Historically (i.e., before computers were used), one of the purposes of double entry accounting was to catch arithmetic errors and data entry errors. Since each transaction had to be recorded in at least two places, the results of additions and subtractions could be double-checked simply by checking whether the accounts were balanced. (Ed. Hence ‘Trial Balance‘)
Today, arithmetic mistakes are no longer a major issue (although data entry errors still are). However, there is one other important benefit of double-entry accounting. Namely, (Ed. used in conjunction with a suitable CoA) it gives a convenient way of tracking and classifying income and expenses.
By not familiarising oneself with the General Ledger, it becomes almost impossible to understand the accounting system. Since the GL summarises all the financial activity of the enterprise, it can run to several pages. An easier report to work with is the Trial Balance. It is just the GL accounts totals at a certain date (one point in time).
Whereas the General Ledger for the year would summarise every transaction by account:
- The beginning balances in the account (for Balance Sheet accounts)
- What went in to the account
- What went out of the account
- The ending balance in the account
The Trial Balance is just number (4) above.
Test GL Balances in PhreeBooks:
To test whether your PhreeBooks GL balances are in balance:
GENERAL LEDGER > Administrative Tools, Validate and Repair General Ledger Account Balances, Test Chart Balances
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