Core Concepts
A glossary of accounting terms and Open Ledger specific definitions.
Company
An entity in Open Ledger with a chart of accounts, financial records, and reporting structure.
Chart of Accounts
A chart of accounts is the complete organizational structure of all ledger accounts within a company. While there’s no universal standard, Open Ledger provides industry-specific templates that align with IRS requirements. The chart of accounts reflects:
- Account hierarchies
- Account relationships
- Classification systems
- Reporting structures
Ledger
Ledgers are the fundamental building blocks of the accounting system, categorized into five types: assets, liabilities, equity, revenue, and expenses.
Assets
Company-owned resources with future economic value, tangible or intangible.
Cash and cash equivalents, accounts receivable, inventory, and prepaid expenses.
Long-term assets like property, plant, and equipment.
Non-physical assets with economic value, including patents and goodwill.
Liabilities
Financial obligations or debts of the company.
Debts due within one year, including accounts payable and accrued expenses.
Obligations due beyond one year, including long-term loans and lease obligations.
Possible future obligations that depend on uncertain events.
Equity
Owner’s stake in the company after subtracting liabilities from assets.
Shares representing ownership in the company held by investors.
Accumulated profits that have been reinvested in the business not distributed.
Money received from investors above the stock’s par value when shares are issued.
Revenue
Money earned from the company’s operating activities.
Income earned from selling products to customers.
Income earned from providing services to customers.
Money earned from investments and lending activities.
Revenue from non-core business activities and one-time events.
Expenses
Costs incurred to generate revenue and run the business.
Direct costs of producing goods or services sold to customers.
Day-to-day costs of running the business, including rent and utilities.
Employee-related costs including salaries, wages, and benefits.
Costs associated with promoting and selling products or services.
Double-Entry Accounting System
Open Ledger implements a robust double-entry accounting system where every transaction affects at least two accounts:
- Debit: Increases assets and expenses, decreases liabilities and equity
- Credit: Increases liabilities and equity, decreases assets and expenses
Each transaction maintains the accounting equation: Assets = Liabilities + Equity
General Ledger
The general ledger is the master record of all financial transactions in the accounting system. It automatically records and organizes every transaction to enable real-time financial tracking, audit trails, and automated statement generation.
Every transaction includes:
- Date and time of the event
- Detailed description
- Debit and credit accounts
- Transaction amount
- Running balance