What Are GL Accounts

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What are GL Accounts?

GL accounts are categories. GL accounts have a number and a name.

Below are some examples of GL accounts:

All GL Accounts belong to one of five types. These types are: Assets,

Liabilities, Revenue, Expense and either Capital or Surplus.Surplus is for

not-for-profit organizations. Capital is for all other organizations.

Here is the same list, now with the GL account types included.

Now let's look how a GL account is set-up.

The 'T' Account Representation.

The basic method to represent a GL account is called a 'T' account. Each GL

account has its own 'T' account. A 'T' account is illustrated below.

The GL Account Name, Number and Type are located in the top section.

The stem of the 'T' is divided into two columns of numbers. The name given to the

left column is: Debit. The name given to a right column is: Credit.


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Each line below the 'T' in a 'T' account is called an 'entry'.

An 'entry' includes either a Debit Amount or a Credit Amount. Often additional

columns are also used to log the date of the 'entry' and some details about it.

In many manual systems, one page in a ledger is used for each GL Account. Each page inthe ledger is a GL Account. The format of each page is similar to the figure that isdisplayed above.

The thickness of the ledger is proportional to the number of GL Accounts used. Locating

the correct page in a thick ledger can be time consuming.

Manually entering debits and credits as well as details about each entry is also timeconsuming. In manual systems, it is difficult to avoid errors and it can be difficult to find

and correct them.

The 'Manage GL Accounts' window.

In TeemWork, GL Accounts are managed in the 'Manage GL Accounts' window. It is

illustrated below.

The top half of this window is a list of your GL Accounts. To select any GL Account,

simply click on its line. The selected row will be highlighted in yellow to indicate that it

has been selected.

The bottom half of the window has two tabs.


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The Account Details tab.

The 'Account Details' tab displays details about the selected GL Account. This is the

information that would be written in the upper section of the 'T' for this GL Accountin a manual system.

As you can see there are fields for the GL Account Number, Type and Name as well

as other fields, such as: Code and AP and AR Accounts.

The Account Detail tab is also used to addGL Accounts and to modify details about the

selected GL Account.

The Debit & Credit tab.

The 'T' account stem divides the left, the 'Debit' side from the right, the 'Credit' side of

the GL Account.

Any and all business transactions involve at least two GL Accounts.

When a business transaction is recorded, an amount is written on the debit (left) side ofone or more GL Accounts. Other amounts are written on the Credit (Right) side of one or

more GL Account.

The sum of all the amounts that are written on the left side must equal the sum of all the

amounts that are written on the right side.

In other words: debits = credits. This is the golden rule of double-entry accounting.

The GL Account 'Bank -- savings' is shown below, an amount of 4500.00 is enteredon the Debit side and three amounts are entered on the Credit side.

When the amount of 4500.00 was entered of the debit side of this account, you know that

an amount of 4500.00 was entered on the credit side of some other GL Account.

If this is not so, then it is because other amounts, adding up to 4500.00, were entered onthe credit side of other GL Accounts.
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In TeemWork, the stem of the 'T' account is represented by the 'Debits and Creditsfor this GL account' tab. This tab is illustrated below for GL Account '1050'.

Each line represents an entry.

The primary columns are the Debit and the Credit columns. The other columnsprovide additional details about the entry. Column totals are also displayed.

In TeemWork, all entries are generated automatically as a by-product of enteringbusiness transactions, such as cheques and invoices.

You do not need to enter debits or credits. This is done for you automatically.

There is nothing magical or mysterious about TeemWork. It simply transforms

business transactions into the corresponding GL Account entries.

Internally, TeemWork behaves as if it was a manual accounting system. Of course,

TeemWork is faster and simpler to use. It can help you save time and avoid errors.

GL account Types

There are five GL account Types.

They are: Assets, Liabilities, Revenue, Expenses and Capital.

Assets, are what one owns. This can include cars, buildings, cash,

bank accounts and equipment.

Liabilities, are what one owes, such as unpaid expenses and loans.

Revenue, is money that is earned.

Expenses, is money that is spent.


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Capital, is owner's equity. Not-for-profit organizations use the word

'Surplus' instead of 'Capital'. Capital or Surplus accounts are not used

in TeemWork.

Below is a slide of the drop down GL account 'Type' list. This list is located

in the 'Manage GL Accounts' window.

Many GL accounts can be of the same Type.

For example, the GL account Type 'Expenses' can be associated with

numerous GL accounts, that are used to post expenses, such as fortelephone service, electricity, rent and employees wages.

The number of GL accounts used depends on the accounting detail that isrequired.

For example, if you have important long distance phone charges, you maywant a separate GL account for 'Long distance phone' expenses and another

GL account for 'Local phone service' expenses. If you have minimal longdistance phone charges, you may decide to use only one GL account to post

all your telephone expenses.

Below is a sample list of some GL accounts.

As you can see, each GL account has a Number, a Type and a Name.

Even if this is not required in TeemWork, usually all GL account Numbers areof the same length and usually, all GL accounts of a given Type begin with

the same digit.

In TeemWork, GL accounts are added, modified and viewed in the 'Manage

GL Accounts' window.


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The 'Manage GL Accounts' window in displayed below. In this example, theGL account 'Local phone service' is highlighted. This indicates that it is

selected.

The details of the selected GL account appears in the tab.

As you can see, the GL account Number for 'Local phone service' is '4400'and its GL account Type is 'Expense'.

Related topics:

For more information about GL accounts, you can read 'What is a GL account

Code?', 'GL Account Debits and Credits' and 'How to add a GL account?'
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