The general ledger is an important tool for recording transactions and serves as the basis for a company’s financial statements. Maintaining the ledger is a priority, because business owners, managers and investors among other stakeholders rely on financial reporting to make decisions. There are some basic maintenance procedures bookkeepers and accountants perform to keep the general ledger reliable.

Journal Entries

A journal entry contains debits and credits that, when posted to the general ledger, form account balances. Debits must equal credits, and automated ledger systems have safeguards built into the posting process, making it easier to perform maintenance. In many accounting departments, standardized journal entries are posted on a monthly basis, but the frequency can vary. Journal entries are the basis for all of the line items in financial statements.

Account Reconciliations

Account reconciliations involve matching general ledger activity to source documents such as bank statements to ensure ledger account balances are accurate. Many account reconciliations are performed on a monthly basis, but as with journal entries, the frequency varies. The number of accounts in the general ledger and the types of transactions the entity processes impact maintenance procedures. If there are differences between the ledger and source documents, accounting personnel must clear the reconciling items by figuring out the reason for the discrepancy. They must also update the general ledger when applicable.

Adjusting Journal Entries

At quarter-end or year-end, adjusting journal entries are needed to keep financial statements in compliance with generally accepted accounting principles. This is an important part of ledger maintenance and directly impacts the accuracy and usability of financial reporting. Payables, receivables, inventory and sales accounts are all subject to adjusting entries under certain circumstances. Accountants are often needed to prepare complex entries where supporting schedules and difficult calculations are required.

Financial Analysis

Performing a trend analysis is another way to maintain the ledger and help ensure that account balances are accurate. By looking at account balances over a period of time, it is possible to ascertain discrepancies in monthly activity. It is also possible to use financial ratios to measure the relationships between ledger accounts and determine if financial statement line items seem reasonable. The debt-to-equity ratio, current ratio and quick ratio are among the accounting metrics that can be used for general ledger maintenance.