Bookkeeping Basics

The 3 column ledger account adds a third column to the standard T account used in bookkeeping, in order that a running balance can be maintained on the account. The three columns are debit, credit and balance.

Accounting is a set of concepts and methods used to measure and report financial information about a business. Financial accounting and management accounting are different types of accounting used by accountants to present the information in alternative forms for different purposes.

The business updates the ledger by copying each of the entries in the books of prime entry to the appropriate account in the ledger. This updating process is referred to as posting the general ledger.

The double entry bookkeeping system categorizes accounts into personal and impersonal accounts. Impersonal accounts are then further divided into real accounts and nominal accounts. The purpose of using these types of accounts in accounting is to simplify the bookkeeping system.

The general ledger is the central ledger in the double entry bookkeeping system. It includes all the accounts a business lists in its chart of accounts and records accounting transactions by account and then date order. A trial balance can be extracted from the general ledger which forms the basis for the production of the financial statements.