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Double-Entry Accounting System
An accounting system where each transaction affects at least two accounts, ensuring that total debits equal total credits.
Normal Balance
The expected balance in an account; accounts typically have either a debit or credit normal balance.
Permanent Accounts
Accounts that carry their balances into the next accounting period, such as assets, liabilities, and shareholders’ equity.
Temporary Accounts
Accounts that are closed at the end of the accounting period, including revenues, expenses, and dividends declared.
Chart of Accounts
A listing of all accounts used by a company, summarizing all financial transactions.
Adjusting Entries
Entries made at the end of an accounting period to account for expenses not yet recognized or revenues not yet recorded.
Accrual Entries
Adjusting entries made when revenue or expenses need to be recognized before cash is exchanged.
Deferral Entries
Adjusting entries made when revenue or expenses are recognized after cash has been received or paid.
Trial Balance
A report that lists the balances of all accounts in the general ledger at a specific point in time, ensuring that total debits equal total credits.
Closing Entries
Entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.
Accounting Equation
The formula stating that assets equal liabilities plus shareholders' equity (Assets = Liabilities + Shareholders’ Equity).
Transaction Analysis
The process of analyzing financial transactions to identify which accounts are affected and how.
General Ledger
A complete record of all financial transactions over the life of a company, summarizing all accounts.
Journal Entry
The record of a financial transaction in the accounting system, detailing all accounts affected and their respective debit or credit amounts.
Depreciation Expense
The portion of a tangible asset's cost that is allocated as an expense over time, reflecting the asset's usage.
Prepaid Insurance
An asset account representing payments made for insurance coverage that will be expensed over time.
Interest Payable
A liability account representing interest that has accrued on loans but has not yet been paid.
