Hi Kerry,
It sounds like you have a correct understanding of how the process works.
Your current method is probably the most effective; keep in mind that a different module may provide an easier method for grading all the students at once, I think assignment would be most effective. The other way would be to enter all of the outside (non-moodle) assignments into one of the various modules and record a grade, and then have the gradebook do the calculations for you.
hope that helps.
Gradebook
letter grades instead of numerical?
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