Analyzing Transactions

These flashcards cover key vocabulary related to transactions and accounting from the lecture notes.

Account

A record showing the increases and decreases of each financial statement item.

T Account

A visual representation of an account with two sides; the debit side on the left and the credit side on the right.

Assets

Resources owned by the business entity.

Liabilities

Debts owed to outsiders, or creditors.

Revenues

Increases in owner’s equity as a result of selling services or products.

Expenses

Costs incurred by a business in the process of generating revenues.

Double-entry accounting system

An accounting method where every transaction is recorded by equal dollar amounts of debits and credits.

Journalizing

The process of recording a transaction in the journal.

Trial Balance

A statement that verifies the equality of debits and credits in the ledger.

Debit and Credit Rules

Debits and credits affect accounts in specific ways; for example, debit increases assets and expense accounts, while credit increases revenue and liability accounts.

Normal Balances of Accounts

The expected balance for an account type, such as debit for assets and credit for liabilities.

Invested cash

Cash put into a business by the owner, affecting the capital account.