An essential element of accounting is a general ledger (GL) account. It serves as a tool for keeping records and monitors all financial activities within a company. Although setting up a GL account is simple, effective recording of all financial information necessitates close attention to detail.
Determine the Type of Account in Step 1
You must choose the sort of account you wish to create before you can create a GL account. Asset accounts, liability accounts, equity accounts, income accounts, and expense accounts are just a few examples of the several kinds of GL accounts. Make sure you select the appropriate account type for your company’s needs.
Second step: assign an account code You must assign an account code after determining the type of account. A distinctive identifier that aids in distinguishing between several accounts is the account code. A naming scheme that is simple to comprehend, such as 1-100 for asset accounts, 101-200 for liability accounts, and so on, is advised.
Step 3: Configure GL Mapping Financial transactions are mapped to the correct GL account through a procedure known as GL mapping. This procedure aids in ensuring the accuracy of any financial data that is recorded. You must specify the mapping rules for each GL account in order to set up GL mapping. If you have an income account, for instance, you must map all transactions pertaining to income to that account.
You need to update the General Ledger in your ERP system after configuring the GL mapping. The General Ledger serves as the organization’s central repository for all financial information. It makes it easier for you to maintain tabs on all of your financial activities, such as sales, expenses, assets, and liabilities. Regular General Ledger updates enable you to produce precise financial reports that you may use to guide your business decisions.
In conclusion, setting up a GL account is an essential accounting procedure. It enables you to produce accurate financial reports and maintain track of all organizational financial transactions. You can build a GL account that meets your company’s needs by following the procedures indicated above. To guarantee that you record financial data accurately, it’s also crucial to comprehend the various GL accounts, GL mapping, and the General Ledger in ERP. Last but not least, it is important to remember that there are three different categories of assets: current assets, fixed assets, and intangible assets. Fixed assets are long-term investments that produce revenue, while intangible assets are immaterial possessions like patents and trademarks. Current assets are possessions that can be transformed into cash within a year.