Accounting Fundamentals

Account

A record used to track a specific type of financial activity, asset, liability, income, expense, or equity amount.

Account Balance

The amount currently recorded in an account after debits, credits, additions, and reductions have been posted.

Adjusting Entry

A period-end journal entry used to record accruals, prepayments, depreciation, or earned revenue.

Bookkeeping

The process of recording transactions and maintaining the information used for financial reporting.

Chart of Accounts

An organized list of all accounts used in a business’s accounting system.

Closing Entry

A period-end entry that transfers temporary revenue and expense balances to an equity account.

Credit

An entry on the right side of an account; its effect depends on the type of account involved.

Debit

An entry on the left side of an account; its effect depends on the type of account involved.

Double-entry Accounting

A system in which every transaction affects at least two accounts and total debits equal total credits.

General Ledger

The central accounting record containing all accounts and transactions posted to them.

Journal Entry

A record of a financial transaction that identifies the accounts affected and related debits and credits.

Reconciliation

The process of comparing records or balances and investigating differences until they are explained or corrected.

Subledger

Trial Balance

A list of general-ledger balances used to check that total debits equal total credits.