Chapter 3: The Double-Entry Accounting System

Vocabulary flashcards covering core terms, debits/credits rules, ledger and journal concepts, and trial balance error checks from Chapter 3.

Luca Pacioli

An Italian friar who published the first book on double-entry accounting in 1494, describing the accounting method used by merchants in Venice.

"Everything about Arithmetic, Geometry, and Proportions"

The 1494 mathematics book written by Luca Pacioli, which contained the first published accounting book as one of its five sections.

Double-Entry Accounting Rule

The principle that in every transaction, the total dollar value of all debits equals the total dollar value of all credits.

Asset Account

An account category where increases are recorded on the debit (left) side and decreases are recorded on the credit (right) side.

Liability Account

An account category where increases are recorded on the credit (right) side and decreases are recorded on the debit (left) side.

Equity Account

An account category where increases are recorded on the credit (right) side and decreases are recorded on the debit (left) side.

Revenue Account

An account category where increases are recorded on the credit (right) side because revenue is an addition to equity.

Expense Account

An account category where increases are recorded on the debit (left) side because expenses are treated as deductions from equity.

General Journal

The book of original entry in which any accounting transaction could be recorded.

General Ledger

The set of all accounts used in a given accounting system, typically organized in financial statement order via the chart of accounts.

Trial Balance

A schedule listing the balances of all ledger accounts that verifies the mathematical accuracy of accounting records and provides a convenient reference of current account balances.

Transposition Errors

An accounting error caused by switching two adjacent entries, which can be checked by dividing the error amount by 9.

Errors of Difference

Trial balance errors featuring differences of the same amount but in different directions, typically resulting from journalizing incorrect accounts.

Mathematical Errors

Trial balance errors checked by dividing the difference between debits and credits by 2.

Source Documents

Items collected during the accounting cycle (such as checks, invoices, and receipts) to document transactions.