Chapter 4: The Accounting Cycle - Journals and Ledgers

VOCABULARY flashcards covering the components of the accounting cycle, including journal entry rules, ledger management, and error detection.

Debit (DR)

An entry recorded on the left-hand side of an account.

Credit (CR)

An entry recorded on the right-hand side of an account.

Accounting Equation

$$\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$$

Double Entry

A system where for each transaction, the total value of debits equals the total value of credits.

Accounting Cycle

The series of steps required to complete the financial statements.

Source Documents

Evidence that a transaction actually occurred, such as sales receipts, bills, checks, or bank statements.

Journal

A record referred to as the "book of original entry" where transactions are recorded in chronological order.

Journalizing

The process of entering transaction data into the journal.

Compound Journal Entries

Journal entries that affect more than two accounts and contain multiple debits and credits.

Posting Reference (PR)

A column in the journal, initially left blank, where the ledger number is entered after the entry is posted.

General Ledger

A record that contains all the asset, liability, equity, revenue, and expense accounts and organizes all information about changes in account balances.

Chart of Accounts

A list of all the accounts contained in the general ledger.

Posting

The procedure of transferring information from the journal to the appropriate ledger account.

Trial Balance

A list of all accounts and their balances at a given time used to prove that total debits equal total credits.

Transposition Error

An error that occurs when two numbers are switched, such as writing $530$ as $350$.

Internal Controls

Procedures like double checking and authorization used to detect and avoid errors in recording and posting transactions.