General Ledger - General Definitions (APA) 

General Ledger: The general ledger is a record of business transactions by account. Journal entries are posted to the general ledger and financial states are prepared from the general ledger.

Expense: An expense is the cost of goods and services consumed by the organization during the account period to produce the organization's products or services. (Costs that occur during the business's operations - such as wages, materials, etc). 

Liability: Liabilities are the organization's debts that have not been paid. Liabilities represent claims against the organization's assets. Liabilities are current (must be paid in a year) or long-term. 

Asset: An asset is anything of value that provides an economic benefit or value to an organization over a period of time. Assets may be current, property, or intangible. (For example: land, equipment, vehicles, cash).

Revenue: Revenue is the amount received for the sale of the organization's products or services. Revenue can be recognized by the receipt of cash or a promise to pay in the future. 

Income Statement: An income statement is the record of the organization's revenue and expenses during an accounting period. The income statement shows an organization's net income or net loss. 

Journal Entry: A journal entry is the record of the daily transactions of a business. Every journal entry records equal debits and credits. 

Double Entry Accounting: Double-entry accounting is the process in a journal entry that records equal debits and credits for every financial transaction. 

Accounting Period: An accounting period is the period of time used to develop an income statement. The accounting period may be a month, a quarter, a half-year, or a fiscal or calendar year.

Chart of Accounts: The chart of accounts is a list of accounts by name and/or identification (account) number. 

Equity: Equity represents an owner's investment in the company consisting of contributed capital and retained earnings. (Equity = Assets - Liabilities). 

Balance Sheet: A balance sheet is the record of the organization's assets, liabilities, and equity at a point in time. The balance sheet formula is: Assets = Liabilities + Equity

What are internal controls?

• Internal controls are designed to safeguard a company's assets and ensure the financial statements are not materially misstated. Internal controls include edits, balancing, and reconciling. 

What does an accrual record?

• An accrual records expenses in the accounting period the expenses are incurred, not paid. Accruals also record revenue in the accounting period the revenue is earned, not when cash is received. 

What is the accounting flow?

• The accounting flow starts with the transaction which is posted in the journal. The data from the journal is posted in the ledger. The data in the ledger is used to create the financial statements.