Accounting

Ledger.

A book of accounts.

General Journal.

A book of original entry in which business transactions are recorded in chronological order.

Creditor.

A business or individual to whom a debt is owed.

In Balance.

A condition in which the total of the debits and the total of the credits are equal in an account.

Credit Balance.

A condition that occurs when the total of credits in an account is larger than the total of the debits in that account.

Debit Balance.

A condition that occurs when the total of the debits in an account is larger than the total of the credits in that account.

Expense.

A decrease in assets, other than withdrawals by the owner, which result from efforts to produce revenues.

Account.

A device for recording the changes (increases or decreases) in the fundamental accounting elements.

Balance Sheet/Statement of Financial Position/Statement of Financial Condition.

A formal financial statement illustrating the assets, liabilities, and owner's equity of a business as of a specific date.

Income Statement/Profit and Loss Statement/Statement of Operations/Operating Statement.

A formal financial statement which presents the income, expenses, and resulting net profit or net loss for a given period.

Statement of Owner's Equity/Statement of Net Worth.

A formal financial statement which summarizes all of the changes in owner's equity during a specified period of time.

Chart of Accounts.

A list of all the account titles and the account numbers assigned to them.

Straight Line Depreciation.

A method in which the depreciable cost basis (original cost basis less salvage value) of an asset is apportioned equally over its estimate useful life expressed in terms of months or years.

Fiscal Period.

A period of time covered by an income statement.

Check.

A piece of commercial paper drawn on funds in a bank account and payable on demand.

Double Entry Accounting/Double Entry Bookkeeping.

A process of recording equal debits and credits for a single business transaction.

Drawing Account/Owner Withdrawal.

A seperate owner's equity account in which withdrawals or cash or other assets by the owner for personal use are recorded.

T Account.

A skeleton form of an account used for instructional purposes.

Supplies.

A type of asset that will be consumed as it is used (Examples: embalming supplies and office supplies).

Post-Closing Trial Balance.

A work paper prepared after all the owner's temporary equity accounts have been closed and all permanent accounts have been balanced and ruled, proving the equality of the debits and credits.

Trial Balance.

A work paper proving the equality of the debit and credit balances in the ledger.

Temporary Owner's Equity Accounts.

Accounts utilized to accumulate income, expenses and owner's withdrawals for one accounting period only.

Contra Account.

An account designed to accumulate totals to offset a related account.

Compound Journal Entry.

An accounting entry that involves more than two accounts.

Worksheet.

An expanded trial balance utilized for computing, classifying, and sorting account balances before preparing the formal financial statements.

Income/Revenue.

An inflow of assets as a result of selling a product or providing a service.

Account Receivable.

An unwritten promise by a customer to pay at a later date for goods sold or services rendered.

Account Payable.

An unwritten promise to pay creditor's for property such as merchandise, supplies or equipment purchased on credit, or for services received on credit.

Transaction.

Any activity of a business enterprise that involves the exchange of values.

Liabilities.

Any debts that a business owes.

Accounting Equation.

Assets equal liabilities plus owner's equity (capital).

Current Assets.

Cash or other assets that will be converted into cash or consumed within one year.

Cash.

Coins, currency (paper money) checks, credit card receipts, and money orders received from others, as well as money deposited in the bank.

Analyzing.

Determining the fundamental significance of business transactions so that financial information may be properly processed.

Adjusting Entries.

Entries made at the conclusion of a fiscal period to bring accounts up to date.

Closing Entries.

Entries made at the end of each reporting period to transfer the balances of the temporary owner's equity accounts to the permanent owner's equity account and to reduce the balance in the temporary owner's equity accounts to zero in preparation for the next accounting period.

Salary.

Generally considered to be compensation for managerial or administrative services, expressed in terms of a month or year.

Depreciation Expense.

That portion of the original cost of a fixed asset that is assigned as an expense to the reporting period expected to benefit from its use.

CR.

The abbreviation for credit.

Owner's Equity/Net Worth/Capital/Proprietorship.

The amount by which the total assets exceed the total liabilities of a business; an owner's financial interest in a business.

General Ledger.

The book of accounts.

Debtor.

The business or individual who owes a debt.

Recording/Data Entry.

The committing of a business transaction and the events surrounding such into writing.

Book Value/Undepreciated Cost.

The cost of a fixed asset less its accumulated depreciation.

Net Loss.

The difference between gross profit and expenses when expenses are larger.

Net Income/Net Profit.

The difference between gross profit and expenses when gross profit is larger.

Account Balance.

The difference between the total debits and the total credits in an account.

Transaction Analysis.

The effect of transactions on the accounting elements.

Useful Life.

The estimated life of a fixed asset.

Source Document/Business Paper.

The first record of business transaction (examples include check stubs, receipts, sales invoices, purchase invoices, cash register tapes, etc.)

Debit.

The left side of a standard account.

Depreciation.

The loss in value of a fixed asset due to wear and tear and the passage of time; or a method of matching the cost of a fixed asset against the revenues that the fixed asset will help produce during its useful life.

Face of Note.

The principal sum the maker of a note promises to pay.

Accounting Cycle.

The process involved in journalizing, posting to the ledger, taking a trial balance, preparing statements, making adjusting and closing entries, and preparing a post-closing trial balance, which is repeated each fiscal period.

Journalizing.

The process of recording business transactions in a journal.

Credit.

The right side of a standard account.

Classifying.

The sorting of the many business transactions in an orderly and systematic manner.

Posting.

The transferal of data from the journal to the ledger.

Adjusted Trial Balance.

The trial balance taken after adjusting entries have been recorded.

Chronological.

In accounting, to record in order of time.

Prepaid Expenses.

Items that are considered to be assets when acquired, but which will become expenses when they are consumed or expired.

Accountant.

One who is concerned with the design of the system of records, the preparation of reports based upon the recorded data, and the interpretation of the reports.

Employee.

One who is under the control and direction of an employer with regard to the performance of employment.

Capital.

Owner's equity.

Assets.

Property of monetary value owned by a business.