Beginning the Accounting Cycle

Compound journal entry

A journal entry that affects more than two accounts.

Journal

A listing of business transactions in chronological order. It links on page the debit and credit parts of transactions. Alternately known as general journal.

Calendar Year

A one-year period beginning on January 1 through December 31. Employers must use for payroll purposes, even if the employer uses a fiscal year for financial statements and for any other reason.

Book of final entry

Book that receives information about business transactions from a book of original entry (a journal).

Book of original entry

Book that records the first formal information about business transactions.

Natural business year

The 12-month period a business chooses for its accounting year which allows the business to count its year-end inventory when it is easiest to do so.

Transposition

The accidental rearrangement of digits of a number. Example: 152 to 125.

Slide

The error that results in adding or deleting zeros in the writing of a number. Example: 79,000 to 7,920

Accounting Period

The period of time for which an income statement is prepared.

Journalizing

The process of recording a transaction entry into the journal.

Journal entry

The transaction (debits and credits) that is recorded into a journal once it is analyzed.

Posting

The transferring, copying, or recording of information from a journal to a ledger.

General Journal

A book that records transactions in chronological order. It is the book of original entry.

Four-column account

A running balance account that records debits and credits and has a column for an ending balance (debit or credit) It replaces the standard two-column we used earlier.

Cross-referencing

Adding to the PR column of the journal the account number of the ledger account that was updated from the journal.

Trial balance

An informal listing of the ledger accounts and their balances in the ledger to aid in proving the equality of debits and credits. The total of the debits should equal the total of the credits.

Fiscal year

Any twelve month period.

Interim Reports

Financial statements that are prepared for a month, quarter or some other portion of the fiscal year.

Accounting Cycle

For each accounting period, the process that begins with the recording of business transactions or procedures into a journal and ends with the completion of a post-closing trial-balance.