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An important part of defining an account number is selecting the appropriate account type. The first digit of the account number defines the account type. For example, an account number of would designate the account type as a liabilities account because it starts with a 2. Table 5.

It is recommended that all account numbers have the same number of digits e. Ensure that your account numbers are sequentially ordered so that your postings are correctly added and displayed, especially for non-posting accounts.

It is recommended that you leave a gap between account numbers for layout purposes so that you have room to add new accounts later. Specifically, double-entry bookkeeping is when each transaction impacts at least one debit and one credit transaction. In other words, each transaction appears in two columns, a debit column and a credit column, whose totals must balance.

The equation remains in balance, as the equivalent increase and decrease affect one side— the asset side— of the accounting equation.

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Terms C. Terms D-E. Terms F-M. Terms N-O. Terms P-S. Terms T-Z. Table of Contents Expand. What Is a General Ledger? How a General Ledger Works. Its Role in Double-Entry Accounting. What a General Ledger Tells You. Balance Sheet Transaction Example. Income Statement Transaction Example. What Is the Purpose of a General Ledger? General ledger accounts encompass all the transaction data needed to produce the income statement, balance sheet, and other financial reports.

General ledger transactions are a summary of transactions made as journal entries to sub-ledger accounts. The trial balance is a report that lists every general ledger account and its balance, making adjustments easier to check and errors easier to locate.