Ledger Accounts and Double Entry Accounting

This set of flashcards covers essential vocabulary and concepts related to ledger accounts and double entry accounting, reflecting the key points from Chapter 5.

Double Entry Bookkeeping

An accounting system where every transaction affects at least two accounts, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.

General Ledger

A complete set of accounts for a business where all transactions are recorded and summarized.

Ledger Account

An individual account within the general ledger that tracks a specific type of transaction, such as sales or purchases.

Accruals

Adjustments made to record revenues that have been earned or expenses that have been incurred but not yet recorded in the financial statements.

Trial Balance

A summary of all ledger account balances to ensure that total debits equal total credits.

Nominal Ledger

Another term for the general ledger, which summarizes all financial transactions of the business.

Transaction

Any event that has a financial impact on a business and is recorded in the accounting system.

Income Statement

A financial statement that shows the company's revenues and expenses over a specific period, resulting in profit or loss.

Statement of Financial Position

Also known as the balance sheet, this statement presents the company's assets, liabilities, and equity at a specific point in time.

Dual Effect

The principle that each transaction has two sides, affecting both a debit and a credit within the accounting system.