How Does Accounting Work?
Accounting Explained In More Detail
Clients and students sometimes like to understand the principles of accounting and bookkeeping in more detail.
The principles in these pages are used by most mainstream accounting software systems including QuickBooks, Sage, Xero and Liquid.
We hope these pages are useful for understanding accounting.
The Accounting Ledgers
Traditionally, all accounting and bookkeeping is done in “Ledgers”, “Accounts”, and “Debits and Credits”. Even though the words and terminology changes, these principles are the basis of modern software.
“Ledger” is an old-fashioned word for an accounting book or record. Although the word “Ledger” is still used in training, it is rarely used in modern software. However, the principles of “Ledger” accounting appear throughout all modern software, even though different words are used.
There are three main ledgers in accounting, and these all appear in modern software, and always will.
The ledgers are now known by a variety of names mainly because of different English-speaking countries using different words, and also the many suppliers in accounting software has led to new terminology, even though the basics remain the same.
The three ledgers are:
• General Ledger (or Nominal Ledger) (or Chart of Accounts)
• Sales Ledger (or Accounts Receivable)
• Purchase Ledger (or Accounts Payable)