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Accounting Best Practices
Financial management is one of the most important practices in business. Good financial management and analysis shows the health of your business. Basic skills in financial management start in the critical areas of cash management and bookkeeping, which should be done according to certain financial controls to ensure integrity in the bookkeeping process. These practices allow you to correctly and efficiently identify assets, liabilities, revenues and expenses.
Business owners and managers should know how to generate financial statements and analyze those statements to understand the financial condition of their business. If you are inexperienced in financial management, then you should consider getting an accountant to help you set up your bookkeeping system, generate financial statements and do some basic financial analysis. Your accountant can help you set up a bookkeeping system, generate financial statements and analyze them, but it is not wise to let an accountant completely take over your responsibility for financial management. It is ultimately your responsibility to understand your financial data to effectively manage your business.
The General Ledger
General Ledger, or GL, is the main accounting record of a business and a summary of financial transactions, including accounts for assets, liabilities, revenue and expenses.
A Chart of Accounts (COA) is a list of all accounts within the GL. It is sometimes referred to as COA.
Double entry accounting is the basis of the standard system used by businesses to record financial transactions. Each account maintains a "history" of changes in monetary values about a particular aspect of the business and each transaction is recorded in at least two accounts:
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One account being debited and at least one account being credited
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For each transaction, the total value of debits must equal the total value of credits
Payroll liabilities are entered into GL just like any other financial transaction. These entries are referred to as "GL Journal Entries". Manual posting of GL Journal Entries is time-consuming and increases the chance for error. Most payroll/HR services offer GL interfaces to reduce the chance of errors.
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