Recording Process in Accounting

These flashcards cover key concepts related to the recording process in accounting, including definitions and explanations essential for understanding financial transactions and their documentation.

Recording Process

The systematic documentation of financial transactions within the accounting cycle.

A = E + L

The fundamental accounting equation representing that Assets equal Equity plus Liabilities.

Dr (Debit)

An entry recorded on the left side of a ledger account, indicating an increase in assets or expenses.

Cr (Credit)

An entry recorded on the right side of a ledger account, indicating an increase in liabilities or equity.

Trial Balance

A statement that lists all the balances of ledger accounts to verify that total debits equal total credits.

Source Document

A document that provides evidence of a transaction, such as invoices, receipts, or contracts.

Financial Statements

Reports that summarize the financial performance and position of a business, including the income statement and balance sheet.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products.

Profit Margin

A measure of profitability calculated as net income divided by revenue, expressed as a percentage.

Perpetual Inventory System

An inventory accounting method that continuously updates inventory records for every transaction.