What is a General Ledger?

Hey, this is Alex from the Aplos Academy
today we’re gonna take a look at transactions what they are how and when
you record them and how they impact your nonprofit accounting system if you’ve
created a non-profit chart of accounts and are ready to record transactions
this is the course for you what are transactions in the previous lesson we
learned what accounts are and how you set them up to represent the five areas
of accounting the money that you have o receive spend and your overall work
these accounts are given value by recording transactions which are
essentially the happenings within your organization receiving money spending
money paying bills and transferring money in between your banks are all
examples of transactions that happen on a daily basis for your nonprofit so how
do you record transactions using your accounts before we dive into the format
I want to tell you about the relationship between the types of
accounts once you understand this everything else becomes a lot easier to
deal with accounts work together in a system which is called double entry
accounting which basically means in every transaction there’s gonna be two
sides one side is called debit and the other side is called credit so before we
move forward forget everything you know about the terms debit and credit it
doesn’t mean your debit and credit cards and it doesn’t even necessarily mean
debiting or crediting an account in accounting debit and credit means
something completely different than what you’ve ever learned you’re welcome there
are five types of accounts and each one is increased or decreased by a debit or
credit if you’re increasing an asset or an expense account you would use the
debit column and for increasing liabilities income and equity you would
use the credit column every transaction has a debit and a credit amount and
these amounts will always equal each other let’s take a look at an example so
you can see how this actually plays out so let’s say you go to the store and you
buy some supplies some paper pens stapler that all amount to about 50
when recording this purchase you’re going to use one of your expense
accounts since they’re used when you record spending money so YouTube the
expense account office supplies since expense accounts are increased by debits
you’re going to put the $50 in the debit column next to the office supplies
account so what is the other side of this transaction when we’re doing double
entry accounting well if you purchase these supplies with money from your
checking account your checking balance is being reduced therefore the other
side of this transaction would be your asset account checking for the credit
amount of $50 again since the expense account is being increased it’s going to
be on the debit side and since the asset is being decreased it’s on the credit
side debit is 15 credit is 50 they both equal each other
there’s your transaction so welcome to recording transactions this process is
called double entry bookkeeping and it’s a necessary part to any accounting
system let’s take a look at one more example this time using income so let’s
say you received a donation for $100 this is money that’s being received by
your organization therefore it’s considered income the income account
you’re going to use is called contributions and since it’s increasing
an income account it’s going to be in the credit column so again what are the
other side of this transaction using double entry accounting well if you’re
depositing the money into your bank account in other words you’re checking
that would be the other side of the transaction
so since assets are increased by debits you can see that this works out in our
transaction so your income is increased by the credit side the assets are
increased by the debit side the debits and credits balance each other so as you
record transactions for your nonprofit remember the chart that we used a couple
of minutes ago remembering this chart is going to be essential if you ever need
to figure out the double entry accounting system so how do you record
these transactions this is going to happen one of two ways either by hand or
through the use of some sort of software obviously software is easier but if you
do it by hand you need to understand two things the general journal and the
general ledger the general journals where you’re going to manually record
the transactions like the examples we mentioned earlier you’re going to record
both accounts that are used and their debit and credit sides and you might
also want to record some other information like the date where you
purchase something who gave you money or any other details once you have the
transaction recorded in the journal you would record the account
details in the general ledger the ledger is a further breakdown of your account
balances and the sum of your transactions so that’s where we’re gonna
stop for today on the recording transactions by hand by now you’re
probably going a little cross-eyed the journal and the ledger of both entirely
replaced by software which makes the whole process infinitely easier software
allows you to record transactions with all the details that you need plus they
usually have screens that are a lot easier to use so you don’t even have to
do double entry accounting you’ll record one account that you’re using and
they’ll automatically do the other side of it for you plus it will automatically
keep your account balances up to date which will allow you to run reports
which we’ll cover in the next lesson so as a nonprofit when you look for
accounting software make sure that it has these three things fund accounting
nonprofit reporting and integrated donations so what’s next now that we’ve
learned how to structure a chart of accounts and record transactions it’s
time to see how everything boils down in what’s called generating reports we’re
going to take a look at the two most commonly generated reports plus the
reports that you need as a nonprofit as per the IRS guidelines until next time
make sure to read the content below because it’s going to go into a lot more
detail on what we covered today plus if you’re interested in nonprofit
accounting software be sure to try Aplos’ 15-day free trial to see how
simple this whole process can be

23 thoughts on “What is a General Ledger?”

  1. I have never done accounting to record anything can you please confirm if I understood the following:

    Assets= have
    Liability =owe
    Expenses =spend

  2. Thanks for sharing. Good graphics and helpful presentation.
    I appreciate the amount of info you share in short time, which is also why i clicked on the video, yet however, the speed with which are you providing the information is way too quick for beginners to follow. Kindly reduce the speed to very slow, and it will increase the effectiveness of your lecture/speech. Maybe you can make more videos of 5 minutes each, allowing you to attract more traffic/views on your channel, yet being effective to your listener to win them over a long-run by speaking in slow speeds. Just a feedback or positive critique! The reason behind is that it is a learning video and not just Fun-facts or entertainment video. A person requires to process and copy these things in mind while listening.
    Once again, thanks for sharing.

  3. Recording Transactions: AKA Book Keeping

    in Double Entry Accounting. Each Transaction has a:
    A) Debit
    B) Credit

    The terms mean something different in accounting.
    5 types of Accounts:

    1. Assets= have

    2. Liability =owe

    3. Equity=worth

    4. Income= Record receiveng money
    5. Expenses = Record spending money

  4. You should speak slowly as Asians are also live on the same planet and also we have to digest each word of accountancy, anyways music was annoying but loved the BOOM BOOM and the way you welcomed lol

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