Double-entry Bookkeeping Lecture Review

Vocabulary-style flashcards covering the fundamentals of double-entry bookkeeping, source documentation, accounting equations, and ledger systems as presented in Chapter 3 of the Kaplan Publishing materials.

Duality

The principle of double-entry bookkeeping that requires the dual effect of every transaction to be recorded, ensuring the accounting equation is maintained.

Accounting equation

A mathematical expression state that, at any point in time, $ASSETS = EQUITY + LIABILITIES$ or $ASSETS - LIABILITIES = EQUITY$.

Business entity concept

The principle that transactions are recorded from the perspective of the business entity itself, separately from its owners.

Equity (Capital)

The residual interest in the assets of the entity after all liabilities have been settled, representing the net investment of the owner.

Source document

A document created to confirm a transaction took place, identifying the date, location, and monetary value; it serves as a data source for the financial accountant.

Purchase requisition

A document completed by an employee to request the purchase of goods or services, which must be approved before generating a purchase order.

Purchase order

A document sent to a supplier to request the supply of goods or services based on details from a purchase requisition.

Despatch note (GDN)

A document issued by the supplier listing the quantity and description of goods sent to the customer.

Goods received note (GRN)

A document produced by the customer as proof of receipt of goods, which is then matched with the despatch note and purchase order.

Sales invoice

A document issued by a supplier as a request for payment, containing details of goods, quantity, price, value, and sales tax.

Credit note

A document issued by a supplier to a customer containing details of goods returned, such as quantity and value.

Debit note

A document produced by the customer for goods returned, which is cross-referenced to the credit note later issued by the supplier.

Remittance advice

A document raised by a customer and sent to a supplier containing details of payment made, such as invoice numbers and dates.

Standing data

Data used repeatedly for recurring transactions, such as price lists, wage rates, sales tax rates, and customer/supplier account details.

'Memorandum only' information

Information recorded for management decision-making and control purposes (e.g., individual receivables' ledger accounts) that does not form part of the double-entry bookkeeping process.

Cloud computing

Access to software and data storage hosted on remote servers and accessed via the internet by multiple users from any location.

Cloud accounting

The application of cloud computing specifically to accounting systems and processes.

General ledger

The complete set of ledger accounts used by an entity to record transactions, also known as the 'nominal ledger' or 'chart of accounts'.

Ledger account

A record of transactions (increases and decreases) assigned to a specific asset, liability, equity, revenue, or expense item.

DEAD CLIC

A mnemonic used to remember double-entry rules where Debits (DE) increase Expenses, Assets, and Drawings, and Credits (CL) increase Liabilities, Income, and Capital.

The journal

A record of accounting entries used for non-routine transactions (such as depreciation or irrecoverable debts) and to correct errors in the general ledger.

Balance c/f (carried forward)

A balancing figure inserted on the side of a T-account that is smaller, used to equalize the two sides before carrying the balance to the next period.

Balance b/f (brought forward)

The opening balance of a ledger account at the start of a new period, carried down from the previous period's closing balance.