Purpose and status of the framework
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- Kinds of ledgers
| Cash receipts journal – All types of cash receipts are recorded.
Purchase journal – Used to record all purchases on account (merchandise, equipment and supplies). Cash disbursement journal – All payments of cash for any purpose are recorded. Type of journal entries according to form: 1. Simple journal entry – One which contains a single debit and a single credit element. 2. Compound journal entry – One which has two or more elements and often representing two or more transactions. Accounts are the storage units of accounting information and used to summarize changes in assets, liabilities and equity including income and expenses. The following are a broad classification of kinds of accounts: 1. Real account – Statement of financial position or so called permanent accounts. These accounts are not closed and carryover to the next accounting period. (ex. Cash, AR and PPE) 2. Nominal account – Income statement or temporary capital accounts. These accounts are closed at the end of the accounting period. (ex. Sales and expenses) 3. Mixed account – A combination of real and nominal accounts. (ex. Prepaid expenses) 4. Clearing account – Holds temporarily certain information pending transfer to other ledger accounts. 5. Controlling account – The general ledger account that summarizes the detailed information in a subsidiary ledger. 6. Suspense account – Is an account that holds temporarily certain information pending for disposition. 7. Reciprocal account – Has a counterpart in another book with in the entity or in another ledger or another entity. 8. Principal account – An account that is independent or can stand alone. 9. Auxiliary account – An account that cannot stand alone and are technically neither assets, liabilities nor income and expenses. 10. Summary account Posting - It is the process of transferring data from the journal to the appropriate accounts in the general ledger and subsidiary ledger. This process classifies all accounts that were recorded in the journals. Kinds of ledgers1. General ledger – Includes all the accounts appearing on the financial statements. 2. Subsidiary ledgers – Affords additional detail in support of certain general ledger accounts.
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