The Basics To Ledger Accounts

Typically a business will cater various daily transactions which require a device to record these items. These are called an Account (abbreviated as: a/c). Every balance sheet item has its own account. For example, the record where all changes to the item "premises" are shown is called the "Premises Account." All these accounts are kept within a ledger.

There are two types of account format, being the "T-account format" and the "Columnar format." Both are depicted below.

The T-Account method you can see forms a T shape, where two sides are used, one for debit and one for credit. This form is often used for manual transactions.

The Columnar format works in columns as single line entries. This type of format is typically used in computer generated accounting such as spreadsheet.

Accounts

There is no limit to the amount of accounts you could have within your ledger, only that they are limited by the size and complexity of your business and customer base. The primary account types never really change, being:

• (dr) Assets (Current & Non-Current)
• (cr) Liabilities (Current & Non-Current)
• (cr) Owner's Equity (Capital & Earnings +/-)
• (cr) Revenue
• (dr) Cost of Goods Sold
• (dr) Expenses
• (cr) Other Revenue
• (dr) Other Expenses

The bold account types above are the bare basic. As stated above, within your account types you can have unlimited accounts, for example; within your 'Assets' account you would have your accounts receivable (debtors). Each of your debtors (debtor owes you money) would have their own subsidiary account. The balance of these subsidiary accounts uniquely would then reconcile to the accounts receivable under the group 'Assets'.