For all you U.S. small business owners out there, you’re probably well aware (or at least you should be!) that April 15 is looming ever closer. That’s right: it’s time again to file your taxes, so do yourself a favor and don’t wait until the last minute to get your paperwork in order. We recently shared a handy tax-time checklist for US business owners, and one of the key items on that list is your general ledger. Read on to find out how this very important piece of your business’ financial portrait has a role to play in making tax time go as smoothly as possible.
What’s a General Ledger?
If you’re a new business owner, or just new to accounting in general, then a quick definition of the general ledger may come in handy here. Simply put, a general ledger is a complete record of each and every financial transaction that has occurred within your company during the life of the business. This includes your company’s assets, liabilities, equity, revenue, and expenses. All of this information is then used to prepare your financial statements for various financial periods. This is all vital info to have on hand when it comes time to prepare your taxes, whether you’re doing it yourself or having a tax professional help you out. (Take note: this post is not meant to serve as professional advice regarding filing your taxes. Speak with a certified tax professional if you need a helping hand with your filing!)
All of your business’ financial reports – like your P&L statement and balance sheet – are created based on the information collected in the general ledger. This makes the general ledger a crucial piece of your business’ complete financial picture, and that’s why whoever is preparing your taxes will want to be able to reference it when preparing your company’s filing.
How Do I Create a General Ledger?
Whether you’re referencing your general ledger while filing your taxes yourself, or handing it over to a tax professional to do the work for you, you’re going to need to know how to organize the general ledger itself. If you’re doing your books the old fashioned way (as in, with actual physical books), then your general ledger will be a literal ledger. All of your journal entries are transferred to the general ledger, and that information is then transferred to your financial reports.
Want to learn about journal entries? Check out our post on the difference between debits and credits in accounting.
Thankfully, our modern world affords us some more simple, streamlined alternatives to stacks upon stacks of books and papers for keeping track of our business’ finances. With the right online accounting software, generating your general ledger is a snap. Just input all of your transactions (whether they’re debits, credits, cash, etc.) and the software does the work for you: even report generation!
Have questions about preparing your company’s general ledger? Drop us a line anytime at firstname.lastname@example.org.