Week 2: Ledger Accounts to Trial Balance

Vocabulary flashcards covering the fundamentals of ledger accounts, the double-entry bookkeeping system, rules for recording transactions, balancing procedures, and the trial balance.

General Ledger

An accounting record that contains all individual ledger accounts together and summarises the financial affairs of a business.

T-Account

An informal term for an individual general ledger account, structured in the shape of a 'T' with a debit side on the left and a credit side on the right.

Business Entity Principle

The accounting principle requiring that all business transactions have a dual effect (two sides) where financial value is both given (provided) and received.

Double-Entry Bookkeeping System

A bookkeeping system based on the business entity principle where every transaction is recorded with two equal entries—a debit and a credit—to maintain financial equilibrium.

Debit (Dr)

The left-hand side of a ledger account where increases in assets or expenditures and decreases in liabilities or capital are recorded.

Credit (Cr)

The right-hand side of a ledger account where increases in liabilities, capital, or revenue incomes and decreases in assets are recorded.

Detail Column

The narrative section of a ledger account entry providing an explanation of the transaction, usually naming the corresponding account on the other 'side' of the double entry.

Sales Account

A revenue income account that records credit entries for the sale of goods acquired specifically for the purpose of selling during normal trading activity.

Purchases Account

A revenue expenditure account that records debit entries for the purchase of goods acquired specifically for the purpose of re-sale during normal trading activity.

Carriage Inwards

Transportation and delivery costs associated with bringing purchased goods into the business for re-sale, which may be included in the purchases account.

Accounts Receivable (Debtors)

An asset account representing the amounts owed to the business by customers who have purchased goods or services on credit.

Accounts Payable (Creditors)

A liability account representing the amounts owed by the business to suppliers for goods or services received on credit.

Receipts

Cash inflows received by the business from any and all sources, recorded as a debit entry to the receiving asset account (such as cash or bank).

Capital Account

An account representing the owner's financial investment introduced into the business, recorded as a credit entry.

Drawings Account

An account debited to record funds or assets removed from the business by the owner for personal use.

Balance c/d (Carried Down)

The balancing figure entered on the smaller side of a ledger account at the end of an accounting period to make the total debits and credits balance.

Balance b/d (Brought Down)

The opening balance carried forward to the opposite side of a ledger account at the start of a new trading period, representing the net balance of the account.

Trial Balance

A financial report that extracts and groups all nominal ledger account balances into debit and credit columns to verify that total debits equal total credits.