specific customers, making it easier to locate transactions and compile financial statements.

Keywords

💡General Ledger

A General Ledger is a comprehensive record-keeping system that contains all of a company's financial transactions, including debits and credits. It is a crucial tool for tracking the financial health of a business. In the video, it is emphasized as the starting point for understanding the 'alchemy of accounting', highlighting its importance in recording all money inflows and outflows. The script mentions that each transaction is duplicated in the General Ledger for specific customers, which aids in easier identification and location of transactions.

💡Accounting Software

Accounting software refers to computer programs that automate and streamline the process of recording, classifying, and reporting financial transactions. Quickbooks is an example of such software, which is mentioned in the video as making the process of managing a General Ledger much easier for business owners. The script illustrates its utility by stating that Quickbooks records all financial transactions chronologically in a journal, which is then used to update the General Ledger.

💡Journal

A Journal in accounting is a chronological record of financial transactions. It is a detailed account of all the business's financial activities as they occur. The video script uses the term to explain that the Journal is a useful record for tracking all money going in and out of the business, which is then used to update the General Ledger with more specific customer details.

💡Trial Balance

A Trial Balance is a report that lists all of a company's accounts and their respective debit and credit balances at a specific point in time. It is used to verify the accuracy of the accounting records. In the video, the Trial Balance is mentioned as a critical step that is almost impossible to compile without ledger accounts, emphasizing the necessity of a well-maintained General Ledger for accurate financial reporting.

💡Financial Statements

Financial Statements are formal records that provide a comprehensive summary of a company's financial activities over a specific period. They include the balance sheet, income statement, and cash flow statement. The video script mentions that financial statements, including the balance sheet, can be easily accessed through Quickbooks, indicating the software's role in facilitating clear financial reporting which is essential for making informed business decisions.

💡Asset Ledger Account

An Asset Ledger Account is a specific type of account within the General Ledger that deals with a company's assets. These can include tangible assets like vehicles, inventory, equipment, and property. The video script categorizes this as one of the five types of General Ledger accounts, highlighting its role in tracking the business's assets and contributing to the overall financial health assessment.

💡Liabilities Ledger

A Liabilities Ledger in the General Ledger tracks a company's debt obligations. This can include bank loans, creditors, and accounts payable. The video script describes this category as essential for understanding the business's financial obligations, which is a critical aspect of managing and planning a business's financial strategy.

💡Capital Ledger

The Capital Ledger outlines the capital that is brought into the business or withdrawn by the owner. It is a record of the owner's investment in the business and any drawings made. The video script includes this as one of the five categories of General Ledger accounts, emphasizing its importance in tracking the owner's equity and the business's capital structure.

💡Expense Ledger

An Expense Ledger is a category within the General Ledger that records all the expenses incurred in running a business. This can include rent, payroll, advertising, and other operational costs. The video script mentions this category to illustrate how the General Ledger helps business owners track and manage the costs associated with their operations.

💡Income Ledger

An Income Ledger is a part of the General Ledger that records all sources of income for a business, including sales, interest from bank balances, and other revenue streams. The video script describes this as the place where all income earned from business activities is recorded, which is vital for understanding the company's profitability.

💡Quickbooks Online

Quickbooks Online is a cloud-based version of the accounting software that allows for real-time tracking of business activity. The video script mentions this service as a tool that makes it easy to access financial insights and statements, which can lead to better business decisions. It exemplifies how technology can simplify and enhance the process of managing a business's financial records.

Highlights

Introduction by Astrid Danniella Galvez, partnering with Quickbooks to share small business tips.

Tracking day-to-day activities and how it relates to small business accounting, using a general ledger to record transactions.

Explanation of the importance of the general ledger in small business operations.

Reference to an article in the video description for those who prefer reading over watching.

Encouragement to like and subscribe to the Quickbooks channel for more business content.

Introduction to accounting with the general ledger, a fundamental tool for business owners.

Definition of a journal and how it records all money in and out of the business chronologically.

Explanation of how the general ledger helps identify transactions related to specific customers.

The benefits of the general ledger, such as itemizing each account to make decision-making easier.

General ledger accounts are categorized into five types: assets, liabilities, capital, expenses, and income.

Details on asset ledger accounts, including inventory, equipment, and property.

Overview of liabilities ledger accounts, covering business debt and obligations like bank loans and accounts payable.

Capital ledger accounts focus on the money brought into or drawn out of the business by the owner.

Expense ledger accounts track operating costs such as rent, payroll, and advertising.

Income ledger accounts record revenue from sales, interest, and other business income.

Quickbooks provides real-time tracking of business activities and financial reporting through the online dashboard.

Transcripts

Hi, everyone. I'm Astrid Danniella Galvez.

And I've partnered with Quickbooks to share

tips on how to run your small business.

If you're like me, you keep track of your day today.

In my case, I track everything like

how many miles I run and my morning jog and the small business world.

You use a general ledger to record all your money in and your money out.

That's what we'll talk about today.

The importance of the general legend.

If you're more of a reader, check out that article

in the video description before we continue.

Don't forget to hit that like button and subscribe to the Quickbooks Channel

for more content like this.

For many business owners,

the alchemy of accounting starts with a General Ledger.

It's something that every business owner has to get their head around.

And nowadays it's so much easier, thanks to accounting software like Quickbooks.

All money going in and out of the business

is chronologically recorded in something called a journal.

The Journal is a very useful record

unless you want to know something specific about dealings with one customer.

That's where the general ledger comes in.

Here, each transaction is duplicated for that specific customer,

making the information easier to find.

There are many advantages to General Ledger accounting

as each account is itemized.

It helps business owners know the net result of each account.

That knowledge can help improve decision

making for the business because each account is separate.

Locating and identifying each transaction

is much easier than looking through a journal.

Compiling a trial balance at the end of the accounting period

and preparing financial statements are almost impossible without ledger accounts.

There are five categories of general ledger accounts.

The asset ledger account deals with assets

such as vehicles, inventory equipment and property.

The liabilities ledger deals with the debt obligations of the business.

This could be bank loans, creditors and accounts payable.

The third category is the capital ledger which outlines the capital

brought into the business or drawn out by, let's say, the owner.

Next is the expense ledger, which covers all the expenses of running your business.

That includes rent, payroll

advertising and more.

Finally, the income ledger

this is where you find all of the income from sales interest, from bank balances

and any other revenue which has been earned from doing business.

Clear financial reporting leads to better business decisions.

Quickbooks online tracks your business activity in real time.

That makes it easy to access insights

with financial statements, including the balance sheet.

Right in your Quickbooks dashboard.

Now that you have a better grasp of the general ledger

and why its essential for your business, let me know what you thought of this video

in the comments below.

If I helped you in any way today, please give this video a thumbs up.

And don't forget to subscribe to the Quickbooks channel.

Thank you for watching.