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Key Terms

  • Accounting Cycle: Process of recording, classifying, and summarizing transactions
  • Accounting Equation: Assets = Liabilities + Equity
  • Accrual Basis: Recording transactions when they occur, not when cash changes hands
  • Credit (CrĂ©dit): Right side of account; increases liabilities, equity, revenue; decreases assets, expenses
  • Debit (DĂ©bit): Left side of account; increases assets, expenses; decreases liabilities, equity, revenue
  • Double-Entry Bookkeeping: System where every transaction affects at least two accounts
  • Expanded Accounting Equation: Assets = Liabilities + Share Capital + Retained Earnings + Revenue - Expenses - Withdrawals
  • Journal (Journal): Chronological record of all transactions
  • Journal Entry (Écriture Comptable): Formal recording of a transaction
  • Ledger (Grand Livre): Collection of all accounts showing balances
  • Matching Principle: Expenses recorded in same period as related revenues
  • Normal Balance: Side of account where increases are recorded
  • Posting (Report): Transferring journal entries to ledger accounts
  • Revenue Recognition Principle: Revenue recorded when earned, not when cash received
  • Source Document: Original document supporting a transaction (invoice, receipt, etc.)
  • T-Account: Visual representation of a ledger account
  • Trial Balance (Balance): List of all accounts and balances to verify debits equal credits