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A ledgeris the principal book or computer file for recording and totaling economic transactions measured in terms of a monetary unit of account by account type, with debits and credits in separate columns and a beginning monetary balance and ending monetary balance for each account.
The ledger is a permanent summary of all amounts entered in supporting journals which list individual transactions by date. Every transaction flows from a journal to one or more ledgers. A company's financial statements are generated from summary totals in the ledgers.
For every debit recorded in a ledger, there must be a corresponding credit so that the debits equal the credits in the grand totals.
The three types of ledgers are the general, debtors, and creditors.The general ledger accumulates information from journals. Each month all journals are totaled and posted to the General Ledger. The purpose of the General Ledger is therefore to organize and summarize the individual transactions listed in all the journals. The Debtor Ledger accumulates information from the sales journal. The purpose of the Debtors Ledger is to provide knowledge about which customers owe money to the business, and how much. The Creditors Ledger accumulates information from the purchases journal. The purpose of the Creditors Ledger is to provide knowledge about which suppliers the business owes money to, and how much.
A ledger can have the following two formats.
This type of ledger is made up of paper. It can be physically touched. Ledgers were invented several centuries ago and this used to be the only available form until the widespread adoption of computers, in the mid to late 20th century.
This type of ledger is a digital file, or collection of files, or a database. It can be manipulated only by means of computer programs, since it does not have a physical form.
The term ledger stems from the English dialect forms liggen or leggen, meaning "to lie or lay" (Dutch: liggen or leggen, German: liegen or legen); in sense it is adapted from the Dutch substantive legger, properly "a book laying or remaining regularly in one place". Originally, a ledger was a large volume of scripture or service book kept in one place in church and openly accessible. According to Charles Wriothesley's Chronicle (1538), "The curates should provide a booke of the bible in Englishe, of the largest volume, to be a ledger in the same church for the parishioners to read on."
In application of this original meaning the commercial usage of the term is for the "principal book of account" in a business house.
Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation. There are several standard methods of bookkeeping, including the single-entry and double-entry bookkeeping systems. While these may be viewed as "real" bookkeeping, any process for recording financial transactions is a bookkeeping process.
Double-entry bookkeeping, in accounting, is a system of bookkeeping where every entry to an account requires a corresponding and opposite entry to a different account. The double-entry has two equal and corresponding sides known as debit and credit. The left-hand side is debit and right-hand side is credit. In a normally debited account, such as an asset account or an expense account, a debit increases the total quantity of money or financial value, and a credit decreases the amount or value. On the other hand, for an account that is normally credited, such as a liability account or a revenue account, it is credits that increase the account's value and debits that decrease it. In double-entry bookkeeping, a transaction always affects at least two accounts, always includes at least one debit and one credit, and always has total debits and total credits that are equal. This is to keep the accounting equation (below) in balance. For example, if your business takes out a bank loan for $10,000, recording the transaction would require a debit of $10,000 to an asset account called "Cash", as well as a credit of $10,000 to a liability account called "Notes Payable".
In double entry bookkeeping, debits and credits are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value to that account, and a credit entry represents a transfer from the account. For example, a tenant who pays rent to a landlord will make a debit entry in a rent expense account associated with the landlord, and the landlord will make a credit entry in a receivable account associated with the tenant. Every transaction produces both debit entries and credit entries for each party involved, where each party's total debits and total credits for the same transaction are equal. Continuing the example, the tenant will also credit the bank account from which they pay rent, and the landlord will debit the bank account where they deposit it.
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs. Forfaiting is a factoring arrangement used in international trade finance by exporters who wish to sell their receivables to a forfaiter. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing. Accounts receivable financing is a term more accurately used to describe a form of asset based lending against accounts receivable. The Commercial Finance Association is the leading trade association of the asset-based lending and factoring industries.
Accounts receivable are legally enforceable claims for payment held by a business for goods supplied and/or services rendered that customers/clients have ordered but not paid for. These are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame. Accounts receivable is shown in a balance sheet as an asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. These may be distinguished from notes receivable, which are debts created through formal legal instruments called promissory notes.
Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use. Stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes.
Hypothecation is the practice where a debtor pledges collateral to secure a debt or as a condition precedent to the debt, or a third party pledges collateral for the debtor. A letter of hypothecation is the usual instrument for carrying out the pledge.
A trial balance is a list of all the general ledger accounts contained in the ledger of a business. This list will contain the name of each nominal ledger account and the value of that nominal ledger balance. Each nominal ledger account will hold either a debit balance or a credit balance. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column. The trading profit and loss statement and balance sheet and other financial reports can then be produced using the ledger accounts listed on the same balance.
A general ledger is a bookkeeping ledger that serves as a central repository for accounting data transferred from all subledgers like accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. Each account maintained by an organization is known as a ledger account, and the collection of all these accounts is known as the general ledger. The general ledger is the backbone of any accounting system which holds financial and non-financial data for an organization.
General journal is a daybook or journal which is used to record transactions relating to adjustment entries, opening stock, accounting errors etc. The source documents of this prime entry book are journal voucher, copy of management reports and invoices.
The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities, and owner's equity of a person or business. It is the foundation for the double-entry bookkeeping system. For each transaction, the total debits equal the total credits. It can be expressed as furthermore:
A bought ledger is a system in accounting by which a business records and monitors its creditors. The purchase ledger contains the individual accounts of suppliers from whom the business has made purchases on credit. Information on invoices and credit notes received, and payments made, are recorded in the supplier's account using the debits and credits system, with the balance of each account at a given moment representing the amount currently owed to that supplier.
The Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union for simplification of bank transfers denominated in euro. As of 2020, there were 36 members in SEPA, consisting of the 27 member states of the European Union, the four member states of the European Free Trade Association, and the United Kingdom. Some countries participate in the technical schemes: Andorra, Monaco, San Marino, and Vatican City.
A journal entry ￼is the act of keeping or making records of any transactions either Economic or non economic.
Under United States law, account stated is a statement between a creditor and a debtor based upon a series of prior transactions that a particular amount is owed to the creditor as of a certain date. Often the account stated is a bill, invoice or a summary of invoices, signed by the customer or sent to the customer who pays part or all of it without protest.
"Mutual credit" is a term mostly used in the field of complementary currencies to describe a common, usually small-scale, endogenous money system.
Special journals are specialized lists of financial transaction records which accountants call journal entries. In contrast to a general journal, each special journal records transactions of a specific type, such as sales or purchases. For example, when a company purchases merchandise from a vendor, and then in turn sells the merchandise to a customer, the purchase is recorded in one journal and the sale is recorded in another.
The concept of a unified ledger accounting application is often new to people who have used traditional modular accounting systems, though the idea is very simple. Traditional modular systems have separate General, Purchase and Sales Ledgers which reflect times when accountants wrote information into large paper books or ledgers. Balances on control accounts were copied from one book to another, so that a full set of accounts could be completed and as an additional process control accounts were reconciled. This ensured that all of the individual entries added correctly to the control totals before any transfers were made.
NewViews is accounting software that is developed and distributed by Q.W.Page Associates Inc., a privately held company based in Aurora, Ontario, Canada. NewViews is noted for its integrated, non-modular approach, which enables the total financial cycle to be updated instantly as each transaction is added. It also allows users to customize nearly every aspect of a set of books. This flexibility comes with a trade-off, however, as NewViews is perceived to have a long learning curve, and to require an investment of time and effort to create a customized accounting solution. In a software review published in InfoWorld, NewViews was compared to "going to a tailor and handing him a bolt of cloth and a pair of scissors."
A purchase returns journal is a prime entry book or a daybook which is used to record purchase returns. In other words, it is the journal which is used to record the goods which are returned to the suppliers. The source document which is used as an evidence in recording transactions into purchase returns journal is the Debit note.
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