The statement must clearly spell out whether the company is making a profit or loss. A business owner using this system records income and expense flows. He also summarizes cash receipts daily and cash receipts and disbursements monthly. Double-entry systems are more complicated to setup and maintain for two reasons. First, a business owner has to initially record a transaction in a journal and then post it to a ledger account.
Journals are a record of each business transaction in the business' supporting records.
Ledgers contain totals from all of the journals and are organized into different accounts. Liabilities, which are claims to resources owned by the firm. Net Worth, which is the difference between assets and liabilities. Income and expense accounts are closed at the end of the tax year . The other accounts remain open permanently.