Bookkeeping, Tax, Accounting, QuickBooks

General Ledger "Balance Sheet" Accounts

The illustration below shows the relationship between debits and credits in double-entry bookkeeping:

The following outline describes in greater detail the four major divisions of the General Ledger Balance Sheet accounts:

    I.  ASSETS — WHAT WE OWN (Debit balance accounts)

A.  Current — Accounts that show assets with continued activity and turnover within the year.

B.  Property, Plant and Equipment — Accounts reflecting assets owned but not intended to have a quick turnover. These items are marked down (depreciated) gradually over a number of years specified by the IRS.

C.  Other — Assets that do not have a quick turnover and are not depreciated.

  II.  LIABILITIES — WHAT WE OWE (Credit balance accounts)

A.  Current — Liabilities with continual activity and turnover within the year.

B.  Long-Term — Contracts payable beyond one year.

III.  ACCRUALS (Credit balance accounts)

A.  Accumulated Depreciation — Accounts that represent markdowns in the value of fixed assets.

B.  Bad Debt Allowance — Shows markdowns in accounts receivable.

  IV.  CAPITAL (Credit balance accounts)

A.  Owners' Investment/Owners' Equity — Cash or other assets invested in a business by a proprietor or partner. During the first year of business, assets invested by owners are recorded in "Owner's Investment" account(s). At year's end, these assets are to be permanently transferred into a new account called "Owners' Equity."

B.  Capital Stock, Retained Earnings (in a corporation)

C.  Draw of Proprietors/Partners (in a single proprietorship or partnership)

D.  MEMO:  Annual Earnings — not a General Ledger account. "Annual Earnings" is only a Balance Sheet statistic.

A simple way to illustrate the function of the General Ledger is to describe it as a book which shows the classification and dollar value of what we own (asset accounts=debit balance) and the source from which these assets came (liabilities, accruals, investments, earnings accounts=credit balance).

Accounting Made Easy, Module I of the Professional Bookkeeper™ Program, explains General Ledger Balance Sheet Accounts in detail.

Click HERE to see what else is taught in Module I.