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Written by Cecilia Chee, Singapore   
Saturday, 01 October 2011 18:35

 

 

What are GL Accounts?

 

GL accounts are categories.  GL accounts have a number and a name.

Below are some examples of GL accounts:

All GL Accounts belong to one of five types. These types are: Assets, Liabilities, Revenue, Expense and either Capital or Surplus. Surplus is for not-for-profit organizations. Capital is for all other organizations. 

Here is the same list, now with the GL account types included.

Now let's look how a GL account is set-up. 

The 'T' Account Representation.

The basic method to represent a GL account is called a  'T' account.   Each GL account has its own 'T' account.  A 'T' account is illustrated below.

  

The GL Account Name, Number and Type are located in the top section.  

The stem of the 'T' is divided into two columns of numbers. The name given to the left column is: Debit.  The name given to a right column is: Credit. 

Each line below the 'T' in a 'T' account is called an 'entry'. 

An 'entry' includes either a Debit Amount or a Credit Amount. Often additional columns are also used to log the date of the 'entry' and some details about it.

In many manual systems, one page in a ledger is used for each GL Account. Each page in the ledger is a GL Account. The format of each page is similar to the figure that is displayed above. 

The thickness of the ledger is proportional to the number of GL Accounts used. Locating the correct page in a thick ledger can be time consuming.

Manually entering debits and credits as well as details about each entry is also time consuming. In manual systems, it is difficult to avoid errors and it can be difficult to find and correct them. 

The 'Manage GL Accounts' window. 

In TeemWork, GL Accounts are managed in the 'Manage GL Accounts'  window. It is illustrated below.

The top half of this window is a list of your GL Accounts. To select any GL Account, simply click on its line. The selected row will be highlighted in yellow to indicate that it has been selected. 

The bottom half of the window has two tabs.

The Account Details tab.

The 'Account Details' tab displays details about the selected GL Account. This is the information that would be written in the upper section of the 'T' for this GL Account in a manual system.

As you can see there are fields for the GL Account Number, Type and Name as well as other fields, such as: Code and AP and AR Accounts.

The Account Detail tab is also used to add GL Accounts and to modify details about the selected GL Account.

The Debit & Credit tab.

The 'T' account stem divides  the left, the 'Debit' side from the right, the 'Credit' side of the GL Account.  

Any and all business transactions involve at least two GL Accounts. 

When a business transaction is recorded, an amount is written on the debit (left) side of one or more GL Accounts.  Other amounts are written on the Credit (Right) side of one or more GL Account.

The sum of all the amounts that are written on the left side must equal the sum of all the amounts that are written on the right side. 

In other words:  debits = credits. This is the golden rule of double-entry accounting.

The GL Account 'Bank -- savings' is shown below, an amount of 4500.00 is entered on the Debit side and three amounts are entered on the Credit side.

When the amount of 4500.00 was entered of the debit side of this account, you know that an amount of 4500.00 was entered on the credit side of some other GL Account.

If this is not so, then it is because other amounts, adding up to 4500.00, were entered on the credit side of other GL Accounts. 

In TeemWork, the stem of the 'T' account is represented by the 'Debits and Credits for this GL account' tab. This tab is illustrated below for GL Account '1050'.

Each line represents an entry. 

The primary columns are the Debit and the Credit columns.  The other columns provide additional details about the entry. Column totals are also displayed.

In TeemWork, all entries are generated automatically as a by-product of entering business transactions, such as cheques and invoices. 

You do not need to enter debits or credits. This is done for you automatically. 

There is nothing magical or mysterious about TeemWork. It simply transforms business transactions into the corresponding GL Account entries. 

Internally, TeemWork behaves as if it was a manual accounting system. Of course, TeemWork is faster and simpler to use. It can help you save time and avoid errors.

Last Updated on Monday, 03 October 2011 11:50
 
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