This article is based on the general ledger and accounting efficiency which is the basis for the preparation of the financial statements for an entity. It explains how the proper management and review of the general ledger function helps in saving time and reducing audit risks. Further as it emphasizes the maintenance of ledger accounts and centralized company systems, all this enables in the preparation and accuracy of the company financial statements; the objectives for this week.
This article relates to the maintenance and preparation of proper general ledger accounts and how this enables efficiency and effectiveness for accountants and controllers. According to the details this article goes into, the proper maintenance and updated accounts facilitate the strategic control and risk analysis work for the company accountants and controllers with less time due for the audit because of proper management. It further explains how this management function of general ledger can be improved including merging the small ledger accounts into bigger ones for reducing error and time involved, limiting the number of accounts to be maintained to enable efficiency and prompt management, using standardized accounting entries regularly to improve uniformity. Further the costing system such as ABC (Activity based costing) is also facilitated through maintaining and assigning relevant accounts.
This article relates to all the financial statements mentioned in the Week 1 objective namely; income statement, retained earnings statement, balance sheet and statement of cash flows. This is because the general ledger accounting is the basis to preparation of all these financial statements and this cannot be achieved without proper ledger accounts.
Being accountants, we need to ensure the proper supervision and checking of the ledger accounts that are maintained in a company. This can be ensured in a number of ways. This includes ensuring accounts that contain a small balance and merge them with suitable bigger accounts for better management; group of companies should follow similar accounts charts for group accounting purposes, use of standard journal entries and modifying the accounts to facilitate the costing methods including ABC etc. All these action items will ensure systematic and accurate accounting systems and the preparation of best suited financial statements for an entity.
Reference:
Encourage general ledger efficiency. (2004). Journal of Accountancy, 198(3), 22.
