A general ledger is the foundation of a company's financial records, as they constitute the central summary of a company's financial system. Every transaction is recorded through the general ledger. These records remain as a permanent track of the history of all financial transactions since the opening day of the company (Business Town, n.d.). The purpose of any business is to increase the owner's equity through solid revenues. These revenues increase assets or proceed to decrease the business liabilities.
In the case shown above, for L.L. Sams Company, the total amount of assets consists of $211,500, while liabilities are listed at $30,000. However, the owner's capital is $181,500. Therefore, the loan assistant would subtract the total liabilities from the owner's equity and assets. This amount would be $363,000.00. In the case shown above, for Melinda Garcia Career Services, the total amount of assets consists of $244,000, while liabilities are listed at $174,000. However, the owner's capital is $70,000. Therefore, the loan assistant would subtract the total liabilities from the owner's equity and assets. This amount would be $174,000.00. The loan officer should also consider requesting each company's profit and loss statement, the quarterly and annually statements, general ledger and the trial balance sheet. All of the financial statements show the business transactions for any specific period. This will show the loan officer how the business is doing financially and assist the officer in deciding which business has a more solid financial ground. Due to the amount of equity left for both companies, it would be in the bank's best interest to negotiate a loan with L.L. Sam's Company. Considering the amount of capital and assets that L.L. Sam's Company, totaling $363,000, the bank would be able to return their invest in the event that the company would not be able to pay back the loan.
Business Town (n.d.)...