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54 CHAPTER 3 Introduction to Accounting

Figure 3-4: General ledger account data
number to distinguish it from other accounts in the COA. Each account also
includes a long text (description) and short text (brief description) of the
account. Designating the account as either a balance sheet or a profi t and loss
account has implications for the ways the balances in the accounts are treated
at the end of the year. Specifi cally, balances in balance sheet accounts are car-
ried forward into the same account, whereas balances in the profi t and loss
accounts are carried forward into different, specifi ed accounts.
In the beginning of the chapter we explained that balance sheet accounts
include assets, liabilities, and owner’s equity (Figure 3-5), whereas profi t and
loss accounts include revenue and expenses (Figure 3-6).

Figure 3-5: Balance sheet accounts

Figure 3-6: Profi t and loss accounts

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