Accounting Principles: Business Transactions, Ledgers, and Trial Balances

Vocabulary flashcards covering core concepts of business transactions, source documents, debit/credit theory, ledger accounts, and trial balances from Chapters 3 and 4.

Business Transaction

A financial event that causes a change in financial position.

Source Document

The original business paper or document that verifies the dollar amount of a transaction and provides accounting personnel with the information needed to process it properly.

Objectivity Principle

An accounting standard requiring that a business's accounting be recorded on the basis of clear, verifiable evidence, ensuring transactions are recorded on fact rather than personal opinion.

Equation Analysis Sheet

A tool used to display individual transactions and the new financial position resulting from each transaction.

Cell Reference

A spreadsheet entry used to duplicate or reproduce data from one cell to another by typing an equals sign ($=$) followed by the target cell identifier.

Zero Proof

A verification test where liabilities and owner's equity are subtracted from total assets (or debit and credit entries are netted) to confirm that the result is zero, demonstrating that the accounts are in balance.

Account

A record that documents each change to items in the accounting equation, with an individual account assigned to each asset, liability, and equity item.

Ledger

A group or file of accounts.

T-Account

A simple type of account shaped like a 'T,' used primarily to help understand accounting theory.

Debit

The word associated with the left side of an account, abbreviated as dr or Dr.

Credit

The word associated with the right side of an account, abbreviated as cr or Cr.

Accounting Entry

All of the changes in the accounts caused by one business transaction, expressed in terms of debits and credits.

Double-Entry System of Accounting

An accounting system in which every transaction is recorded in two steps—first as a debit (or debits) and second as a credit (or credits)—so that the total debit entries equal the total credit entries.

Account Balance

The dollar value of an account that indicates whether the value is a debit or a credit.

Pin Totals (Pencil Footings)

Tiny pencil figures used to record the subtotals of each side of a T-account prior to calculating the final account balance.

Exceptional Account Balance

An account balance that ends up on the side opposite to its normal balance, such as an asset account with a credit balance or a liability account with a debit balance.

Overdraft Agreement

A financial contract with a bank that allows a deposit account balance to go below zero.

Purchase on Account

An item purchased on credit that is not paid for at the time of purchase.

Sale on Account

An item or service sold on credit where cash is not received at the time of the sale.

Payment on Account

Money paid out to a creditor to reduce the amount owed.

Receipt on Account

Money received from a debtor to reduce the amount owed to the business.

Trial Balance

A listing of all account balances in a ledger used to determine if the total dollar value of debit balances equals the total dollar value of credit balances.