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Summary of stages of accounting
Transactions –> Journals –> ledger accounts –> Financial statements
Books of original entry are the books where transactions are recorded for the first time. These are journals. Journals act as an initial store of information before the summarising and storing of that information in ledger accounts.
For example, if a business has a sale of $500 today at 9 september, according to the sales invoice, the books of original entry should be:
Each account has its “T” account. For example, the entries of general journal ledger
The double entry books of account are called the general ledger.(“T” account) This photo template shows the general journal and the general ledger account. At the specific date, the “Dr” and “Cr” show the general journals. It means “adding” or “reducing”. The “Cash” and “Revenue” tell us what’s the name of the general ledger account. We can summarise the related information under them.
In accounting, dividing the ledger is necessary, the most biggest advantage is that you can analyse all the aspects of your business, and you can see it clearly where the problem is, do what to correct it in your company and make your business operating more better. Because the general journal and the changing of the amount of general ledger accounts show all specific information. But there is an only disadvantage, that is splitting the ledger means more control is required to ensure all data is correctly recorded.
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