Project Accounting Journal Entries

What are intercompany reconciliations?
Intercompany reconciliation is reconciling between the two branches of the
same company located in multiple locations. Where as one branch acts as seller to other
branch when some product is moved from Branch A to B branch. Eg: - when Branch A
sends some products to Branch B then in this case. Branch A becomes the seller and
Branch B becomes the purchaser.
Just to put in simple words about the Inter company reconciliation process, it is a
reconciliation between the receivables and the payables among two branches of a company
to make sure there is no cash loss within the Business entity and to make sure if they have
any discrepancies, the reason for the difference. Also Intercompany reconciliation keeps a
record of the financial status of a branch updated on a given period
2 :: What experience do you have with general ledger?
Experience to make entries of all cash and non cash transaction, purchase and sales for
cash and for credit
3 : Explain What is an accrual?
Accrual basis of accounting means that the costs or revenues of events are recognized in
the period in which they occur, though the cash flows may take place in another accounting
period.
For example, if I begin an accounting service in December and provide $10,000 of
accounting services in December, but don't receive any of the money from the clients until
January, there will be a difference in the income statements for December and January
under the accrual and cash bases of accounting. Under the accrual basis, my income
statements will show $10,000 of revenues in December and none of those services will be
reported as revenues in January. Under the cash basis, my December income statement
will show no revenues. Instead, the December services will be reported as January
revenues under the cash method.
4 :: Explain Which of the following is not included in the government accounting Balance
Sheet: 1) Asset, 2) Cost, 3) Liability, 4) Surplus.
5 :: Explain What qualities have you got that would make you a good accountant?
Aside from the obvious ones such as numeracy and interpersonal skills, key skills will
include determination and self discipline (to get through the difficult professional
examinations) and an interest in the business world generally.
6:: Explain What is procedure for testing after implementation as functional consultant?
Testing involves a step by step check of various transactions configured in the SAP system.
7 :: how strong in finance? justify sensex is the backbone of national income? Assume that
you are going to merge one company? what are the steps are u taken?

It is true that sensex is the backbone of national income. Sensex is an index that measures
the movement of the share prices of a group of major companies from different sectors of
the economy , which implies that it is a measure of shareholders' expectations of
companies' future performance based on future plans of companies and the overall
economic scenario.
9 :: Explain What is about Future Period and Adjustment Period?
Future period means in oracle not yet opened, u can't post any entry in this period, U can
have two future periods or one displayed in calendar options, adjustment period means,
normally company may have 12 months, or 13 months as per co's requirements, if u have
13 month, Jan to Dec its 12 months, additional one month i.e dec say example 25th to 31st
Dec. So here we have 13 months, additional 5 days called adjustment period, this is use full
to enter additional entries Audit time,if your dec period is closed, u may still have 5 days
period to entry adjustment entries given by auditors.
10 :: Explain What is meant by business?
Business is an activity performed with the sole intention of earning profit. The activity may
vary according to the scope and volume.
11: Explain What is the significance of responsibility in oracle applications?
Users cannot access the concurrent programs ( just like Forms) until unless the program is
attached to a responsibility through a ?Request Group?. Thus the responsibilities provide
the complete security by restricting access to forms, reports, tables( through data-groups)
and also to specific records ( through profile options like Set of Books Id, MO Org Id).
12 :: Please tell me what is a general ledger?
A general ledger is a complete record of financial transactions over the life of a company.
The ledger holds account information that is needed to prepare financial statements and
includes accounts for assets, liabilities, owner's equity, revenues and expenses.
13 Do you know what a general ledger account is?
A general ledger account is an account or record used to sort and store balance sheet and
income statement transactions.
Examples of general ledger accounts include:
The asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land and
Equipment.
14: Tell me about the difference between ledger and general ledger?
General Ledger are those ledgers are using commonly in all types of business
organizations.
Example:

purchases, sales, printing & stationary etc
Ledger is which ledger is created for the business organization requirement.
15 :: What qualities do you have that can make you a good accountant in general ledger?
examinations) and an interest in the business world generally. An ability to work in (and
ultimately lead) teams, strong analytical skills, good verbal and written communication skills
and curiosity (particularly on the audit side) are some of the others you could mention, if you
are not strong in some of these areas then you may have problems making a persuasive
case for yourself.
18 :: Tell me how many periods should have in general ledger, taking into account the
annual closing?
There total periods will be 13. First 12 periods for each month and 13th period for the year
closing transactions.
19:: Which steps would you take before you approve an invoice for payment as a general
ledger?
This question measures your understanding of invoice verification process, so make sure
you have checked it out before going to the interview. Such a typical process should involve
checking to see if the received goods are in satisfactory manner, recording in the notebook.
One more thing, it is also good to describe the importance of each step to the interviewers.
20 :: Tell you know about Unix as general ledger?
Unix (all-caps UNIX for the trademark) is a family of multitasking, multiuser computer
operating systems that derive from the original unix, developed in the 1970s.
21 :: Why would you like to work with us as a general ledger?
More likely than not, the interviewer wishes to see how much you know about the company
culture and whether you can identify with the organization's values and vision. Every
organization has its strong points and these are the ones that you should highlight in your
answer.
22 :: What does mean by business as a general ledger?
Business is an economic activity involving the production or procurement and sale of certain
goods and services for the satisfaction of human need in the society.
23 :: What does a ledger posting means?

All the business transactions are first recorded in Journal or Subsidiary books in a
chronological order when they actually take place and from there the transactions of similar
nature are transferred to Ledger and this process of transferring is called as ledger posting.
24 :: Tell me what are control ledgers?
In a business, sometimes it is not feasible to carry accounts of all the suppliers and
customers in the main ledger. In such cases apart from general or main ledger, the control
ledgers are maintained. Control ledgers records the individual accounts. In the end of the
period, balance shown in the main ledger has to tally with the balance in the individual
ledger accounts maintained in the control ledger.
25 :: Tell me what are the purposes of maintaining control ledgers?
Purposes of maintaining control ledgers are:
☛ Sundry Debtors
☛ Sundry Creditors
☛ Advances to Staff
26:: What do you know about balancing a ledger account?
To know the net effect of all the business transactions recorded in the ledger account, the
accounts need to be balanced. Thus, Balancing of Ledger Account means the balances of
Debit and Credit side should be equal.
27 :: List some steps for balancing of ledger account?
This involves following steps:
☛ First total of both the sides are taken.
☛ Secondly difference between the totals of both the sides is calculated.
☛ If the debit side is in excess to the credit side then place the difference on the credit side
by writing By Balance c/fd.
☛ If the total of credit side is in excess to the debit side, place the difference on the debit
side by writing To Balance c/fd.
☛ After placing the difference on the appropriate side, make sure the totals of both the
sides are equal.
28 :: List some steps for reconciliation process at account level?
The reconciliation process at the account level typically comprises the following steps:
☛Beginning balance investigation. Match the beginning balance in the account to the
ending reconciliation detail from the prior period. If the amounts do not match, investigate
the reason for the variance in the prior period. If the account has not been reconciled for

some time, it is possible that the error lies several periods in the past.
☛Current period investigation. Match the transactions reported in the account within the
period to the underlying transactions, and adjust as necessary.
☛Adjustments review. Review all adjusting journal entries recorded in the account within
the period for appropriateness, and adjust as necessary.
☛Reversals review. Ensure that all journal entries that should have reversed within the
period have been reversed.
☛Ending balance review. Verify that the ending detail for the account matches the ending
account balance.
29 :: List some steps of the concept of reconciliation of general ledger?
The concept of reconciling the general ledger can also refer to examining the general ledger
as a whole to ensure that all accounts are being aggregated into the financial statements.
This reconciliation process involves the following steps:
☛ Summarize the ending balances in all revenue accounts and verify that the aggregate
amount matches the revenue total in the income statement.
☛ Summarize the ending balances in all expense accounts and verify that the aggregate
amount matches the expense total in the income statement. This can be conducted at the
individual expense line item level in the income statement.
☛ Summarize all asset, liability and equity accounts and verify that the aggregate amounts
match the respective line items in the balance sheet.
31 :: How would you reconcile a general ledger?
The general ledger is the master set of accounts that aggregates all transactions recorded
for a business. When a person is reconciling the general ledger, this usually means that
individual accounts within the general ledger are being reviewed to ensure that the source
documents match the balances shown in each account. The reconciliation process is a
common activity just prior to the arrival of the auditors for the annual audit, to ensure that
the accounting records are in pristine condition.
32 :: Asset | liabilities
cash on hand 40000 bank o|d 1100 |stock of goods 25000 capital 80000
how to do opening ledger posting.
1. There is an option available in Oracle from where you can search your batch which was
imbalance and uploaded in Oracle successfully, you can delete that batch and upload the
fresh one.
2. You can also reverse that batch in Oracle itself and then upload the fresh batch with
required correction.
Why depreciation is not charged on land?
No we should not provide Depreciation on Land because the life of Land is Unlimited.
It because land does not have limited useful life...Depreciation is just a replacement cost

of an asset, hence assets like land that has unlimited useful life are not depreciated. If land
is taken on lease it should also be depreciated like any other fixed asset.
Where do we show VAT payable in profit and loss account?
It cannot be shown in profit and loss that can be show as current liabilities in balance sheet
of liabilities left hand side
Yes. We can post budget journals in a closed period.
What are the factors to determine the net profit
Add/Less Indirect Expense
Explain the Business flow of Oracle General Ledger
In an ERP System, All the sub-ledger entries like AR, AP, Inventory, Payroll etc has to flow
to General Ledger as a control of Account. All the sub-ledger entries used to flow to GL
using a scheduled a...
What is the difference between ledger and general ledger?
General Ledger is the control account where we do not have individual details for each
entries which is flowing from Sub edger.
Ledger, technically the breakup of an individual ledger with all details which is recording in
sub-ledger level.
What is the process flow for general ledger?
In An ERP System, all the sub-ledger entries like AR, AP, Payroll, Inventory has to flow to
GL as an control account. Usually it happens every day through a scheduled automatic
program like “Transfer e...
Gl set ups> open the periods of gl > create/reverse journal entries> post and review>
conversion , revaluation, translation, consolidation can be run > review/correct balances >
run accounting reports> close gl periods.
We have recurring journals in gl and recurring invoices in ap why we have both?
Because AP is a sub ledger therefore every invoice should have corresponding entry in GL
a/c
P&L Account & Trial Balance.
What is the difference between P&L account and Trial Balance?
P/l is a statement prepare for the Period showing the profit and loss of the company.where
as the TB shows the actual position of the company as on date.
Pl include only expand income where as the TB include the asset and lib and Expand
Income
What is balance sheet reconciliation?

Balance sheet account reconciliations is the process by which the assets and liabilities in
the unit's balance sheet are substantiated.
What is the reconciliation in GL?
GL reconciliation means Account payable, Accounts receivable ledger balance compared
with General Ledger balance and it should be tallied. If not tallied we have to do the
reconciliation.
Reconciliation is process way by which the assets and liabilities in the unit's balance sheet
are substantiated.
What is average Balance In Oracle Financials?
If a manpower supplier is a proprietor & service receiver is LTD Company. Due to RCM
amendment service provider 25 % service tax & service receiver is paying remaining 75%
Service Tax. So what will be general ledger entry in above cases in SAP. & what will be
general entry at a time of cenvat credit ?
Problem statement
• There are 2 Regions in a country REGION X & REGION- Y
• REGION X is closed and GL Trial Balance (TB) is transferred to REGION Y books ( X-TB
is uploaded in Y books like a journal we do normally)- No Sub Ledger (SL) level transfer
was done
• There was 1 invoices lying AP SL in X books ( xx722002 )- for 1000 GBP
• When TB was uploaded in Y books xx722002...
2 :: Please tell us why should we hire you as a general ledger?
This is the part where you link your skills, experience, education and your personality to the
job itself. This is why you need to be utterly familiar with the job description as well as the
company culture. Remember though, it is best to back them up with actual examples of say,
how you are a good team player. It is possible that you may not have as much skills,
experience or qualifications as the other candidates. What then, will set you apart from the
rest? Energy and passion might.

account balance.
sides are equal.
6 :: What do you know about balancing a ledger account?
7 :: Tell me what are the purposes of maintaining control ledgers? Purposes of maintaining
control ledgers are:
☛ Sundry Debtors ☛ Sundry Creditors ☛ Advances to Staff

answer.
13 :: Which steps would you take before you approve an invoice for payment as a general
ledger?
annual closing?
15 :: Tell me the procedure for testing after implementation as functional consultant in
general ledger?
Example: In case of MM we need to check say if the purchase cycle is working in the
system as it is in real business scenario i.e. whether it is generating PRs, RFQ, PO, GI, LIV
properly and there is no errors during transactions.
16 :: Please give me your self introduction as a general ledger?
☛ Explain brief about your education history.☛ Explain brief about your work experience.
☛ Explain brief about your skills and strength.☛ Explain brief about your weaknes.

case for yourself.
18 :: Tell me about the difference between ledger and general ledger?
organizations.
Example:purchases, sales, printing & stationary etc
19 :: Do you know what is a general ledger account?
Equipment.
21 :: Explain What is the significance of responsibility in oracle applications?
users cannot access the concurrent programs ( just like Forms) until unless the program is
24 :: What is the difference between ledger and general ledger?
General Ledger means, Those ledgers are using commonly in all types of business
organizations. eg: purchases, sales, printing&stationary, etc...Ledger means, which ledger
is created for the business organization requirement

economic scenario.
26 :: Explain What is procedure for testing after implementation as functional consultant?
system as it is in real business scenario i.e. whether it is generating PRs,RFQ,PO,GI,LIV
and curiosity (particularly on the audit side) are some of the others you could mention - if
you aren't strong in some of these areas then you may have problems making a persuasive
case for yourself.
You are likely to be asked many questions seeking evidence of these particular
competencies and will be expected to give examples which are backed up with evidence:
for example, if asked about your leadership qualities, you should give an example of where
you led a group successfully rather than just stating 'people always look to me to take the
lead'.
Sheet:
1) Asset,
2) Cost,
3) Liability,
4) Surplus.
Answer: Surplus
29 :: Explain What is an accrual?
period.
Like for a period of July 05 - October 05, if the organization was due to receive 1000K from
an individual X but has not recieved yet for some reason, will recieve in November 05. It

would be still be accounted for in the period July 05 - October 05 and not the period starting
from November 05.
cash and for credit
31 :: Explain cost sheet-orientation and understating of problems?
Cost sheet is sheet Where all the cost should be recorded which related to the product
What is intercompany reconciliations
Intercompany reconciliation is reconciling between the two
branches of the same company located in multiple locations.
Where as one branch acts as seller to other branch when
some product is moved from Branch A to B branch.
Eg: - when Branch A sends some products to Branch B then in
this case. Branch A becomes the seller and Branch B becomes
the purchaser.
Just to put in simple words about the Inter company
reconciliation process, it is a reconciliation between the
receivables and the payables among two branches of a
company to make sure there is no cash loss within the
Business entity and to make sure if they have any
discrepancies, the reason for the difference. Also Intercompany reconciliation keeps a
record of the financial
status of a branch updated on a given period
cash and for credit
3 :: Explain What is an accrual?
period.
Like for a period of July 05 - October 05, if the organization was due to receive 1000K from
an individual X but has not recieved yet for some reason, will recieve in November 05. It
would be still be accounted for in the period July 05 - October 05 and not the period starting
from November 05.
Sheet: 1) Asset, 2) Cost, 3) Liability, 4) Surplus.

and curiosity (particularly on the audit side) are some of the others you could mention - if
you aren't strong in some of these areas then you may have problems making a persuasive
case for yourself.
You are likely to be asked many questions seeking evidence of these particular
competencies and will be expected to give examples which are backed up with evidence:
for example, if asked about your leadership qualities, you should give an example of where
you led a group successfully rather than just stating 'people always look to me to take the
lead'.
6:: Explain What is procedure for testing after implementation as functional consultant?
system as it is in real business scenario i.e. whether it is generating PRs,RFQ,PO,GI,LIV
economic scenario.
8 :: What is the difference between ledger and general ledger?
General Ledger means, Those ledgers are using commonly in all types of business
organizations. eg: purchases, sales, printing&stationary, etc...Ledger means, which ledger
is created for the business organization requirement

11 :: Explain What is the significance of responsibility in oracle applications?
users cannot access the concurrent programs ( just like Forms) until unless the program is
13 Do you know what a general ledger account is?
Equipment.
14: Tell me about the difference between ledger and general ledger?
organizations.
Example:
purchases, sales, printing & stationary etc
case for yourself.
16 :: Please give me your self introduction as a general ledger?
17 :: Tell me the procedure for testing after implementation as functional consultant in
general ledger?
system as it is in real business scenario i.e. whether it is generating PRs, RFQ, PO, GI, LIV
annual closing?

19:: Which steps would you take before you approve an invoice for payment as a general
ledger?
answer.
25 :: Tell me what are the purposes of maintaining control ledgers?
Purposes of maintaining control ledgers are:
☛ Sundry Debtors
☛ Sundry Creditors
☛ Advances to Staff
26:: What do you know about balancing a ledger account?

sides are equal.
account balance.
30 :: Please tell us why should we hire you as a general ledger?
This is the part where you link your skills, experience, education and your personality to the
job itself. This is why you need to be utterly familiar with the job description as well as the

company culture. Remember though, it is best to back them up with actual examples of say,
how you are a good team player. It is possible that you may not have as much skills,
experience or qualifications as the other candidates. What then, will set you apart from the
rest? Energy and passion might.
31 :: How would you reconcile a general ledger?
32 :: Asset | liabilities
cash on hand 40000 bank o|d 1100 |stock of goods 25000 capital 80000
how to do opening ledger posting.
Capital
Definition: Capital is the investment by an entity's owners in a business, plus the impact of
any accumulated gains or losses. This is may be considered the residual wealth of a
business after all of its liabilities have been settled.
Capital is also defined as the aggregate wealth of an individual.
Cash
Definition: Cash is bills, coins, bank balances, money orders, and checks. Cash is used to
acquire goods and services or to eliminate obligations.
Cash Account
Definition: A cash account is a brokerage account that requires the account holder to
render full payment in cash for any securities purchased by the settlement date. The

account holder has not elected to, or has not been allowed to, make purchases of securities
on margin. A purchase made on margin is one using funds borrowed from the brokerage.
Cash Book
Definition: A cash book is subsidiary ledger in which are stored all cash receipt and cash
payment transactions. It is the primary repository of cash-related information for a business.
The information in the cash book is periodically aggregated and posted to the general
ledger. The information in the cash book is routinely compared to the bank's records via a
bank reconciliation to ensure that the information in the book is correct. If not, an adjusting
entry is made to bring the cash book into conformance with the bank's information.
What is a cash reconciliation?
A cash reconciliation is the process of verifying the amount of cash in a cash register as of
the close of business. The verification can also take place whenever a different clerk takes
over a cash register. The procedure to follow for this cash reconciliation is
Cash Sweeping
A cash sweeping system (also known as physical pooling) is designed to move the cash in
a company’s outlying bank accounts into a central concentration account, from which it can
be more easily invested. By concentrating cash in one place, a business can place funds in
larger financial instruments at higher rates of return. Cash sweeps are intended to occur at
the end of every business day, which means that quite a large number of sweep
transactions may arise over the course of a year.
The Chart of Accounts

The chart of accounts is a listing of all accounts used in the general ledger of an
organization. The chart is used by the accounting software to aggregate information into an
entity's financial statements
Credit Balance
Definition: A credit balance is the ending total in an account, which implies either a positive
or negative amount, depending on the situation. A credit balance applies to the following
situations:
 A positive balance in a bank account
 The total amount owed on a credit card
 A negative balance in an asset account
 A positive balance in a liability, equity, revenue, or gain account
 The remaining balance in a cash account with a broker after securities have been
bought
Currency Hedging Procedure
When a business has current or expected cash holdings or obligations involving foreign
currencies, it may be prudent to create a hedging transaction to mitigate the company’s
potential losses arising from exchange rate fluctuations in future periods.
Current Cost
Definition: Current cost is the cost that would be required to replace an asset in the current
period. This derivation would include the cost of manufacturing a product with the work

methods, materials, and specifications currently in use. The concept is used to generate
financial statements that are comparable across multiple reporting periods.
Debenture
Definition: A debenture is a bond issued with no collateral. Instead, investors rely upon the
general creditworthiness and reputation of the issuing entity to obtain a return of their
investment plus interest income. If the issuer of a debenture were to default, investors
would be placed at the level of general creditors in terms of their ability to recover funds
from the issuer.
What is the difference between a debtor and a creditor?
A creditor is an entity or person that lends money or extends credit to another party. A
debtor is an entity or person that owes money to another party. Thus, there is a creditor and
a debtor in every lending arrangement. The relationship between a debtor and a creditor is
crucial to the extension of credit between parties and the related transfer of assets and
settlement of liabilities.
What is degree of financial leverage?
The degree of financial leverage calculates the proportional change in net income that is
caused by a change in the capital structure of a business. This concept is used to evaluate
the amount of debt that a business is obligated to repay.
Expense
Definition: An expense is the reduction in value of an asset as it is used to generate
revenue. If the underlying asset is to be used over a long period of time, the expense takes
the form of depreciation, and is charged ratably over the useful life of the asset. If the

expense is for an immediately consumed item, such as a salary, then it is usually charged
to expense as incurred. If an expenditure is for a minor amount that may not be consumed
for a long period of time, it is usually charged to expense at once, to eliminate the
accounting staff time that would otherwise be required to track it as an asset.
What is factoring?
Factoring is the use of a borrowing entity's accounts receivable as the basis for a financing
arrangement with a lender. The borrower is willing to accept a factoring arrangement when
it needs cash sooner than the payment terms under which its customers are obligated to
pay. Factors are usually willing to advance funds quite rapidly under this type of
arrangement.
What are final accounts?
Final accounts is a somewhat archaic bookkeeping term that refers to the final trial balance
at the end of an accounting period from which the financial statements are derived. This
final trial balance includes all of the journal entries used to close the books,
Financial Accounting
Definition: Financial accounting is the practice of recording and aggregating financial
transactions into financial statements. The intent of financial accounting is to distribute a
standard set of financial information to outside users of the information, such as creditors,
lenders, and investors. It is usually compared to managerial accounting, which focuses on
an operational analysis of a business to explore how it can be made more efficient or
profitable. Managerial accounting reports are only intended for internal use.

Types of financial analysis
Financial analysis involves the review of an organization's financial information in order to
arrive at business decisions. This analysis can take several forms, with each one intended
for a different use.
GAAP accounting
GAAP accounting occurs when a business records financial transactions and issues
financial statements that are in accordance with GAAP rules. GAAP is an acronym for
generally accepted accounting principles; it is the most widely used accounting framework
within the United States. This means that GAAP accounting is widely practiced within the
United States. Outside of that geographic area, the predominant accounting framework is
IFRS (international financial reporting standards), so IFRS accounting is found outside of
the United States
General Journal Description | Entries | Example
General Journal Description
The general journal is part of the accounting record keeping system. When an event occurs
that must be recorded, it is called a transaction, and may be recorded in a specialty journal
or in the general journal.
What is the difference between the general ledger and general journal?
When an accounting transaction occurs, it is first recorded in the accounting system in a
journal. There may be several journals, which are either designed to contain special types
of transactions (such as for cash receipts, cash disbursements, or sales) or for all other
types of transactions. These other transactions are recorded in the general journal.
Examples of entries made into the general journal are asset sales, depreciation, interest
income, interest expense, and the sale of bonds or shares in the company to investors.

General Ledger
Definition: A general ledger is the master set of accounts that summarize all transactions
occurring within an entity. There may be a subsidiary set of ledgers that summarize into the
general ledger. The general ledger, in turn, is used to aggregate information into the
financial statements of a business; this can be done automatically with accounting software,
or by manually compiling financial statements from the information in a trial balance report
(which is a summarization of the ending balances in the general ledger).
How to reconcile the general ledger
How to post to the general ledger
Ledger posting is the aggregation of financial transactions from where they are stored in
specialized ledgers, and transferring the information into the general ledger. Initially,
transactions that are completed in volume are typically recorded in a specialty ledger, such
as the sales ledger. Doing so keeps the general ledger from being awash in the detail for
thousands of transactions. The information in the general ledger is then aggregated into a
set of financial statements for each reporting period.
General ledger template
A general ledger is a file comprised of the accounts used to record the business
transactions of an organization. The general ledger has a specifically-defined template,
which is used to organize the myriad of transactions that may be stored in the file.

The difference between the general ledger and trial balance
There are a number of differences between the general ledger and trial balance, which are
as follows:
 Amount of information. The general ledger contains the detailed transactions
comprising all accounts, while the trial balance only contains the ending balance in
each of those accounts. Thus, the general ledger may be several hundred pages
long, while the trial balance covers only a few pages.
 Usage. The general ledger is used as the main source of information by financial
accountants when they are investigating accounts. The trial balance has a much
more limited use, where the totals of all debits and credits are compared to verify
that the books are in balance.
 Auditor usage. The auditors request a copy of the trial balance as part of their year-
end audit, so that they have final balances for all accounts. They use the general
ledger for a different purpose, which is to trace balances back to individual
transactions.
 Nature of information. The general ledger is considered to be a database of
information about accounting transactions, while the trial balance is really just a
report that is derived from the general ledger.
What is GAAP?
GAAP is short for Generally Accepted Accounting Principles. GAAP is a cluster of
accounting standards and common industry usage that have been developed over many
years. It is used by organizations to:
 Properly organize their financial information into accounting records;
 Summarize the accounting records into financial statements; and
 Disclose certain supporting information.

Generally Accepted Accounting Principles (GAAP)
Generally Accepted Auditing Standards (GAAS)
Ghost Card
Gross Margin
Definition: Gross margin is net sales less the cost of goods sold. The gross margin reveals
the amount that an entity earns from the sale of its products and services, before the
deduction of any selling and administrative expenses. The figure can vary dramatically by
industry. For example, a company that sells electronic downloads through a website may
have an extremely high gross margin, since it does not sell any physical goods to which a
cost might be assigned. Conversely, the sale of a physical product, such as an automobile,
will result in a much lower gross margin.
What is gross profit?
Gross profit is net sales minus the cost of goods sold. It reveals the amount that a business
earns from the sale of its goods and services before the application of additional selling and
administrative expenses. Gross profit is typically stated partway down the income
statement, prior to a listing of selling, general, and administrative expenses.
Hedging
Definition: Hedging is a risk reduction technique whereby an entity uses a derivative or
similar instrument to offset future changes in the fair value or cash flows of an asset or
liability. A perfect hedge eliminates the risk of a subsequent price movement. A hedged item
can be any of the following individually or in a group with similar risk characteristics:
 Highly probable forecast transaction

 Net investment in a foreign operation
 Recognized asset
 Recognized liability
 Unrecognized firm commitment
How do I reconcile an account?
An account reconciliation is usually done for all asset, liability, and equity accounts, since
their account balances may continue on for many years. It is less common to reconcile a
revenue or expense account, since the account balances are flushed out at the end of each
fiscal year. However, this may be done simply to verify that transactions were recorded in
the correct account; a reconciliation may reveal that a transaction should be shifted into a
different account. Usually, this means moving an expense into a different account.
Accounting ChangeDefinition: An accounting change is a change in accounting principle,
accounting estimate, or the reporting entity. These changes can trigger modifications in the
reported profits or other financial aspects of a business. In more detail:

Accounting ConceptsDefinition: Accounting concepts are a set of general conventions that
can be used as guidelines when dealing with accounting situations. These concepts have
also been integrated into the various accounting standards, so that a user will not
implement a standard and then find that it is in conflict with one of the accounting concepts.
Accounting cost definition and usage
Accounting cost is the recorded cost of an activity. An accounting cost is recorded in the
ledgers of a business, so the cost appears in an entity's financial statements.
Accounting Income
Definition: Accounting income is profitability that has been compiled using the accrual basis
of accounting. In general, accounting income is the change in net assets during a reporting
period, excluding any receipts from or disbursements to owners. It is also calculated as
revenues minus all expenses.
Accounting income shows the results of all operational and financial activities engaged in by
a business.
Similar Terms
Accounting income is also known as net income.
Accounting Measurement
Definition: Accounting measurement is the aggregation of numeric information, typically in
terms of a unit of currency. For example, the sales in a reporting period may be expressed
in dollars of revenue. It is also possible to use some other unit of measure, such as hours of
employee time or hours of machine time. For example, employees spend 120 hours
working on a consulting project. By using a standardized accounting measurement, it is
easier to compare results over a period of time.

Accounting Payment Terms
Definition: Accounting payment terms are the payment rules imposed by suppliers on their
customers. Payment terms are imposed to ensure that payments are received by suppliers
within a reasonable period of time. Discount terms may be allowed in order to accelerate
cash collections. A large customer may use its purchasing power to force a supplier to
agree to terms that are more favorable to the customer, such as a longer period of time in
which to pay the supplier, or relaxed rules for returning goods.
Accounts Payable
Definition: Accounts payable is the aggregate amount of an entity's short-term obligations to
pay suppliers for products and services which the entity purchased on credit. If accounts
payable are not paid within the payment terms agreed to with the supplier, the payables are
considered to be in default, which may trigger a penalty or interest payment, or the
revocation or curtailment of additional credit from the supplier.
Accounting for accounts payable
The accounting for accounts payable involves the recordation and payment of liabilities.
This is the primary functional area through which a business records expenses and pays
other parties.
How to reconcile accounts payable
Before closing the books at the end of each reporting period, the accounting staff must
verify that the detailed total of all accounts payable outstanding matches the payables
account balance stated in the general ledger. Doing so ensures that the amount of accounts
payable reported in the balance sheet is correct. This is called an accounts payable
reconciliation.

The difference between accounts receivable and accounts payable
Accounts receivable are the amounts owed to a company by its customers, while accounts
payable are the amounts that a company owes to its suppliers. The amounts of accounts
receivable and payable are routinely compared as part of a liquidity analysis, to see if there
are enough funds coming in from receivables to pay for the outstanding payables. This
comparison is most commonly made with the current ratio, though the quick ratio may also
be used.
Accounts Receivable
Definition: Accounts receivable is short-term amounts due from buyers to a seller who have
purchased goods or services from the seller on credit. Accounts receivable is listed as a
current asset on the seller's balance sheet.
The total amount of accounts receivable allowed to an individual customer is typically
limited by a credit limit, which is set by the seller's credit department, based on the finances
of the buyer and its past payment history with the seller. Credit limits may be reduced during
difficult financial conditions when the seller cannot afford to incur excessive bad debt
losses.
Accounts receivable are commonly paired with the allowance for doubtful accounts (a
contra account), in which is stored a reserve for bad debts. The combined balances in the
accounts receivable and allowance accounts represent the net carrying value of accounts
receivable.
The seller may use its accounts receivable as collateral for a loan, or sell them off to a
factor in exchange for immediate cash.

Accounts receivable may be further subdivided into trade receivables and non trade
receivables, where trade receivables are from a company's normal business partners, and
non trade receivables are all other receivables, such as amounts due from employees.
Accounts Receivable Accounting
Overview of Accounts Receivable
When you sell goods or services to a customer and allow it to pay you at a later date, this is
known as selling on credit, and creates a liability for the customer to pay your business.
Conversely, this creates an asset for your company, which is called accounts receivable.
This is considered a short-term asset, since you are normally paid in less than one year.
Accounts Receivable Collection Period | Days Sales Outstanding
A comparison of the receivables to the sales activity of a business is called the accounts
receivable collection period or days sales outstanding. This comparison is used to evaluate
how long customers are taking to pay a company. A low figure is considered best, since it
means that a business is locking up less of its funds in accounts receivable, and so can use
the funds for other purposes. Also, when receivables remain unpaid for a reduced period of
time, there is less risk of payment default by customers.
What is the accounts receivable ledger?
The accounts receivable ledger is a subledger in which is recorded all credit sales made by
a business. It is useful for segregating into one location a record of all amounts invoiced to
customers, as well as all credit memos and (more rarely) debit memos issued to them, and
all payments made against invoices by them. The ending balance of the accounts
receivable ledger equals the aggregate amount of unpaid accounts receivable.

 Invoice date
 Invoice number
 Customer name
 Identifying code for item sold
 Sales tax
 Total amount billed
 Payment flag (states whether paid or not)
Accrual Accounting
Definition: Accrual accounting is the recording of revenue when earned and expenses when
incurred. This accounting is recorded irrespective of the dates on which any associated
cash flows occur. The primary impact of accrual accounting is on the income statement,
since the reported net profit or loss of a business can be substantially altered by the
recordation of accrual basis transactions.
Accrual basis accounting conforms to the generally accepted accounting principles (GAAP)
and international financial reporting standards (IFRS) frameworks. Accrual accounting is
required by these two major accounting frameworks, because it results in the most accurate
representation of the financial results and financial position of a business.
Small businesses may use the less-complex cash basis of accounting. The cash basis is
not considered as accurate as accrual accounting, since the recognition of transactions
under the cash basis may be accelerated or delayed in accordance with when cash is
received or paid.
Accrual accounting is required if the owners of a business want its financial statements to
be audited. Auditors will not provide an opinion if the books are not compiled using the
accrual basis of accounting.

Accrual Basis
Definition: Accrual basis is a method of recording accounting transactions for revenue when
earned and expenses when incurred. The accrual basis requires the use of allowances for
sales returns, bad debts, and inventory obsolescence, which are in advance of such items
actually occurring. An example of accrual basis accounting is to record revenue as soon as
the related invoice is issued to the customer.
A key advantage of the accrual basis is that it matches revenues with related expenses, so
that the complete impact of a business transaction can be seen within a single reporting
period.
Auditors will only certify financial statements if they have been prepared using the accrual
basis of accounting.
The alternative method for recording accounting transactions is the cash basis.
The Accrual Principle
The accrual principle is the concept that you should record accounting transactions in the
period in which they actually occur, rather than the period in which the cash flows related to
them occur. The accrual principle is a fundamental requirement of all accounting
frameworks, such as Generally Accepted Accounting Principles and International Financial
Reporting Standards

What is a bad debt?
A bad debt is a receivable that a customer will not pay. Bad debts arise under the following
circumstances:
 When a company extends too much credit to a customer that is incapable of paying
back the debt, resulting in either a delayed, reduced, or missing payment.
Bad Debt Expense
Definition: Bad debt expense is the amount of an account receivable that is considered to
not be collectible. The amount of this expense reflects the credit choices made by a
business when extending credit to customers.
Balance Sheet
Definition: The balance sheet is a report that summarizes all of an entity's assets, liabilities,
and equity as of a given point in time. It is typically used by lenders, investors, and creditors
to estimate the liquidity of a business. The balance sheet is one of the documents included
in an entity's financial statements. Of the financial statements, the balance sheet is stated
as of the end of the reporting period, while the income statement and statement of cash
flows cover the entire reporting period.
Typical line items included in the balance sheet (by general category) are:
 Assets: Cash, marketable securities, accounts receivable, inventory, and fixed
assets
 Liabilities: Accounts payable, accrued liabilities, taxes payable, short-term debt, and
long-term debt
 Shareholders' equity: Stock, retained earnings, and treasury stock

What is a bank balance?
A bank balance is the ending cash balance appearing on a bank statement for a bank
account. The bank balance can also be derived at any time when an inquiry is made
regarding the bank's record of the cash balance in an account.
Bank Charge
Definition: A bank charge is a fee assessed to an account by a financial institution. A bank
charge may be levied for a number of reasons, including the following:
 Not maintaining a minimum balance
 Issuing a not sufficient funds check
 Depositing a check that bounces
 Exceeding the overdraft limit on an account
 The passage of time, if there is a monthly service fee
 The ordering of additional bank checks
 Foreign transaction fees
 The issuance of a paper bank statement, rather than an on-line one
 The manual handling of transactions by a bank teller
 Inactivity in an account
Bank Debits
Definition: Bank debits are transactions that reduce the balance in a customer's account at
a bank. Larger debits are usually associated with checks written by a bank customer to a
payee, or withdrawals directly made by a customer from their own account. Smaller debits
can be associated with the imposition of bank fees, such as:

 Check printing fee
 Check processing fee
 Deposit processing fee
 Foreign transaction fee
 Minimum balance fee
 Monthly maintenance fee
 NSF fee
 Paper statement fee
Bank Draft
Definition: A bank draft is a payment on behalf of the payer, which is guaranteed by the
issuing bank. A draft is used when the payee wants a highly secure form of payment.
The bank can safely issue this guarantee because it immediately debits the payer's account
for the amount of the check, and therefore has no risk. In effect, the required funds have
been set aside by the bank. Not only is this a safe transaction for the bank, it is also
beneficial, since the bank has ownership of the funds from the time when it debits the
payer's account to when the money is eventually paid to the payee (which could be several
weeks, depending on when the payer elects to send the check to the payee). In addition,
banks charge a fee for this service.
A bank draft may be required by the seller in a transaction when there is a large sale price
involved, or when the seller does not have a relationship with the buyer, or has reason to
suspect that collecting a payment from the buyer would otherwise be problematic. For
example, a bank draft may be required by the seller when a home or an automobile is being
sold.
There are two situations in which a seller may not succeed in collecting funds under a bank
draft. The first case is when the issuing bank goes bankrupt, so that it is not honoring any

outstanding drafts. The second case is when the draft is fraudulent, and so was not actually
prepared by a bank.
Similar Terms
A bank draft is also known as a cashier's check.
Bank Reconciliation
Bank Reconciliation Overview
A bank reconciliation is the process of matching the balances in an entity's accounting
records for a cash account to the corresponding information on a bank statement. The goal
of this process is to ascertain the differences between the two, and to book changes to the
accounting records as appropriate. The information on the bank statement is the bank's
record of all transactions impacting the entity's bank account during the past month.
What is the purpose of a bank reconciliation?
A bank reconciliation is used to compare your records to those of your bank, to see if there
are any differences between these two sets of records for your cash transactions. The
ending balance of your version of the cash records is known as the book balance, while the
bank's version is called the bank balance. It is extremely common for there to be differences
between the two balances, which you should track down and adjust in your own records. If
you were to ignore these differences, there would eventually be substantial variances
between the amount of cash that you think you have and the amount the bank says you
actually have in an account. The result could be an overdrawn bank account, bounced
checks, and overdraft fees. In some cases, the bank may even elect to shut down your
bank account.

What is a bank reconciliation statement?
A bank reconciliation statement is a form used to compare internal records of checking
account activity to those stated by the bank.
Bank Service Charge Expense
Definition: Bank service charge expense is the name of an account in which is stored all
fees charged to an organization's checking accounts by its bank. This separate account is
more likely to be used when a business maintains a large number of checking accounts,
and wants to analyze the costs of maintaining them. When there are fewer checking
accounts or the fees are quite low, service charges are more likely to be recorded in a
miscellaneous expenses account.
What is a book balance?
A book balance is the account balance in a company's accounting records. The term is
most commonly applied to the balance in a company's checking account at the end of an
accounting period. An organization uses the bank reconciliation procedure to compare its
book balance to the ending cash balance in the bank statement provided to it by the
company's bank.
Branch Accounting
Definition: Branch accounting involves separately tracking business transactions for each
operating unit of a business. By doing so, one can see the financial results, financial
position, and cash flows of each operating unit. This information is quite useful for
evaluating performance. It is most commonly found in organizations that have a number of
geographically dispersed locations.

Branch accounting can result in a large chart of accounts, since a separate account coding
structure must be maintained for each operating unit.

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