The bookkeeper would log these debits and credits in the ledger. For more information, see Accounting: Making Sense of Debits and Credits. Typically, one account receives the debit and another account receives the credit, but the debit or credit can be split among multiple accounts.įor example, when you purchase office supplies and pay cash, the Cash account receives the credit (subtracts from) and an expense account, perhaps called Office Supplies, receives the debit.
In double-entry bookkeeping, each journal entry or transaction requires a debit and a credit of equal value. The General Ledger was divided into the various accounts that we now call the Chart of Accounts, and the transactions were posted to these accounts using a method called double-entry bookkeeping. At the end of the month, the bookkeeper or accountant transferred the totals from each journal to the General Ledger.
Accounting Methodology: Double-Entry Bookkeepingīefore computers, bookkeepers logged financial transactions into paper journals specific to the type of transaction. We'll discuss the General Ledger later, but first let's make sure we understand double-entry bookkeeping. The Chart of Accounts is often referred to as the General Ledger accounts. The balance is also displayed for some accounts: Notice that the account type is displayed for each account, along with the optional account number.
Below is part of a sample Chart of Accounts as displayed by QuickBooks.
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