Betty’s Bakery

Small Business Manual Accounting & Bookkeeping Practice Set

Step 4: The General Ledger – continued Work to be Performed – continued

1. Review and become familiar with the 36 GL account ledger pages covering the five General Ledger Types: Assets, Liabilities, Equity, Income, and Expense.

2. Starting with the Sales Journal and continuing through the other five journals one-at-a-time, copy and enter each column’s total debit or credit dollar amounts to the applicable General Ledger account debt or credit column.

3. For instance, the Sales Journal’s left-side total debit column amount for Accounts Receivable would be entered into the first line of Accounts Receivable GL account as a debit amount. To complete the posting, enter the month-end date, description (sales Journal), and posting reference SJ-01 to provide an audit trail.

4. Similarly, the Sales Journal’s right-side total credit column amounts would be entered as credits into the various GL income (revenue) accounts.

5. Be sure to update the GL account balance for each debit and credit transaction entered into the debit and credit columns Note: GL debit account balances are not shown with brackets while GL credit account balances are shown with brackets. (Remember: GL asset and expense accounts generally carry debit balances while liabilities, equity, and income accounts carry credit balances.)

Step 5: Workpapers

The practice set workpapers are located in Step 5: Workpapers. They consist of the Chart of Accounts, Trial Balance, Bank Statement, Bank Reconciliation, Balance Sheet, Income Statement, and Financial Ratios. Review the various workpapers to get familiar with their format, content, and the financial information each provides. When all the workpapers have been finished, the practice set is considered completed.

The Chart of Accounts Overview

As discussed above, the design and set up of the chart of accounts is the first accounting process step required of any new company. The chart of accounts serves as a framework for the entire accounting system, and it provides a standardized way to record and report financial transactions

Work to be Performed

As mentioned above, the Chart of Accounts has already been created and is located in Step 5: Workpapers (5.2). If not already done so, remove it from the manual and review to become familiar with the five account categories: assets, liabilities, equity, income, and expense.