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What is a General Ledger? (Recording Nonprofit Transactions) - YouTube
Channel: Aplos
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Hey, this is Alex from the Aplos Academy
today we're gonna take a look at
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transactions what they are how and when
you record them and how they impact your
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nonprofit accounting system if you've
created a non-profit chart of accounts
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and are ready to record transactions
this is the course for you what are
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transactions in the previous lesson we
learned what accounts are and how you
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set them up to represent the five areas
of accounting the money that you have o
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receive spend and your overall work
these accounts are given value by
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recording transactions which are
essentially the happenings within your
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organization receiving money spending
money paying bills and transferring
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money in between your banks are all
examples of transactions that happen on
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a daily basis for your nonprofit so how
do you record transactions using your
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accounts before we dive into the format
I want to tell you about the
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relationship between the types of
accounts once you understand this
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everything else becomes a lot easier to
deal with accounts work together in a
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system which is called double entry
accounting which basically means in
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every transaction there's gonna be two
sides one side is called debit and the
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other side is called credit so before we
move forward forget everything you know
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about the terms debit and credit it
doesn't mean your debit and credit cards
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and it doesn't even necessarily mean
debiting or crediting an account in
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accounting debit and credit means
something completely different than what
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you've ever learned you're welcome there
are five types of accounts and each one
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is increased or decreased by a debit or
credit if you're increasing an asset or
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an expense account you would use the
debit column and for increasing
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liabilities income and equity you would
use the credit column every transaction
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has a debit and a credit amount and
these amounts will always equal each
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other let's take a look at an example so
you can see how this actually plays out
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so let's say you go to the store and you
buy some supplies some paper pens
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stapler that all amount to about 50
when recording this purchase you're
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going to use one of your expense
accounts since they're used when you
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record spending money so YouTube the
expense account office supplies since
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expense accounts are increased by debits
you're going to put the $50 in the debit
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column next to the office supplies
account so what is the other side of
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this transaction when we're doing double
entry accounting well if you purchase
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these supplies with money from your
checking account your checking balance
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is being reduced therefore the other
side of this transaction would be your
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asset account checking for the credit
amount of $50 again since the expense
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account is being increased it's going to
be on the debit side and since the asset
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is being decreased it's on the credit
side debit is 15 credit is 50 they both
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equal each other
there's your transaction so welcome to
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recording transactions this process is
called double entry bookkeeping and it's
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a necessary part to any accounting
system let's take a look at one more
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example this time using income so let's
say you received a donation for $100
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this is money that's being received by
your organization therefore it's
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considered income the income account
you're going to use is called
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contributions and since it's increasing
an income account it's going to be in
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the credit column so again what are the
other side of this transaction using
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double entry accounting well if you're
depositing the money into your bank
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account in other words you're checking
that would be the other side of the
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transaction
so since assets are increased by debits
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you can see that this works out in our
transaction so your income is increased
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by the credit side the assets are
increased by the debit side the debits
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and credits balance each other so as you
record transactions for your nonprofit
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remember the chart that we used a couple
of minutes ago remembering this chart is
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going to be essential if you ever need
to figure out the double entry
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accounting system so how do you record
these transactions this is going to
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happen one of two ways either by hand or
through the use of some sort of software
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obviously software is easier but if you
do it by hand you need to understand two
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things the general journal and the
general ledger the general journals
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where you're going to manually record
the transactions like the examples we
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mentioned earlier you're going to record
both accounts that are used and their
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debit and credit sides and you might
also want to record some other
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information like the date where you
purchase something who gave you money or
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any other details once you have the
transaction recorded in the journal you
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would record the account
details in the general ledger the ledger
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is a further breakdown of your account
balances and the sum of your
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transactions so that's where we're gonna
stop for today on the recording
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transactions by hand by now you're
probably going a little cross-eyed the
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journal and the ledger of both entirely
replaced by software which makes the
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whole process infinitely easier software
allows you to record transactions with
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all the details that you need plus they
usually have screens that are a lot
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easier to use so you don't even have to
do double entry accounting you'll record
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one account that you're using and
they'll automatically do the other side
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of it for you plus it will automatically
keep your account balances up to date
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which will allow you to run reports
which we'll cover in the next lesson so
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as a nonprofit when you look for
accounting software make sure that it
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has these three things fund accounting
nonprofit reporting and integrated
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donations so what's next now that we've
learned how to structure a chart of
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accounts and record transactions it's
time to see how everything boils down in
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what's called generating reports we're
going to take a look at the two most
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commonly generated reports plus the
reports that you need as a nonprofit as
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per the IRS guidelines until next time
make sure to read the content below
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because it's going to go into a lot more
detail on what we covered today plus if
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you're interested in nonprofit
accounting software be sure to try
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Aplos' 15-day free trial to see how
simple this whole process can be
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