Types of Accounting Books

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Accounting books help bookkeepers record corporate transactions.
Accounting books help bookkeepers record corporate transactions. (Image: accounts image by Alexey Klementiev from <a href='http://www.fotolia.com'>Fotolia.com</a>)

Corporate accounting books are critical in modern economies because they help companies record and report financial transactions in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Department heads in accounting business units ensure that employees follow adequate procedures when recording transactions in journals, general ledgers and subsidiary ledgers.

Journal

A journal is an accounting record that displays two columns--one for debits and the other for credits. A bookkeeper, or accounting clerk, records operating transactions by debiting and crediting financial accounts such as asset, liability, equity, revenue and expense. An accounting clerk debits an expense or asset account to increase its balance, and credits the account to reduce its amount. The opposite is true for revenue, liability and equity accounts. An asset is a resource that a firm owns such as land or cash. A liability is a loan that a corporation must repay or a financial commitment it must honor. Revenue is income an organization earns by selling goods or providing services. Expense items are charges, or costs, that a firm incurs in selling goods or providing services. An equity account relates to transactions with corporate owners.

General Ledger

A general ledger includes all transactions that a corporate bookkeeper records in journals. U.S. GAAP and IFRS require a company to report a full and "fair" set of general ledger reports when filing regulatory data. In accounting parlance, "fair" means accurate or objective. A full set of ledger statements includes a balance sheet (or statement of financial position), a statement of profit and loss (otherwise known as a statement of income or P&L), a statement of cash flows and a statement of retained earnings (also called statement of equity). A balance sheet lists a company's assets, liabilities and the owners' equity at a given point in time. A corporate P&L indicates the firm's revenues, gains, expenses and losses during a period of time. A statement of cash flows provides insight into an organization's cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. A statement of retained earnings instructs a reader on transactions with corporate owners such as dividend payments and stock purchases or sales.

Subsidiary Ledger

A subsidiary ledger is a portion of a general ledger. For example, a balance sheet ledger report may include subsidiary ledger data for short-term assets and liabilities as well as fixed assets and long-term debt. A short-term asset is a resource that a company expects to convert into cash (sell) within a year. Examples of short-term assets include cash, accounts receivable and inventories. Long-term, or fixed, assets include machines and equipment. A short-term liability is debt due within 12 months, while a borrower must repay long-term liabilities after a year or more.

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