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General Ledger v. Chart of Accounts

There are quite a few ways to keep account of your business, but at the same time, large parts of the process are (or should be) dramatically similar from business to business. In particular, two procedures, keeping a general ledger and keeping a chart of accounts, are crucial to accurate accounting. Here’s a rundown of the two, and how getting the best credit card processing for small business is all part of the process.

The General Ledger

A general ledger is the most important accounting document that you have for your business: it’s your ultimate reference point, and when referenced regularly, it gives you a top-down view of all the action going on in your business. As you can probably imagine, to do this, it needs to be accurate. Here’s why you need to take all the necessary steps to ensure that yours is always in tip-top shape.

Properly tracking expenditures

That you can accurately track different types of expenses. For example, you shouldn’t put a vehicle payment into an auto expense account. Your general ledger will help you separate expense accounts from loan/liability accounts, which is essential to correctly tracking interest.

If you’re a small business, odds are at one point this year, you deposited personal funds in order to cover expenses. To make sure these funds don’t get counted as income, you need to be accurate with your general ledger.

Chart of accounts

The general ledger tracks your business accounts over the life of your business. The Chart of Accounts, on the other hand, is a more immediate reflection of your business, in that it should only show accounts that are currently open. The chart of accounts made up of all the necessary accounts for your business’s transactions: assets, liabilities, and equity, if you have it, make up your balance sheet. Then, added to this is the business’s income: revenue and expenses.

Making life easier

With your chart of accounts, less is probably more. That’s because if you make your list of accounts too granular, it’s more complicated to work with. Also, if the way you organize your accounts continually changes dramatically, you will have a tougher time comparing your accounts year over year to see trends.

If you use QuickBooks, which integrates easily with Moolah, you’ll be able to stay on top of your chart of accounts, as well as your general ledger much more easily. That’s because when a transaction is processed, the software automatically debits one account and credits the other. It comes with a default chart of accounts and general ledger, that will work well for most small businesses, and which you can modify as needed to suit your needs.

With easy reporting features, QuickBooks makes it much easier for you to reference your general ledger regularly. Get in a habit of checking it! It’s the best way to stay on top of trends and notice issues before they cause bigger problems. Shouldn’t the best credit card processing for small business do its part to make it simple for you to stay on top of your accounting? Moolah tends to think so.