Truebooks ERP

General Ledger Workflow

Standard Operating Procedure (SOP) for Financial Accounting

Chart of Accounts

Multi-Currency

Financial Periods

Trial Balance

Financial Statements

Year-End Closing

Phase 1: Chart of Accounts Setup

Goal: Configure the complete chart of accounts structure with proper classifications, account types, and GL hierarchy.

Account Types

Type	Classification	Normal Balance	Examples
Asset	Assets	Debit	Cash, Bank, Receivables
Liability	Liabilities	Credit	Payables, Loans
Equity	Equity	Credit	Capital, Retained Earnings
Revenue	Revenue	Credit	Sales, Service Income
Expense	Expenses	Debit	Salaries, Rent, Utilities

Account Configuration

Identification

Account Code (structured numbering)

Account Name & Description

Parent Account (hierarchy)

Controls

Is Active / Allow Posting

Is Control Account

Is Bank/Cash Account

Account Numbering Convention

Range	Account Type	Examples
1000-1999	Assets	1001 Cash, 1100 Bank
2000-2999	Liabilities	2001 AP, 2500 Loans
3000-3999	Equity	3001 Capital, 3500 Reserves
4000-4999	Revenue	4001 Sales, 4500 Other Income
5000-6999	Expenses	5001 COGS, 6001 Salaries

Output: Complete chart of accounts ready for transaction posting

Phase 2: Financial Period Management

Goal: Configure fiscal year and financial periods for transaction control and period-based reporting.

Fiscal Year Setup

Identification: Fiscal Year Name, Start Date, End Date

Configuration: Number of Periods (12 monthly / 13 / 4 quarterly)

Auto-generate: Periods created automatically

Period Status Flow

Open

Closing

Closed

Locked

Period End Checklist

Post all pending journal entries

Run bank reconciliation

Review AR/AP aging

Post depreciation entries

Post accruals and deferrals

Run trial balance

Review financial statements

Close period

Output: Fiscal year with configured periods for transaction control

Phase 3: Opening Balances

Goal: Enter opening balances for all balance sheet accounts when starting a new fiscal year or implementing the system.

Opening Balance Entry

Assets (Debit)

Cash and Bank

Accounts Receivable

Inventory

Fixed Assets

Liabilities (Credit)

Accounts Payable

Accrued Expenses

Loans Payable

Tax Liabilities

Equity (Credit)

Capital

Retained Earnings

Reserves

Verification

Run Opening Balance Trial Balance

Verify: Total Debits = Total Credits

Compare with source documents

Post opening balances

Output: Opening balances posted and verified with trial balance

Phase 4: Journal Entries

Goal: Record all financial transactions through journal entries with proper documentation, approval, and posting.

Journal Entry Types

Type	Purpose	Examples
Standard	Regular business transactions	Expenses, income
Adjusting	Period-end adjustments	Accruals, deferrals
Reversing	Reverse previous entries	Error corrections
Opening	Opening balance entries	Year start
Closing	Year-end closing entries	Income to RE
Recurring	Auto-posting periodic entries	Rent, depreciation

Journal Entry Status Flow

Draft

Pending Approval

Approved

Posted

Common Journal Entries

Transaction	Debit Account	Credit Account
Sales Invoice	Accounts Receivable	Sales Revenue
Purchase Invoice	Purchases/Expense	Accounts Payable
Cash Receipt	Cash/Bank	Accounts Receivable
Cash Payment	Accounts Payable	Cash/Bank
Payroll	Salary Expense	Salary Payable
Depreciation	Depreciation Expense	Accumulated Depr.

Output: Journal entries posted to update account balances

Phase 5: Financial Reports

Goal: Generate accurate financial reports for management decision-making, compliance, and stakeholder communication.

Core Financial Reports

Trial Balance

All accounts with balances

Debits = Credits validation

Opening, Period, Closing

Balance Sheet

Assets = Liabilities + Equity

Comparative periods

Point-in-time snapshot

Profit & Loss

Revenue - Expenses = Net Profit

Period-based (Month/Quarter/Year)

By cost center/department

Cash Flow Statement

Operating activities

Investing activities

Financing activities

Output: Complete financial statements for management and compliance

Phase 6: Year-End Closing

Goal: Close the fiscal year by transferring income/expense balances to retained earnings and preparing for the new year.

Pre-Closing Checklist

Complete all journal entries

Post all adjusting entries

Finalize bank reconciliation

Complete inventory valuation

Post depreciation

Clear suspense accounts

Verify sub-ledger reconciliations

Generate draft financial statements

Closing Journal Entries

Step	Description	Debit	Credit
1	Close Revenue accounts	Revenue accounts	Income Summary
2	Close Expense accounts	Income Summary	Expense accounts
3	Transfer to Retained Earnings	Income Summary	Retained Earnings

Post-Closing Verification

Run Post-Closing Trial Balance

Verify only Balance Sheet accounts remain

Confirm Retained Earnings updated

Generate opening balances for new year

Lock the closed fiscal year

Output: Fiscal year closed with balances carried forward to new year

GL Lifecycle Summary

Chart of Accounts

Financial Periods

Opening Balance

Journal Entries

Reports

Year-End Close

Module Integration

Module	GL Impact
Accounts Receivable	Sales invoices, receipts → Revenue & AR accounts
Accounts Payable	Purchase bills, payments → Expense & AP accounts
Inventory	Stock movements → Inventory & COGS accounts
Cash & Bank	Cash transactions → Cash & Bank accounts
Fixed Assets	Depreciation → Asset & Expense accounts
Payroll	Salary processing → Expense & Liability accounts

Best Practices

Chart of Accounts

Use consistent numbering

Keep hierarchy shallow

Clean up unused accounts

Journal Entries

Post entries daily

Clear narrations

Reverse errors, never delete

Period Management

Close periods promptly

Limit reopening access

Maintain audit trail