We have a general ledger account called “Accounts Payable.” This account holds all the money we owe to vendors who have not yet been paid.
Our accountant likes to see a zero balance in our “Accounts Payable” account at the end of every month. In Quickbooks, there is a command to automatically transfer all outstanding vendor bills from “Accounts Payable” to the appropriate vendor accounts when you do your monthly closing.
The problem is that I don’t know exactly how much is supposed to be in “Accounts Payable” at any given time, because I can’t predict how much our vendors will overcharge us or deliver things late. We may have already spent some of this money on payroll or other expenses, or we may yet pay some of it out for other expenses.
Closing out the cash accounts in Quickbooks is pretty straightforward. They use a dual-entry journal, so you just need to match your bank statement entries with the corresponding account entries in the program.
The hard part is the bank reconciliation. That’s because you can’t tell if an entry is wrong just by looking at it. It looks like the right amount, but maybe it’s not. To figure that out, you have to know two things: what transactions were entered in the program, and what transactions were posted to the bank statement.
How do you do that?
An accounting ledger is a list of accounts with each account listed under a heading. In QuickBooks, the main accounting ledger is called the Chart of Accounts. It lists all the accounts that can be used in QuickBooks, and it is where you set up your chart of accounts.
Closing the accounts and generating reports is very simple and straightforward. All you need to do is:
- Open QuickBooks and select the company file you wish to close.
- Go to the top menu bar and choose File -> Utilities -> Generate Financial Statements.
- Click next as prompted by the application till you get to the second page as shown in above image.
- Select “Closing Date” as “Today’s date” by clicking on the drop down arrow besides it. Then click “Next” button to proceed further with closing your account/company file in QuickBooks.
The report will generate automatically, displaying all the Balance Sheet, Profit & Loss Account, Cash Flow Statement etc., based on the selected company file that you have chosen to close in QuickBooks accounting software application.
A general ledger account is an account used for general purposes. A business entity has several ledger accounts, each of which is used to hold different types of financial information. Each type of information held in a ledger account may be used to generate its own report. For example, sales information can be used to generate sales reports, while projection information can be used to generate budget reports. Two types of accounts are available in the QuickBooks accounting system: chart of accounts and other asset/liability accounts.
What is a chart of accounts?
A chart of accounts is a list of all the accounts you use, also called ledger accounts. The QuickBooks accounting system provides a default chart of accounts that you can use for most businesses. You can create your own chart of accounts if you have special needs. Understanding what types of non-financial information you need to track will determine how many additional chart-of-accounts you need to create, because every type of non-financial information has at least one corresponding account in the chart of accounts.
Every entry in your chart of accounts has to be assigned to an account in the Chart of Accounts. The accounts in the Chart of Accounts are assigned to one or more Ledger Accounts assigned under Chart of Accounts.