Accounting Basics
The process of keeping financial accounts.
What is accounting?
Resources owned by a business that have economic value.
What are assets?
Obligations or debts owed by a business.
What are liabilities?
Income earned from normal business operations.
What is revenue?
The costs required for something; the money spent on something.
What are expenses?
The owner's claims on the assets of the business after all liabilities have been deducted.
What is equity?
A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.
What is a balance sheet?
An accounting entry that increases asset and expense accounts, and decreases liability, revenue, and equity accounts.
What is debit?
An accounting entry that decreases asset and expense accounts, and increases liability, revenue, and equity accounts.
What is credit?
created whenever a client sells or purchases something on credit as a way of keeping track of how much money a client actually has.
What is a sales invoice?
An accounting device used to analyze transactions
What is a T account?
The number assigned to an account
What is an account number?
A list of accounts used by a business
What is a chart of accounts?
A form for recording transactions in chronological order
What is a journal?
Recording transactions in a journal
What is journalizing?
Information for each transaction recorded in a journal
What is an entry?
A business paper from which information is obtained for a journal entry
What is a source document?
A journal amount column that is not headed with an account title
What is a general amount column?
Writing an account title number on the heading of an account.
What is opening an account?
The side of the account that is increased
What is the normal balance?
Transferring information from a journal entry to a ledger account
What is posting?
An incorrect journal entry being corrected with an additional journal entry
What is correcting entry?
A bank account from which payments can be ordered by a depositor
What is a checking account?
The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current
What is file maintenance?
A check endorsement consisting only of the endorser's signature