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LogoutBusinesses that utilize the double-entry accounting system, in which each financial transaction impacts at least two sub-ledger accounts and each entry contains at least one debit and one credit transaction, use a general ledger. Journal entries are double-entry transactions that are recorded in two columns, with debit entries on the left and credit entries on the right, and the total of all debit and credit entries must balance.
Assets−Liabilities=Stockholders’ Equity
This format is followed by the balance sheet, which displays information at the account level. In the short-term assets part of the balance sheet, for example, numerous asset accounts, such as cash and accounts receivable, are included.
The accounting equation requires that transactions posted to the accounts on the left of the equal sign in the formula equal the sum of transactions posted to the account (or accounts) on the right. This is how the double-entry accounting technique works. The balancing rule applies regardless of how the equation is written (for example, Assets = Liabilities + Stockholders’ Equity).