Account

An accounting form that is used to record the increases and decreases in each financial statement item.

Balance of the Account

The amount of the difference between the debits and credits that have been entered into an account.

Capital Account, Drawing Account

An account used for a proprietorship that represents the owners equity.

Chart of Accounts
A list of the accounts in the ledger

Credit
Amounts entered on the right side of the account

Debit
Amounts entered on the left side of the account.

Double-Entry Accounting System

A system of accounting for recording transactions, based on recording increases and decreases in accounts so that

Drawing
The account used for a proprietorship that represents the owners equity.

Journal
The initial record in which the effects of a transaction are recorded.

Journal Entry
The form of recording a transaction in a journal.

Journalizing
The process of recording a transaction in the journal.

Ledger
A group of accounts for a business.

Normal Balance of an Account

A debit or credit depending on whether increases in the account are recording as debits or credits.

Posting
The process of transferring the debits and credits from the journal entries to the accounts.

Rules of Debit and Credit

Specific rules for recording debits and credits based on the type of account.
T-account
The simplest form of an account.

Transposition
An error in which the order of the digits is changed.

Unadjusted Trial Balance

A summary listing of the totals and balances of accounts in the ledger prior to the posting of adjusting entries.

Unearned Revenue
The Liability created by receiving revenue in advance.

Element of Assets
Cash, pre-paid expenses, land

Element of Liabilities
Unearned revenue, rent payable

Element of Owners Equity

Drawing, capital

Element of Revenue
Commissions, fees earned, sales

Element of Expenses
Auto expense, utility expense, rent expense

Chart of Accounts Order

1. Assets
2. liabilities
3. Owners Equity
4. Revenue Account
5. Expense Account

Asset
Increase as debit, decrease as a credit

Liability
Increase as a credit, decrease as a debit

Owners Capital
Increase as a credit, decrease as a debit

Owners Drawing
Increase as a debit, decrease as a credit

Revenue, Liability, Owners Capital

Increase as a credit, decrease as a debit

Expenses, Owners Drawing, Asset

Increase as a debit, decrease as a credit
al statement item.

into an account.

decreases in accounts so that debits equal credits

its or credits.
ting of adjusting entries.