An account book records business transactions, with the most common being the general ledger in double-entry bookkeeping systems. Other types of accounting books include the general journal, cost ledger, and subsidiary ledger. Transactions are recorded in the general journal, and then transferred to the general ledger. At the end of the accounting period, the general ledger balances are transferred to financial statements.
An account book contains transaction records for business accounts. Double-entry bookkeeping systems used by business organizations include numerous ledgers or ledgers, including the general ledger and general journal. Collectively, these books are known as ledgers, an abbreviated term for ledgers. A single book of accounts can refer to any of the numerous books used in the accounting process.
Primarily, the most common use of the term “account book” refers to the general ledger used in double-entry bookkeeping systems. The general ledger contains all the accounts used by an organization, along with the current balances of those accounts. Changes to these accounts require entries to record the transactions, creating a continuous record of the organization’s financial history. Other types of accounting and ledger books include the general journal, cost ledger, and subsidiary ledger, depending on the specific accounting system chosen. Each book meets the definition of an account book, although the term is used less frequently for these books.
In double-entry bookkeeping, the general ledger is one of numerous record-keeping components used in conjunction with other books in the business accounting system. General ledger information is transferred to the organization’s financial statements at the end of the accounting period. Transactions are recorded as they relate to account balances in the general ledger, but these records simply reflect credits or debits to the listed accounts. Detailed information about specific transactions is recorded through journal entries in the general journal.
Account house record books showing changes in various business accounts used by an organization. These accounts show changes in the balances of assets, liabilities, and expenses. For double-entry bookkeeping, the general journal records specific transactions that involve at least two affected accounts, one with credit and one with debit. The new account balance extracted from the general journal information is transferred to the general ledger as a summary entry.
An example may help explain how an account book is used. The purchase of office equipment creates a reduction in cash and an increase in the asset account for office equipment. The specific transaction, the accounts affected, and the transaction entry warrant a separate line entry in the general journal. The increase or decrease of each account is then transferred to the main ledger of accounts, the general ledger. At the end of the accounting period, general ledger balances are transferred to financial statements such as the balance sheet, income statement, and statement of owner’s equity.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
