ord is the journal (sometimes cash journal), which records every daily transaction as to date, kind of transaction (income/expense), amount, and balance-sheet category, i.e., asset, liability, capital (Ragan 5). In a retail operation, one journal should record sales and cash receipts, and another should record cash outlays or disbursements and purchases that the retailer makes. For example, cash register tapes would record retail-store income, and invoices from inventory suppliers would record retail-store expenses. The journals record each transaction, but it would be inefficient to consult individual transactions every time one wanted to understand the financial picture. The ledger is a mechanism by which changes in assets, liabilities, capital, income, and expense can be tracked. The ledger consists of a number of accounts, which represent different aspects of operation. In a retail business, accounts would include (for example) bank account(s), receivables, payables, payroll, equipment, and inventory. Journal transactions are said to be posted to ledger accounts.
The conventions of double-entry bookkeeping control the way in which transactions are posted to a ledger. Double-entry bookkeeping "record[s] every transaction twice--as a debit entry in one account and as a credit entry in another. . . . [T]he total of the amounts entered as debits must equal the total of the amounts entered as credits" (Ragan 6). Debits and credits are entered in ledger columns designed for the purpose. Thus if one account receives a credit, another account must receive a debit; debit entries go on the left, and credit entries go on the right column.
If the credit and debit totals in the columns do not balance (and they must), then there is either a credit or a debit balance. Accordingly, at the end of an accounting period, credit and debit totals must be compared. That is called taking a trial balance (Ragan 7). If the totals are different, it is n...