General ledger account analysis is an important task for both accounting and management personnel. Performing general ledger account analysis allows you to ensure that all financial transactions have been properly accounted for in the correct general ledger account. If financial transactions are recorded to an incorrect account, the financial statements will reflect incorrect totals, which can lead to problems when attempting to create a budget for the next accounting year.
Print out a general ledger report detail of all financial transactions recorded to a specific general ledger account for a specified period of time. For example, you may want to conduct a general ledger account analysis annually, quarterly or monthly.
Review each transaction to determine that it was initiated by a valid type of transaction entry. For example, if you are performing a general ledger account analysis on an expense account and you notice sales income has been recorded in the account, that transaction has been recorded improperly and needs to be moved to the correct general ledger account.
Review each transaction to determine that it was initiated by a valid source. For example, if you are performing a general ledger account analysis on the pool maintenance expense account and notice an expense paid to Office Depot, the expense was probably recorded to the wrong expense account and needs to be corrected.
Review the documentation that initiated the financial transactions to verify the validity of the documents. For example, if you are performing a general ledger account analysis on an expense account, pull the original invoice for the expenses to ensure all invoices are valid. If the account has hundreds of transactions, select a random sampling of 10 percent of the transactions to audit the invoices.
Make all necessary corrections to the financial transactions based on your general ledger account analysis.
Always conduct general ledger account analysis before preparing an operating budget for the coming year.