Accounting is the science and art of systematically recording, classifying, and summarizing the financial transactions or events of a business in a set of books. A business transaction means the exchange of money or items of value between two or more people.

Spicer and Pegler defined bookkeeping as the systematic recording of transactions in a manner that clearly reveals a company’s financial relationships with other people and correctly determines the cumulative effect of a transaction on the company’s financial position. JR Baltiboi has observed that bookkeeping is the art of recording business transactions in a set of books.

The registration of commercial transactions implies: the analysis of the transactions of the source document, the recording of those transactions, their publication in a ledger, etc. All business transactions are first entered into the journals. All these different types of inputs need to be classified. This is accomplished by opening different accounts on separate pages in the general ledger and then posting various general ledger entries to the corresponding accounts.

A ledger account is a record of debits, credits, and balances for each individual account: elements of assets, liabilities, and income and expenses. Each account in the general ledger represents a summary record of all transactions related to that particular account. The importance of the general ledger as the main book of accounts lies in the fact that the figures that appear in financial statements, such as balance sheets and profit and loss accounts, are derived from the general ledger. A general ledger, along with cash and bank books, forms a complete set of business accounts.

Accounting is the foundation of the accounting process, as financial accounting includes interpretations of the details generated by accounting.