Where does a business transfer the totals of journal at the end of the month?

Answer 1

An Italian Monk invented double entry accounting. He put items on the left side he called assets and expenses and on the right liabilities, equity and income. This way both sides balance with each other. if you divide the list horizontally the assets liability and equity make up a balance sheet with the difference called income profit or loss. The difference between the income and the expenses was the income profit or loss. They balanced.

When accounting started out in the caveman days Joe traded pink rocks in front of his house for bananas from his neighbors yard. Then another neighbor was willing to trade his apples for pink rocks. A third neighbor said I am growing corn. The harvest wont be ready for 2 months. This became the first receivable.

Joe invented a journal. He recorded his transaction by date, by asset, by receivable and sale. At the end of the month he added up his columns to arrive at a single total for each column.

He transferred this total to another book called a General Ledger. Set up by month based upon the categories and classifications. Cash, receivables, Sales etc.

There were no computers which could post individual items on a continuing basis. So journals for sales, purchases, inventory were maintained. Summaries went to the General ledger. The totals by account became a single number in one of the 5 groups assets, liabilities, capital, income, expense.

simple