Fund organizations run many funds. They call themselves fund “families.” Studies show that marketing, not high returns, increases funds under management over the long-term. The fund families send you newsletters and have Web sites. Every article is designed to encourage you to ignore the results you have gotten and buy more product. Your mailbox will also be stuffed with bulletins about new funds, account statements, proxy statements, and tax statements. The more money you have with the family, the higher the level of service and status you can achieve within the family. You can move up from ordinary to preferred to gold to platinum to admiralty. Switching funds within the fund group is convenient and quick. To switch from a rival fund, they will even do all the paperwork for you. But moving out of the family is discouraged. If you are dissatisfied with one of their funds, they hope your sense of loyalty and desire for convenience will cause you to buy another fund within the family. Retaining your mutual funds is their primary goal.

Some funds close to new investors. This gives existing investors the illusion that they own an exclusive product, which discourages them from selling. Some funds also impose penalties for early withdrawals. This keeps your money under management and creates a steady income stream for the und manager.

As with any good dysfunctional family, there are many secrets. You cannot find out what stocks your fund owns more than every six months, and then only 45 days after the six-month period ends. Nor can you get any information explaining why one manager was fired and another hired. Even mutual fund watchdogs such as Lipper and Morningstar cannot obtain this information. It is as if this is not your money but the family’s money.

If you have family abandonment issues, mutual fund investing will be troublesome. Seeking approval and support for your emotional deficiencies will cause you to stay with poor funds when better returns are available elsewhere. Severe depression could follow.

During ownership, some savers also experience a sense of regret. High inflation in the 1970s reduced the purchasing power of savings and was not compensated for by interest paid. When real estate was hot in the early 1980s, savers regretted they were not participating. The stock bubble of the late 1990s also led to regrets and jealousy. However, savers who hold out experience a sense of satisfaction when bubbles burst and speculators scramble to place their remaining funds in savings instruments.

When CDs mature and must be rolled over, savers experience a mixed set of emotions. Higher interest rates can lead to joy unless inflation has risen such that purchasing power will be lost. Lower rates can lead to regret that a long-term investment was not made.

Liquidating savings often triggers many emotions. A source of security is dying. When savings must be substantially liquidated, a grieving process begins. The saver may experience a wide range of emotions including sadness, regret, anger, resentment, helplessness, confusion, and free-floating fear. Generally, the cause of liquidation will compound the emotional mix. A divorce often requires a non-working spouse to both watch her savings dwindle as she reenters the work force and grieves the loss of her marriage.

The biggest issues with money market funds involve impulse buying of stuff you do not need and becoming a target for sales pitches from the sales force that sold you the money market fund. Money market funds can be tapped with checks, credit cards, and online transfers. Impulse buyers may want to avoid the opportunity to make quick purchases. Some brokers who are slightly unscrupulous tell money market fund owners that they should “put their money to work” and that “cash is trash.” Lured by potentially higher returns in stocks and other high-commission, high-spread investments, money market funds are easily and quickly converted. With CDs, you lose your interest if you liquidate before the term. Savings accounts often require several steps to convert into risky investments. Money market funds, particularly those attached to brokerage accounts, can be converted at the click of a mouse. If you are vulnerable to sales pitches or impulse buying, you may not want to own money market funds.

Important as it is, the general ledger doesn’t exist in a vacuum, but interacts rather cleverly with other parts of a company’s accounting system. This occurs through a process called posting.

Posting is simply entering into the G/L a summary of posted directly to the general ledger include returns of merchandise, allowances from a supplier for credit, asset acquisitions, asset sales, investor capital contributions, loan drawdowns, and loans. These are called journal entries.

Transactions transactions recorded in the subledgers or journals, with a reference number. We’ll get further into the entire process later.

Some transactions are posted only to the general ledger and not to the subledgers. These transactions tend to be unusual. But proceed with caution. Items that should be entered in subledgers but are simply posted to the general ledger for the sake of convenience can throw the bookkeeping out of whack and unbalance your balance. That’s an error no accounting system can afford.

The general ledger exists for three main purposes: It serves as a summary of every transaction as recorded in the books of original entry; it’s the source document for all financial reports; and it offers an audit trail for tracking individual transactions, should that become necessary.

As the heart of the company’s financial body, the G/L records all transactions that occur within the company’s business activities. It also functions as the center of the firm’s books of original entry. When individual transactions are recorded anywhere within the subsidiary ledgers (subledgers), such as accounts payable or accounts receivable, they feed up to the G/L. (If a business is relatively small, there may not be any subledgers. However, even if you work in a company with such a simplified accounting system, it’s good to know how a more sophisticated system works.)

But the G/L is not a single document. Its content is augmented by receipts, journal entries, invoices—paperwork known as “source documents” that support the transactions recorded within. They all roll together, in fact, to form the company’s accounting system, with the G/L at its heart.

Why is it important for any manager not responsible for financial matters to understand general ledger processing? Well, why is it important for a salesperson to understand the nature, properties, and construction of the item he or she is selling? Financial management is a crucial part of your position. The more you know about what takes place on the accounting side of the fence, the better off you’ll be.

Henry David Thoreau wasn’t an accountant when he said, “Simplify! Simplify!” but he captured the essence of balance sheet management. Keep it simple at first. Your accounting system will grow as your business grows.

Accrual accounting is used by all businesses of any size because it allows for better cash management, providing a better match between expenses and revenues, whether transactions are for cash or on credit. Without an accrual system, in fact, there’s no need for more complex accounting functions. It’s a way to better match revenues with the means for producing those revenues and gives a clearer picture of the actual profits your company makes.

In cash-based accounting, on the other hand, you record nothing until actual cash has traded hands. Whether you’re purchasing raw materials for manufacture from a vendor or selling finished goods to a distributor, nothing is entered in the ledger without a money transaction attached to it.