What Are the Different Types of Ledger Entries?

Osmand Vitez

Accounting systems use a series of ledgers and journals in order to record and classify the various transactions in which a business engages. Ledger entries represent the transactions in these books, with accountants typically labeling them as journal entries. The various types of ledger entries include those in subledgers and journals. Each one of these two categories has different books that hold specific transactions for easier reference at a later time. Double entry accounting requires both a debit and a credit for each entry.

Accounting systems use a series of ledgers and journals in order to record and classify the various transactions in which a business engages.
Accounting systems use a series of ledgers and journals in order to record and classify the various transactions in which a business engages.

Classic accounting has two requirements accountants must always follow when recording business transactions into accounting books. First, a debit and credit must be in each entry in order to balance the accounting equation. Second, ledger entries must always result in assets equaling claims against those assets, whether the claims are made by outside stakeholders or the owner. Each subledger and journal must follow these rules; otherwise, the accounting books will be out of balance. Additionally, errors may wind up in the books due to unbalanced entries entered into the various ledger accounts.

In many countries, businesses are required by law to maintain expense ledgers so that the government can prevent and detect illegal activities such as money laundering or corporate embezzlement.
In many countries, businesses are required by law to maintain expense ledgers so that the government can prevent and detect illegal activities such as money laundering or corporate embezzlement.

The general ledger often carries the moniker the book of original entry. This means the aggregate figures from other subledgers and journals roll up to the general ledger. Hence, all ledger entries that affect subledgers and journals also affect the general ledger. For example, common subledgers include accounts payable, accounts receivable, payroll, and others. Each of these subledgers has their own group of ledger entries, which carry names that represent the subledgers into which they are recorded.

Journals are chronological books of entry in an accounting system. These journals have a somewhat limited use; they only retain transactions that relate to sales, purchases, and cash receipts, along with cash disbursements and general entries. In short, all ledger entries fall under one of these journals. For example, purchasing inventory results in a debit in the purchases journal and a credit in the cash disbursements journal. Other entries go into the journals in a similar fashion, maintaining the balance of the company’s books.

Accountants can record ledger entries throughout the month into the respective journals for each transaction. This ensures the books are always up-to-date and that no transactions fail to get recorded into the journals. The different types of journal entries do not matter — sales, purchases, cash receipts, or disbursements — so long as they are accurate and valid to the accounting books.

In addition to electronic versions, some companies keep hard-copy journals as well.
In addition to electronic versions, some companies keep hard-copy journals as well.

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