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Bookkeeping Terms 1
Foundational terms to learn bookkeeping
| Term | Definition |
|---|---|
| assets | Anything the business owns of value or a resource of value that has the potential to be transformed into cash. |
| liability | What the business owes to others. |
| equity | Owner's stake in the business, how much they have invested or withdrawn. |
| accounts payable | Money a business owes to others for goods or services. |
| accounts receivable | Money that is owed to a business for providing a good or service. |
| revenue | Income earned through business, gross proceeds or sales. |
| expenses | The costs of doing business, such as labor costs, costs of goods sold, overhead, etc. |
| debit | An increase in assets or expenses, or a decrease in liabilities, owner's equity, or revenue. |
| credit | A decrease in assets or expenses, or an increase in liabilities, owner's equity, or revenue. |
| general ledger | Provides a record of each financial transaction that takes place during the life of an operating business and contains all accounts needed to prepare financial statements. |
| Chart of Accounts | Lists of all the accounts and sub-accounts used to categorize transactions. |
| Unadjusted Trial Balance | A form or statement that lists the titles and balances of all ledger accounts at a given date before adjusting entries are made. |
| Adjusting Entries | Creating new entries to record accrual, deferrals, and non-cash adjustments; these are provided to bookkeepers by a CPA or accountant. |
| Adjusted Trial Balance | Listing of the ending balances in all accounts after adjusting entries have been prepared. |
| vendor | An entity or individual from whom a business purchases goods or services, sometimes for resale or company use. |
| Double-Entry Accounting | A method of bookkeeping that uses at least 2 entries, a debit and a credit, for every transaction. |
| deferral | An entry to record a current payment or expense at a later period when the money has actually been earned or incurred. |
| accrual | An entry to record a future revenue or expense in the current period, even if money hasn't been paid or received yet. |
| Income Statement | Also called the profit and loss statement, the income statement shows the business's revenues and expenses during a particular period. |
| Balance Sheet | The balance sheet is a financial statement that reports a business's assets, liabilities, and equity at a specific point in time. |
| Statement of Cash Flows | A report on the sources and uses of cash by a business. |
| Statement of Equity | A report on the changes in business equity, from the opening balance to the end of the period balance. |
| operating expenses | The day-to-day expenses incurred as the business generates revenue directly associated with the core business activities. |
| operating profit | The profitability of a business's core operations before interest, taxes, and non-operating expenses are deducted, calculated by subtracting the total operating expenses from the gross profit. |
| bookkeeping | The process of recording and organizing financial transactions systematically, forming the foundation of accounting. |
| Procurement | The process of acquiring goods or services from external sources, typically involving negotiation and purchasing. |
| General Journal | A chronological record of a business’s financial transactions, used for making the first formal accounting entry. |
| accounting | The systematic process of recording, summarizing, analyzing, and reporting financial transactions of a business. |
| Accounting Equation | The fundamental equation of accounting: Assets = Liabilities + Equity, reflecting a company's financial position. |
| Expanded Accounting Equation | An extended form of the accounting equation: Assets = Liabilities + Owner’s Capital + Revenues - Expenses - Withdrawals. |
| Accounting Cycle | A series of steps followed during an accounting period, including journalizing, posting, trial balances, adjusting entries, and financial statements. |
| Four Core Financial Statements | The primary reports used to summarize a company's financial activities: Income Statement, Balance Sheet, Statement of Cash Flows, and Statement of Equity. |
| reconciliation | The process of comparing two sets of records (e.g., bank statements and company records) to ensure they agree. |
| data entry | The process of inputting financial or other information into a database or accounting system. |
| invoice | A document issued by a seller to a buyer that outlines the goods or services provided, along with their costs and terms of payment. |
| sales receipt | A document provided to a customer as proof of payment for goods or services received at the point of sale. |
| List of Assets | cash, inventory property equipment accounts receivable intangible items |
| Accounting Cycle Steps | 1. Collect and analyze transactions 2. Record/Post transactions to the ledger 3. Prepare an Unadjusted Trial Balance 4. Prepare Adjusting Entries at the end of the period 5. Prepare an Adjusted Trial Balance 6. Prepare financial statements |
Created by:
deenonthebrain
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