Books of Account

Before the era of electronic accounting, transactions were recorded in different books. Although these books are no longer manually recorded, their terminology still holds a place in the storage and process of accounting data.

The general ledger is the master book. It contains all the accounts and statements. There is an account for each category of asset, equity, expense, and revenue. Every debit and credit is summarized in these accounts. At the end of each accounting period, financial statements are prepared using the balance remaining in each account.

However, the general ledger often doesn’t go into enough detail to satisfy management. For more detailed data regarding each account, a subsidiary ledger is formed. In essence, the total of the individual balances in a subsidiary ledger will equal the overall total balance in the corresponding general ledger account.

A general journal is often kept as well. This is the initial point of entry for every transaction. It is also known as the book of original entry. The transaction is first recorded here and then transferred to the general ledger. The general journal serves as a complete record, the debit and credit, of every single transaction. Recording the transaction in two locations makes it easier to track a mistake if one needs correcting.

Most businesses have other books of original entry as well for this reason. They may keep a cash receipts journal, a sales journal, a payroll journal, a purchase journal and a cash payments or disbursements journal. Not all books will be necessary. It depends on the types of services offered, the nature of the enterprise and the other methods used for tracking data.