Accounting

What is a Ledger? Ledger is a summary of transactions that relate to a certain account. For example, our bank ledger will summaries all the transactions that involved our bank account; our loan ledger will summarise all the transactions that involved our loan account and so on In bookkeeping/accounting Ledgers are important because they summarise…

What is a Journal Entry in Accounting? A Journal Entry is simply a summary of the debits and credits of the transaction entry to the Journal. Journal entries are important because they allow us to sort our transactions into manageable data. Consider the following diagram Journal Entry Diagram You’ll notice the above diagram shows the…

What is Drawings in Accounting? As the owner, you will put money into the business from time to time. For example, on the day the business started, you would’ve deposited some of your own money into the business. This means you can also take money out of business. For example, imagine one day you’re running…

What is the Accounting Equation? The Accounting Equation is based on the double entry accounting, which says that every transaction has two aspects, debit and credit, and for every debit there is equal and opposite credit. It helps to prepare a balance sheet, so it is also called the Balance Sheet Equation. Accounting Equation Formula…

What Are Assets and Liabilities? The words asset and liability are two very common words in accounting/bookkeeping. Some people simply say an asset is something you own and a liability is something you owe. In other words, assets are good, and liabilities are bad. That’s not wrong, but there’s a little more to it than…

What is the Purpose of Accounting? Even if you’re not in business, chances are you work for somebody that is. Whether you fix the computers, write advertisements or makes sales over the phone, your role is designed to help your employer achieve one key objective – making a profit. Your ability to understand financial information…