General Ledger

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The general ledger documents all of the organization’s transactions over the course of a year for all accounts. Every time a check is written, the transaction reduces cash and increases an expense account. Every time a check is deposited and recorded, cash is increased and revenue is increased.

The transactions are accumulated over the year and the totals maintained.

The account balances are the basis for all reporting activity. Account balances are sorted to generate all financial statements produced throughout the year.

Access to the general ledger should be limited to a very few individuals. Most transactions are posted automatically through receipts and payables modules. All modifications to the accounts should be made by posting a journal entry. This procedure ensures an audit trail will be maintained and all activity is recorded and monitored.

All accounts in the general ledger should be analyzed and/or reconciled each month to ensure the accuracy of the balances. [1]

Chart of Accounts

A listing of the titles of the general ledger accounts is known as the chart of accounts.

The accounts in the general ledger and in the chart of accounts are organized as follows:

  • statement of financial position accounts
    • asset accounts
    • liability accounts
    • net asset accounts
  • statement of activities accounts
    • revenues and gains
    • expenses and losses

The number of accounts in a nonprofit's general ledger could range from 30 to 1,000 or more. The number of accounts depends on the number of programs that the nonprofit has, the types of revenues it earns, and the level of detail required for planning and control of the organization.

For example, a nonprofit is likely to have a separate general ledger account for each of its bank accounts. It may also have 50 general ledger accounts for each of its major programs, plus many accounts under its fundraising and management and general expense categories.

The detail in the general ledger accounts will always be available for management's use. However, all of the account balances will be summarized into a few totals that are presented in the financial statements and IRS Form 990.

Nonprofit recordkeeping can get a bit challenging, so it is worth noting that accounting software exists to help nonprofits record transactions efficiently. The accounting software will also allow for reports of revenues and expenses by function (programs, fundraising, management and general), by the nature or type of expense (salaries, electricity, rent, depreciation, etc.), and/or by grant.[2]


Chart of Accounts

The Accounting Coach: Detailed Chart of Accounts Example

TechSoup: QuickBooks for Nonprofits: Setting Up the Chart of Accounts

Aplos: What is a Nonprofit Chart of Accounts Samle Chart of Accounts - Nonprofit Organizations

General Ledger

Small Business Chron: Example of a Nonprofit's General Ledger

BlackBaud: Nonprofit General Ledger Guide for Black Baud software