GL Flow Map
A comprehensive diagram showing all GL (General Ledger) entries across all transaction types.
Master GL Flow Diagram
COMPLETE GL FLOW MAP
═══════════════════════════════════════════════════════════════════════════════════════════════════
BALANCE SHEET
┌─────────────────────────────────────────────────────────────────────────────────────────────┐
│ │
│ ASSETS LIABILITIES EQUITY │
│ ═══════ ═══════════ ══════ │
│ │
│ ┌─────────────┐ ┌─────────────┐ ┌─────────────┐ │
│ │ CASH │ │ A/P │ │ RETAINED │ │
│ │ (Bank) │ │ (Vendors) │ │ EARNINGS │ │
│ └──────┬──────┘ └──────┬──────┘ └──────┬──────┘ │
│ │ │ │ │
│ ┌──────┴──────┐ ┌──────┴──────┐ │ │
│ │ + Customer │ │ + Vendor │ │ │
│ │ Payment │ │ Bill │ │ │
│ │ + Deposit │ │ - Vendor │ │ │
│ │ + Refund In │ │ Payment │ │ │
│ │ - Vendor │ │ - Vendor │ │ │
│ │ Payment │ │ Credit │ │ │
│ │ - Refund Out│ └─────────────┘ │ │
│ │ - Expense │ │ │
│ │ Payment │ ┌─────────────┐ │ │
│ └─────────────┘ │ A/P EMPLOYEE│ │ │
│ │ (Emp Reimb) │ │ │
│ └──────┬──────┘ │ │
│ │ │ │
│ ┌──────┴──────┐ │ │
│ │ + Expense │ │ │
│ │ Report │ │ │
│ │ - Expense │ │ │
│ │ Payment │ │ │
│ └─────────────┘ │ │
│ ┌─────────────┐ │ │
│ ┌─────────────┐ │ IRNB │ │ │
│ │ A/R │ │ (Item Rcpt │ │ │
│ │ (Customers) │ │ Not Billed)│ │ │
│ └──────┬──────┘ └──────┬──────┘ │ │
│ │ │ │ │
│ ┌──────┴──────┐ ┌──────┴──────┐ │ │
│ │ + Invoice │ │ + Item │ │ │
│ │ - Payment │ │ Receipt │ │ │
│ │ - Credit │ │ - Vendor │ │ │
│ │ Memo │ │ Bill │ │ │
│ └─────────────┘ └─────────────┘ │ │
│ │ │
│ ┌─────────────┐ │ │
│ │ INVENTORY │◄─────────────────────────────────────────────────────────┘ │
│ │ (Asset) │ │
│ └──────┬──────┘ │
│ │ │
│ ┌──────┴──────────────────────────────────────────────────────────────┐ │
│ │ + Item Receipt + Customer Return + WO Completion │ │
│ │ + Vendor Bill Dir + Assembly Build (FG) + Adjustment (+) │ │
│ │ - Item Fulfillment - Vendor Return - WO Issue │ │
│ │ - Invoice Direct - Assembly Build (Comp)- Adjustment (-) │ │
│ │ - Cash Sale - Transfer (from loc) + Transfer (to loc) │ │
│ └─────────────────────────────────────────────────────────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────────────────────────┘
INCOME STATEMENT
┌─────────────────────────────────────────────────────────────────────────────────────────────┐
│ │
│ REVENUE EXPENSES │
│ ═══════ ════════ │
│ │
│ ┌─────────────┐ ┌─────────────┐ │
│ │ SALES │ │ COGS │ │
│ │ REVENUE │ │ │ │
│ └──────┬──────┘ └──────┬──────┘ │
│ │ │ │
│ ┌──────┴──────┐ ┌──────┴──────┐ │
│ │ + Invoice │ │ + Invoice │ │
│ │ + Cash Sale │ │ + Cash Sale │ │
│ │ - Credit │ │ - Credit │ │
│ │ Memo │ │ Memo │ │
│ └─────────────┘ │ (return) │ │
│ └─────────────┘ │
│ │
│ ┌─────────────┐ │
│ │ VARIANCES │ │
│ │ (Standard │ │
│ │ Costing) │ │
│ └──────┬──────┘ │
│ │ │
│ ┌──────┴──────┐ │
│ │ + PPV │ │
│ │ + Material │ │
│ │ + Labor │ │
│ │ + Overhead │ │
│ └─────────────┘ │
│ │
│ ┌─────────────┐ │
│ │ ADJUSTMENTS │ │
│ │ (Inv Adj │ │
│ │ Account) │ │
│ └──────┬──────┘ │
│ │ │
│ ┌──────┴──────┐ │
│ │ + Shrinkage │ │
│ │ + Damage │ │
│ │ - Found │ │
│ └─────────────┘ │
│ │
│ ┌─────────────┐ │
│ │ OPERATING │ │
│ │ EXPENSES │ │
│ └──────┬──────┘ │
│ │ │
│ ┌──────┴──────┐ │
│ │ + Expense │ │
│ │ Report │ │
│ │ + Journal │ │
│ │ Entry │ │
│ │ + Vendor │ │
│ │ Bill (svc)│ │
│ └─────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────────────────────────┘
GL Entries by Transaction Type
Sales Flow GL Entries
SALES FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
SALES ORDER
└── No GL (just a promise)
ITEM FULFILLMENT
└── No GL (typically - inventory move only)
INVOICE (from SO, inventory already fulfilled)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Accounts Receivable $1,000 Dr ← Customer owes you │
│ Sales Revenue $1,000 Cr ← You earned money │
│ │
│ COGS $600 Dr ← Cost of what you sold │
│ Inventory Asset $600 Cr ← Inventory left │
└─────────────────────────────────────────────────────────────────────────────┘
INVOICE DIRECT (no SO, no fulfillment)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Accounts Receivable $1,000 Dr ← Customer owes you │
│ Sales Revenue $1,000 Cr ← You earned money │
│ │
│ COGS $600 Dr ← Cost of what you sold │
│ Inventory Asset $600 Cr ← Inventory decreased │
└─────────────────────────────────────────────────────────────────────────────┘
CASH SALE
┌─────────────────────────────────────────────────────────────────────────────┐
│ Cash / Undeposited $1,000 Dr ← You received cash │
│ Sales Revenue $1,000 Cr ← You earned money │
│ │
│ COGS $600 Dr ← Cost of what you sold │
│ Inventory Asset $600 Cr ← Inventory decreased │
└─────────────────────────────────────────────────────────────────────────────┘
CUSTOMER PAYMENT
┌─────────────────────────────────────────────────────────────────────────────┐
│ Cash / Bank $1,000 Dr ← Money received │
│ Accounts Receivable $1,000 Cr ← Customer paid debt │
└─────────────────────────────────────────────────────────────────────────────┘
CREDIT MEMO (with inventory return)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Sales Revenue $200 Dr ← Reverse the sale │
│ Accounts Receivable $200 Cr ← Reduce what customer owes │
│ │
│ Inventory Asset $120 Dr ← Goods returned to stock │
│ COGS $120 Cr ← Reverse the cost │
└─────────────────────────────────────────────────────────────────────────────┘
CREDIT MEMO (no inventory - price adjustment)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Sales Revenue $200 Dr ← Reduce revenue │
│ Accounts Receivable $200 Cr ← Reduce what customer owes │
└─────────────────────────────────────────────────────────────────────────────┘
CUSTOMER REFUND
┌─────────────────────────────────────────────────────────────────────────────┐
│ Accounts Receivable $200 Dr ← Use up the credit │
│ Cash / Bank $200 Cr ← Money goes out │
└─────────────────────────────────────────────────────────────────────────────┘
Purchase Flow GL Entries
PURCHASE FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
PURCHASE ORDER
└── No GL (just a commitment)
ITEM RECEIPT (from PO)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory Asset $500 Dr ← Goods received │
│ IRNB (Item Rcpt Not Billed) $500 Cr ← Liability until billed │
└─────────────────────────────────────────────────────────────────────────────┘
VENDOR BILL (from Item Receipt)
┌─────────────────────────────────────────────────────────────────────────────┐
│ IRNB $500 Dr ← Clear the receipt liability │
│ Accounts Payable $500 Cr ← Now owe vendor │
└─────────────────────────────────────────────────────────────────────────────┘
VENDOR BILL DIRECT (no PO, no receipt)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory Asset $500 Dr ← Goods received │
│ Accounts Payable $500 Cr ← Owe vendor │
└─────────────────────────────────────────────────────────────────────────────┘
VENDOR PAYMENT
┌─────────────────────────────────────────────────────────────────────────────┐
│ Accounts Payable $500 Dr ← Clear your debt │
│ Cash / Bank $500 Cr ← Money goes out │
└─────────────────────────────────────────────────────────────────────────────┘
VENDOR CREDIT (with inventory return)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Accounts Payable $100 Dr ← Reduce what you owe │
│ Inventory Asset $100 Cr ← Goods returned to vendor │
└─────────────────────────────────────────────────────────────────────────────┘
VENDOR REFUND
┌─────────────────────────────────────────────────────────────────────────────┐
│ Cash / Bank $100 Dr ← Money received back │
│ Accounts Payable $100 Cr ← Use up the credit │
└─────────────────────────────────────────────────────────────────────────────┘
Manufacturing Flow GL Entries
MANUFACTURING FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
WORK ORDER
└── No GL (planning document)
WORK ORDER ISSUE (components to production)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Work In Process (WIP) $300 Dr ← Components now in production │
│ Inventory Asset (Raw) $300 Cr ← Components left inventory │
└─────────────────────────────────────────────────────────────────────────────┘
WORK ORDER COMPLETION (finished goods)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory (Finished) $400 Dr ← Finished goods to inventory │
│ Work In Process (WIP) $400 Cr ← Clear WIP │
└─────────────────────────────────────────────────────────────────────────────┘
ASSEMBLY BUILD (one-step manufacturing)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory (Finished) $400 Dr ← Finished goods created │
│ Inventory (Components) $400 Cr ← Components consumed │
└─────────────────────────────────────────────────────────────────────────────┘
STANDARD COSTING VARIANCES
┌─────────────────────────────────────────────────────────────────────────────┐
│ If actual > standard (unfavorable): │
│ Purchase Price Variance $50 Dr ← Paid more than expected │
│ │
│ If actual < standard (favorable): │
│ Purchase Price Variance $50 Cr ← Paid less than expected │
└─────────────────────────────────────────────────────────────────────────────┘
Inventory Flow GL Entries
INVENTORY FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
INVENTORY ADJUSTMENT (increase - found inventory)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory Asset $100 Dr ← More inventory found │
│ Inventory Adjustment $100 Cr ← Credit to adjustment acct │
└─────────────────────────────────────────────────────────────────────────────┘
INVENTORY ADJUSTMENT (decrease - lost/damaged)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory Adjustment $100 Dr ← Debit to adjustment/expense │
│ Inventory Asset $100 Cr ← Less inventory │
└─────────────────────────────────────────────────────────────────────────────┘
INVENTORY TRANSFER (between locations)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Inventory - Location B $200 Dr ← Inventory at destination │
│ Inventory - Location A $200 Cr ← Inventory left source │
│ │
│ (Net zero - just moves between sub-accounts) │
└─────────────────────────────────────────────────────────────────────────────┘
TRANSFER ORDER (with in-transit)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Fulfillment (ship): │
│ Inventory In Transit $200 Dr ← Items on the truck │
│ Inventory - Location A $200 Cr ← Left source │
│ │
│ Receipt (receive): │
│ Inventory - Location B $200 Dr ← Arrived at destination │
│ Inventory In Transit $200 Cr ← No longer in transit │
└─────────────────────────────────────────────────────────────────────────────┘
Bank Flow GL Entries
BANK FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
DEPOSIT (from undeposited funds)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Bank Account $1,500 Dr ← Money in the bank │
│ Undeposited Funds $1,500 Cr ← Clear holding account │
└─────────────────────────────────────────────────────────────────────────────┘
DEPOSIT (direct from A/R)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Bank Account $1,000 Dr ← Money in the bank │
│ Accounts Receivable $1,000 Cr ← Customer paid │
└─────────────────────────────────────────────────────────────────────────────┘
BANK RECONCILIATION
└── No GL entries (just matching - unless adjustments needed)
RECONCILIATION ADJUSTMENT (bank fees)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Bank Fees Expense $25 Dr ← Fee expense recognized │
│ Bank Account $25 Cr ← Money left bank │
└─────────────────────────────────────────────────────────────────────────────┘
Employee Flow GL Entries
EMPLOYEE FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
EXPENSE REPORT (at approval)
┌─────────────────────────────────────────────────────────────────────────────┐
│ Travel Expense $450 Dr ← Airfare costs │
│ Lodging Expense $600 Dr ← Hotel costs │
│ Meals Expense $150 Dr ← Business meals │
│ Transport Expense $80 Dr ← Taxi/Uber │
│ A/P - Employee $1,280 Cr ← Owe employee │
└─────────────────────────────────────────────────────────────────────────────┘
EXPENSE REPORT PAYMENT (Bill Payment to Employee)
┌─────────────────────────────────────────────────────────────────────────────┐
│ A/P - Employee $1,280 Dr ← Clear liability │
│ Bank Account $1,280 Cr ← Money to employee │
└─────────────────────────────────────────────────────────────────────────────┘
CORPORATE CARD EXPENSE REPORT
┌─────────────────────────────────────────────────────────────────────────────┐
│ At Card Statement: │
│ Credit Card Clearing $500 Dr ← Holding account │
│ Credit Card Payable $500 Cr ← Card liability │
│ │
│ At Expense Report Approval: │
│ Travel Expense $500 Dr ← Expense recognized │
│ Credit Card Clearing $500 Cr ← Clear holding │
└─────────────────────────────────────────────────────────────────────────────┘
Financial Flow GL Entries
FINANCIAL FLOW - GL IMPACT
═══════════════════════════════════════════════════════════════════════════════
STANDARD JOURNAL ENTRY
┌─────────────────────────────────────────────────────────────────────────────┐
│ Example: Accrued Expense │
│ Rent Expense $5,000 Dr ← Expense recognized │
│ Accrued Expenses $5,000 Cr ← Liability created │
└─────────────────────────────────────────────────────────────────────────────┘
INTERCOMPANY JOURNAL ENTRY
┌─────────────────────────────────────────────────────────────────────────────┐
│ Parent Company (Subsidiary A): │
│ Intercompany Receivable $10,000 Dr ← Due from Sub B │
│ Management Fee Revenue $10,000 Cr ← Income recognized │
│ │
│ Child Company (Subsidiary B): │
│ Management Fee Expense $10,000 Dr ← Expense recognized │
│ Intercompany Payable $10,000 Cr ← Due to Parent │
│ │
│ (Auto-eliminates in consolidated reports) │
└─────────────────────────────────────────────────────────────────────────────┘
REVERSING JOURNAL ENTRY
┌─────────────────────────────────────────────────────────────────────────────┐
│ Month End (December 31): │
│ Wage Expense $8,000 Dr ← Accrued wages │
│ Accrued Wages $8,000 Cr ← Liability │
│ [Marked as Reversing] │
│ │
│ Auto-Created (January 1): │
│ Accrued Wages $8,000 Dr ← Reverses liability │
│ Wage Expense $8,000 Cr ← Reverses expense │
└─────────────────────────────────────────────────────────────────────────────┘
STATISTICAL JOURNAL ENTRY
┌─────────────────────────────────────────────────────────────────────────────┐
│ (Uses Statistical Accounts - No monetary value) │
│ Headcount - Sales Dept 5 Dr ← Track 5 employees │
│ Headcount - Control 5 Cr ← Balancing entry │
│ │
│ Used for: KPIs, allocations, non-monetary tracking │
└─────────────────────────────────────────────────────────────────────────────┘
PERIOD END JOURNAL ENTRY
┌─────────────────────────────────────────────────────────────────────────────┐
│ Example: Depreciation │
│ Depreciation Expense $2,500 Dr ← Monthly depreciation │
│ Accumulated Depreciation $2,500 Cr ← Contra-asset │
│ │
│ Example: Prepaid Amortization │
│ Insurance Expense $1,000 Dr ← Monthly portion │
│ Prepaid Insurance $1,000 Cr ← Reduce prepaid │
└─────────────────────────────────────────────────────────────────────────────┘
Complete Money Flow Diagram
COMPLETE MONEY FLOW
═══════════════════════════════════════════════════════════════════════════════
YOUR COMPANY
┌──────────────────────────────────────────────────────────────────────────┐
│ │
│ MONEY IN MONEY OUT │
│ ════════ ═════════ │
│ │
│ ┌─────────────────┐ ┌─────────────────┐ │
│ │ │ │ │ │
│ │ Customer │ │ Vendor │ │
│ │ Payment │ ──────────────▶ │ Payment │ │
│ │ │ CASH │ │ │
│ │ $1,000 │ BANK │ $500 │ │
│ │ │ │ │ │
│ └────────┬────────┘ └────────┬────────┘ │
│ │ │ │
│ ▼ ▼ │
│ ┌─────────────────┐ ┌─────────────────┐ │
│ │ │ │ │ │
│ │ Clears A/R │ │ Clears A/P │ │
│ │ (from Invoice) │ │ (from Bill) │ │
│ │ │ │ │ │
│ └─────────────────┘ └─────────────────┘ │
│ │
│ ┌─────────────────┐ ┌─────────────────┐ │
│ │ │ │ │ │
│ │ Vendor Refund │ │ Customer │ │
│ │ (returned $) │ │ Refund │ │
│ │ │ │ (credit used) │ │
│ └─────────────────┘ └─────────────────┘ │
│ │
└──────────────────────────────────────────────────────────────────────────┘
THE A/R & A/P LIFECYCLE
═══════════════════════════════════════════════════════════════════════════════
ACCOUNTS RECEIVABLE (Customer owes you):
Created by: Reduced by: Cleared by:
┌──────────┐ ┌──────────┐ ┌──────────┐
│ Invoice │ ──▶ │ Credit │ ──▶ │ Payment │ ──▶ $0
│ Cash Sale│ │ Memo │ │ Refund │
│ (if A/R) │ │ │ │ Write-off│
└──────────┘ └──────────┘ └──────────┘
ACCOUNTS PAYABLE (You owe vendor):
Created by: Reduced by: Cleared by:
┌──────────┐ ┌──────────┐ ┌──────────┐
│ Vendor │ ──▶ │ Vendor │ ──▶ │ Payment │ ──▶ $0
│ Bill │ │ Credit │ │ Refund │
│ │ │ │ │ │
└──────────┘ └──────────┘ └──────────┘
Debit/Credit Quick Reference
THE GOLDEN RULES OF DEBIT/CREDIT
═══════════════════════════════════════════════════════════════════════════════
┌─────────────────────────────────────────────────────────────────────────────┐
│ │
│ BALANCE SHEET ACCOUNTS: │
│ │
│ ASSETS (Cash, A/R, Inventory) │
│ Increase = DEBIT Decrease = CREDIT │
│ "Got something? Debit it!" │
│ │
│ LIABILITIES (A/P, IRNB, Loans) │
│ Increase = CREDIT Decrease = DEBIT │
│ "Owe more? Credit it!" │
│ │
│ EQUITY (Retained Earnings, Capital) │
│ Increase = CREDIT Decrease = DEBIT │
│ │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ INCOME STATEMENT ACCOUNTS: │
│ │
│ REVENUE (Sales, Interest Income) │
│ Increase = CREDIT Decrease = DEBIT │
│ "Made money? Credit revenue!" │
│ │
│ EXPENSES (COGS, Rent, Salaries) │
│ Increase = DEBIT Decrease = CREDIT │
│ "Spent money? Debit expense!" │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
REMEMBER: Debits ALWAYS equal Credits in every transaction!
Account Flow Summary
| Account | Created/Increased By | Cleared/Decreased By |
|---|---|---|
| A/R | Invoice, Cash Sale (if A/R) | Payment, Credit Memo, Write-off |
| A/P | Vendor Bill | Payment, Vendor Credit |
| IRNB | Item Receipt | Vendor Bill |
| Cash | Payment In, Deposit, Refund In | Payment Out, Refund Out |
| Inventory | Receipt, Return, Build, Adj+ | Fulfill, Sale, Issue, Adj- |
| Revenue | Invoice, Cash Sale | Credit Memo, Return |
| COGS | Invoice, Cash Sale | Credit Memo (return) |
Which Transactions Post GL?
| Transaction | Posts GL? | Why? |
|---|---|---|
| Sales Order | No | Just a promise |
| Purchase Order | No | Just a commitment |
| Work Order | No | Planning document |
| Transfer Order | No | Planning document |
| Item Fulfillment | Usually No | Physical only (unless special config) |
| Invoice | Yes | Creates A/R, recognizes revenue |
| Cash Sale | Yes | Recognizes revenue and cash |
| Customer Payment | Yes | Moves cash, clears A/R |
| Item Receipt | Yes | Creates inventory, IRNB |
| Vendor Bill | Yes | Creates A/P, may clear IRNB |
| Vendor Payment | Yes | Moves cash, clears A/P |
| Credit Memo | Yes | Adjusts A/R, may adjust inventory |
| Vendor Credit | Yes | Adjusts A/P, may adjust inventory |
| Inventory Adjustment | Yes | Changes inventory value |
| Inventory Transfer | Yes | Moves between location accounts |
| Assembly Build | Yes | Changes component/finished inventory |
| Deposit | Yes | Moves to bank account |
| Expense Report | Yes | Creates expense, A/P Employee |
| Expense Payment | Yes | Clears A/P Employee, reduces cash |
| Journal Entry | Yes | Direct GL posting, any accounts |
| Intercompany Journal | Yes | Cross-subsidiary entries |
| Statistical Journal | No | Non-monetary tracking only |
Next Steps
- Inventory Flow Map - See all inventory movements
- Data Map Overview - Return to overview