Maintain a General Ledger Research Paper Example | Topics and Well Written Essays - 2750 words

Maintain a General Ledger - Research Paper Example These kinds of assets are known as 'fixed assets'. Current assets represent the stock of business assets held by the company, the debtors and cash and bank balances. There are intangible assets like goodwill also. Liabilities represent the amounts payable by the company to different constituents of the business like banks, creditors or other agencies. Liabilities may be classified as 'long term liabilities' representing the loans obtained by the company from banks or other financial institutions for running the business and 'current liabilities' representing the amounts payable to The Revenues are the income being earned by any business. Revenues include sales and other earnings from investments of the business. Rental income and interests from investments are also considered as revenues. The revenues are the cash inflows for the business and determine the profits of the company. Expenses are the cash outflows from the business in connection with the running of the business. Expenses may be of capital in nature representing purchase of additional assets or machinery. Revenue expenses are those incurred on a day to day basis for running of the business. The revenue expenses are charged against the income of the business and the profits determined. In the double entry book keeping principle every accounting entry should have a corresponding debit or credit entry reflected in another account. These entries are known as contra entries. Contra entries are passed through general journal and mostly represent non-cash transaction entries like accounting for depreciation. Writing off a bad debt In the course of business sales are done on a credit basis and the parties to whom the credit sales are made sometimes may not be able to make payment for the goods or services bought or availed due to their financial difficulties or bankruptcy. In those cases the amount due to the business is termed as a 'bad debt'. Usually these bad debts are charged off against revenue of the company as expense. This is known as 'writing off a bad debt'. Debtors also known as Accounts Receivables In the process of doing business many a times sales are being made to different parties on credit terms implying that the party instead of making the payment on cash basis will make the payment after a certain agreed period of time. These parties to whom sales are made on credit terms are known as 'Debtors' also known as 'Accounts Receivable' Creditors also known as Accounts Payable Just as the sales are being made on credit terms the business may procure the goods and services on credit terms with the payment to be made within definite periods mutually agreed between the suppliers and the business. These parties who supply the goods or services are known as 'Creditors' also known as 'Accounts Payable'. General Journal General Journal Sales Journal Sales Returns and Allowances Journal Purchase Journal General Ledger - Capital Account General Ledger -