What are books of accounts?
The International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) regulatory rules define books of accounts as records of day-to-day corporate transactions that show the results of operations. An account is also a record in the general ledger that is used to sort or store financial transactions.
The Main Types of Books of Accounts
Recognizing, identifying, and determining the linkages between the existing major types of accounting records are used to categorize books of accounts. The double-entry idea and its features are commonly used in transactions. On this basis, books of accounts can be classified as books of original or prime entry, which are employed in the process of summarizing and analyzing transactions. The General Ledger is the other type of accounting book.
Among the many books of prime or original entry are the following:
These books of accounts are divided into two categories: purchases and sales day books. These books are used to keep track of financial transactions that take place on a credit basis. The Purchases day book/register keeps track of credit purchases, while the Sales day book keeps track of all credit sales. The Day books make it easier and faster by allowing you to record and analyze transactions before transferring them to ledgers, either directly or through the appropriate journals. They are most commonly used in businesses that record a large number of sales transactions.
On a monetary basis, this book of account records both credit and debit transactions in a company. The transactions are documented and examined chronologically. The totals from a cash book are either transmitted directly to the ledger or through a diary. It’s also worth noting that a cash book can be used in place of a cash account in the ledger.
A journal can be used as an original/prime entry book or a secondary entry book in the accounting process. A diary is used to identify and group transactions of a similar nature together, in addition to recording transactions chronologically. A journal also indicates whether a transaction should be posted to the credit or debit side of the appropriate ledger. Every financial transaction in a firm must constantly pass through a journal, which is why it is so important in corporate operations.
On the other hand, the general ledger is separated into two sections:
The Purchase and Sales Ledgers make up a personal ledger. It’s a part of the general ledger that keeps track of customer and supplier account transactions.
Apart from the financial statements such as the Statement of financial position, Income statement, and Statement of cash flows, an impersonal Ledger is made up of Real, Nominal, and Private Ledgers. Accounts that directly relate to individuals are handled by the nominal and real components of the impersonal ledgers. Fixed assets, stock, services, and wages accounts are among them. Accounts relating to the management and ownership of organizations or corporations are handled by private ledgers. A ledger’s accounts use the T-account format, which includes a name and index at the top of the page. These accounts are balanced on a regular basis.
The structure and contents of books of accounts are critical in the accounting process. Regardless of how difficult comprehending these critical accounting concepts may be, it is nevertheless important in order to produce financial reports that can be believed to be complete and correct. As essential aspects of every financial report, such reports improve accountability, reliability, and transparency. As a result, in order to fully and comprehensively comprehend the accounting records, one might get accounting 101 assignment help from reputable professionals.