Xplain the benefits of special journals and subsidiary ledgers Essay

Xplain the benefits of special journals and subsidiary ledgers - Essay Example This statement is also used to show net profit or loss the company or business incurred after a given accounting period. Balance sheet also known as statement of financial position is a financial statement showing the summary of financial balance of a business. The statement also shows the company’s financial condition. The two financial statements have different accounting transactions presented in these statements (William et al, 2008). While income statement describes the performance of a business of the current year, balance sheet shows the company’s overall position as from the beginning of the year to the current year. The transactions posted on the balance sheet include assets, liabilities and equity, the balance sheet has three parts arranged in liquidity order, assets are followed by liabilities. The difference between assets and liabilities gives capital, in the balance sheet the records of each account is usually maintained using double entry book-keeping, which is an accounting system. The transactions posted on income statement include revenues and expenses, this statement is however, divided into two parts the operating and non-operating sections. The operating section shows information concerning the revenues and expenses of the business, which comes because of regular operations of a business. Non-operating section shows information not related to direct regular operations of the business (Dani els & Mortimer, 1980). Information from these financial statements is normally posted in different journals and ledgers. Transactions made on income statement affect it in different ways, for example, an increase in sales by a certain amount affect the income statement since it will provide an additional income thus increase in net profit and vice versa when income from sales reduces. These sales also have an effect of balance sheet. Employee’s transactions, which amount to