Accounts
Basic units for accumulating and storing accounting data from similar transactions.
Balance
The difference in dollars between the total debit footing and the total credit footing of an account. Also called account balance.
Cash return on assets
A ratio that shows how much cash is generated by each dollar of assets; Net Cash Flow from Operating Activities ÷ Average Total Assets.
Chart of accounts
A list of account numbers and titles that facilitates finding accounts in the ledger.
Classification
The process of assigning transactions to the appropriate accounts.
Compound entry
An entry that has more than one debit or credit entry.
Cost principle
The practice of recording transactions at cost.
Cost
The exchange price associated with a business transaction at the point of recognition.
Credit
The right side of an account.
Debit
The left side of an account.
Debit
The left side of an account.
Double-entry system
The accounting system in which each transaction is recorded with at least one debit and one credit, so that the total amount of debits equals the total amount of credits.
Exchange price
The price resulting from an agreement between the buyer and seller that can be verified by evidence created at the time of the transaction; the price at which a transaction is recorded.
Footings
Working totals of columns of numbers. To foot means to total a column of numbers.
Journal entry
A journal notation that records a single transaction.
Journal form
A way of recording a transaction in which the date, debit account, and debit amount appear on one line and the credit account and credit amount appear on the next line.
Journal
A chronological record of all transactions; the place where transactions first enter the accounting records. Also called book of original entry.
Journalizing
The process of recording transactions in a journal.
Normal balance
The usual balance of an account; the side (debit or credit) that increases the account.
Posting
The process of transferring journal entry information from the journal to the ledger.
Recognition point
The predetermined time at which a transaction should be recorded; usually, the point at which title passes to the buyer.
Recognition
The determination of when a business transaction should be recorded.
Source document
An invoice, check, receipt, or other document that supports a transaction.
Trial balance
A comparison of the total of debit and credit balances in the accounts to check that they are equal.
Valuation
The process of assigning a monetary value to a business transaction.
Which accounts are debited and which are credited in a transaction
Increases in assets are debited.
Decreases in assets are credited.
Increases in liabilities and owner’s equity are credited.
Decreases in liabilities and owner’s equity are debited.
Revenues and capital invested into the business increase owner’s equity, and are therefore credited.
Expenses and withdrawals decrease owner’s equity, and are therefore debited.
