What Are General Ledger Codes?

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A general ledger includes subsidiary ledgers or records.
A general ledger includes subsidiary ledgers or records. (Image: calculator image by leafy from <a href='http://www.fotolia.com'>Fotolia.com</a>)

A general ledger code, or an accounting code, helps a company record transactions, depending on financial accounts involved in such transactions. This code also ensures that total account data includes all sub-account transactions. A general ledger code is a number that a company assigns to account groups, such as customer receivables or vendor payables.

General Ledger Defined

A general ledger is an accounting summary or worksheet divided in two sections--debit and credit. A ledger is the primary financial reporting record because all financial statement data comes from general and subsidiary ledger information.

Code Significance

General ledger coding is important because it helps staff accountants and bookkeepers report accurate journal entries. This is particularly crucial in the case of a global company engaging in multiple activities involving numerous financial accounts.

Types

General ledger codes relate to five account types--asset, liability, revenue, expense and equity. A general ledger accountant reports asset, liability and equity items in the balance sheet and records revenue and expense items in the income statement.

Time Frame

Accounting rules require a company to "close," or reduce to zero, some financial accounts at the end of each month or quarter. These accounts are usually expenses and revenues because a firm needs to "close" them before preparing a statement of income.

Expert Insight

A specialist, such as a certified information systems auditor, often may help a company establish general ledger codes. This is especially important if the accounting software package is new or requires practical expertise to operate.

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