Recording Transactions Recap

A collection of vocabulary flashcards related to financial accounting principles, focusing on recording transactions and financial reporting.

Double entry bookkeeping

A system where every transaction affects two accounts, one debited and one credited.

Trial balance

A statement that lists the balances of all accounts to check the accuracy of the bookkeeping.

Accruals basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Debit (Dr)

An entry on the left side of an account, increasing assets or expenses.

Credit (Cr)

An entry on the right side of an account, increasing liabilities or income.

Trade receivable

Amount owed by customers for products or services sold on credit.

Trade payable

Amount owed to suppliers for goods or services purchased on credit.

Cash accounting

An accounting method where income is only recognized when cash is received and expenses when cash is paid.

Income recognition

The principle that dictates when revenue should be recognized in the financial statements.

Year-end adjustments

Corrections made at the end of an accounting period to ensure that financial statements are accurate.

Sales book

A ledger that records all sales transactions.

Purchases book

A ledger that records all purchase transactions.

Equity

The residual interest in the assets of the entity after deducting liabilities.

Cash increases

Occurs when cash is received from sales or financing.

Cash decreases

Occurs when cash is paid for expenses or liabilities.

Equipment asset

Long-lived tangible assets used in the production of goods and services.