How the Accounting Process Works

First you Collect the accounting information from data sources available.

Once the information is identified, it is posted to the books of prime entry.

These are not double entry and are just lists: sales day book, sales day returns book, purchases day book, purchases returns book, cash book, petty cash book and the journal (includes all other types of items that do not fall into the other books)

The books of prime entry are then entered into the ledger accounts which may be of any number and are in double entry format. e.g. purchase of car for cash will Dr. motor account Cr cash account

The collection of ledger accounts is known as the general ledger or nominal ledger

Separately business entities will maintain lists of individual receivables and payables due from each customer and supplier. These will be known as memorandum balances often referred to also as receivables ledger and payables ledger. These are not to be confused with the receivables and payables ledger control accounts. The memorandum ledgers are also sometimes known as subsidiary ledgers or individual ledgers. They are not part of the double entry system.

The receivables and payables control accounts are part of the double entry system and the general ledger unlike the memorandum (which is not part of the ledger either).