Fundamentals of Accountancy, Business and Management 1

These flashcards cover key concepts, terms, and definitions relevant to the fundamentals of accountancy, including accounting equations, journal entries, and the accounting cycle.

Assets = Liabilities + Owner's Equity

This is the fundamental accounting equation that shows the relationship between a company's assets, liabilities, and owner's equity.

Debits and Credits

A double-entry system of accounting where every transaction affects at least two accounts; debits must equal credits.

Journal

A chronological record of an entity's transactions, showing the effects of transactions in terms of debits and credits.

Journalizing

The process of recording a transaction in the journal.

Simple Entry

A journal entry affecting only two accounts, one debited and one credited.

Compound Entry

A journal entry that requires three or more accounts.

Ledger

A grouping of the entity's accounts, serving as the reference book of the accounting system.

General Ledger

The main ledger where accounts are classified to summarize transactions and prepare financial statements.

Chart of Accounts

A listing of all accounts and their account numbers organized in the order of financial statements.

Trial Balance

A control device that helps minimize accounting errors by ensuring that total debits equal total credits.

Temporary Accounts

Accounts used to gather information for a specific accounting period, which are transferred to permanent accounts at period end.

Normal Balance of an Account

The side of the account (debit or credit) where increases are recorded; assets and expenses have a debit balance, while liabilities and equity have a credit balance.