> For the complete documentation index, see [llms.txt](https://docs.xyb.co/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xyb.co/xyb-platform-1/xyb-ledger/getting-started/quickstart/familiarise-with-core-accounting-concepts.md).

# Familiarise with Core Accounting Concepts

## 1. Accounting Types and their Impact

One of the core features of XYB Ledger is its support for multiple accounting types, which govern how balances are managed within wallets. The ledger recognizes five primary accounting types:

* **Liability**: Obligations owed to third parties.
* **Asset**: Resources owned by the institution.
* **Revenue**: Inflows of economic benefits.
* **Expense**: Outflows incurred during operations.
* **Equity**: Residual interests in assets after liabilities.

The accounting type dictates how credits and debits impact balances:

* **Assets and Expenses**: Debits increase balances, while credits decrease them.
* **Liabilities, Revenue, and Equity**: Credits increase balances, while debits decrease them.

## 2. Ledger Accounts and Wallet Structures

Ledger organizes funds under **accounts** and **wallets**, where:

* **Group accounts** maintain customer funds.
* **Chart accounts** track institutional funds.

Each account contains one or more wallets, which hold balances segmented into:

* **Committed Balance**: Funds settled and finalized.
* **Reserved Debit Balance**: Future debits, always negative for liabilities.
* **Reserved Credit Balance**: Future credits, always positive for liabilities.

This hierarchical structure enables seamless fund movements between accounts, irrespective of their type.

## 3. Posting and Instruction Management

* Reflects a debit or credit operation on a specific wallet.
* Is tied to a movement or instruction.
* Includes critical metadata such as value date, posting ordinal, and associated attributes.

Instructions act as the container for financial operations. They:

* Define one or more movements that adjust wallet balances.
* Support attributes and metadata for enhanced transaction tracking.
* Enable consistent application of rules, such as consolidated balance checks or currency validations.

Together, postings and instructions ensure precise and transparent updates to the ledger’s state.

## 4. Movement Management

Movements in XYB Ledger represent value transfers between wallets. These are initiated via **instructions**, which may comprise multiple activities. The states of movements include:

* **Passive**: Movement is defined but inactive.
* **Active**: Movement is initiated with an assigned amount.
* **Complete**: Movement is finalized.
* **Cancelled**: Movement is invalidated.

Each movement generates postings, adjusting balances in the respective wallets based on the defined accounting rules.

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