Chapter 2: The Accounting Cycle During the Period

Journal

A chronological record of all transactions affecting a firm.

Chart of accounts

A list of all account names used to record transactions of a company

Trial balance

A list of all accounts and their balances at a particular date, showing that total debits equal total credits.

T-account

A simplified form of a general ledger account with space at the top for the account title and two sides for recording debits and credits.

Account

A summary of the effects of all transactions related to a particular item over a period of time.

General ledger

All accounts used to record the company's transactions.

Internal transactions

Events that affect the financial position of the company but do not include an exchange with a separate economic entity.

Accounting cycle

Full set of procedures used to accomplish the measurement/communication process of financial accounting.

Debit

Left side of an account. Indicates an increase to asset, expense, or dividend accounts, and a decrease to liability, stockholders' equity, or revenue accounts.

Revenue recognition principle

Record revenue in the period in which it's earned.

Credit

Right side of an account. Indicates a decrease to asset, expense, or dividend accounts, and an increase to liability, stockholders' equity, or revenue accounts.

Journal entry

The format used for recording business transactions.

Posting

The process of transferring the debit and credit information from the journal to individual accounts in the general ledger.

External transactions

Transactions the firm conducts with a separate economic entity.