Double Entry Bookkeeping System
a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account.
For instance, recording earnings of $100 would require making two entries:
- a debit entry of $100 to an account called "Cash" and
- a credit entry to an account called "Income."
Each account must below to one of these 5 following types
Commonly known as the Chart of Accounts (CoA)
a created list of the accounts used by an organization to define each class of items for which money or the equivalent is spent or received.
A journal entry, in accounting, is a logging of transactions into accounting journal items. The journal entry can consist of several recordings, each of which is either a debit or a credit. The total of the debits must equal the total of the credits or the journal entry is said to be "unbalanced".
1. Balance Sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.
A balance sheet is often described as a "snapshot of a company's financial condition". Of the three basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year.
2. Income Statement
An income statement (US English) or profit and loss account (UK English) (also referred to as a profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement, or statement of operations) is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period. It indicates how the revenues (money received from the sale of products and services before expenses are taken out, also known as the “top line”) are transformed into the net income (the result after all revenues and expenses have been accounted for, also known as “net profit” or the “bottom line”).
It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.
3. General Ledger
A general ledger contains user-defined account codes and related dimensional codes for recording transformed different types of vouchers including on-balance-sheet, off-balance-sheet, post-balance sheet, financial and non-financial natures.