The financial dealings of any particular accounting system can be divided into the four most important and major accounting cycles. They are the revenues, payment, roll payment and the general journal. Transactions in the accounting system is carried out by the means of sales invoices, purchase invoices, receipts, checks, and other entries on the payroll which are then posted to the consecutive journals. These postings can also be recorded in the form of internal control, in the general ledger.
General ledger is abbreviated as GL, and it is a significant part of the accounting system. It holds within itself all the dealings and activities of transaction, which are the organised neatly by the class of accounts. There exists various cycles in any accounting system. The best business accounting software follows a number of steps. A brief elucidation of it is as follows:
- The entry of order: This serves to be the first important step through which the invoices enter. The entry is direct either through the sales orders or through a point of sale (POS) system. The latter is however constituted of the cash register mainly which is then posted to the sales journal. Such entries also aggregate on the accounts receivable ledger, which is there after organised by the client. The inventory ledger can also affect the point of sale if the business organisation maintains the same. The journal activity consisting of an absolute sale can also be posted on general ledger.
- Cash deposits or receipts: The cash receipt journal consists of the posted deposits of sales as well as other bank deposits. Information on sales deposit can also be aggregated on the accounts receivable ledger which is arranged by the client. It is of common notion that such postings also get an entry to the bank account ledger. And finally all such cash receipts ultimately posted on the general ledger.
- Receivable accounts: For any accounting system the accounts receivable, forms an integral part of it. A separate journal records both the cash receipt and the sales data from the client in this case. The data is derived from the posting made on the cash receipt journal and also the sales invoice journal.
Cycle of purchase:
- Purchasing of orders: The invoices which enter directly or indirectly through the purchase of orders are immediately posted to the purchase journal. It is needless to say that these entries can also get accumulated on the general accounts payable ledger. The vendors organize such ledgers. In cloud based accounting software also such ledgers are found. All activity of purchase is finally posted on to the general ledger, passing through the inventory ledger specifically maintained by an organization.
- The cash checks or disbursements: This consists of the payments or the expenses. During the activity of an accounting system this check or cash disbursement journal, is find the posted on to the general ledger.
- Accounts payable: This consists of a separate journal which is used for the recording of the cash receipt data as well as the sales data by the vendor.