4.1-4.4

Accounting cycle

A series of steps performed during each reporting period to classify, record, and summarize financial data to produce statements.

Business transactions

Financial events that cause measurable changes in the assets, liabilities, or equity of an entity.

Business documents

Source papers and digital evidence that serve as the formal basis for recording financial transactions.

Return (sales or purchases)

The actual physical return of merchandise back to the supplier or seller.

Allowance (sales or purchases)

A price reduction granted to a buyer to resolve an issue without the physical return of goods.

Debit balances

The account category that normally increases with left-side entries, encompassing assets, drawings, and expenses.

Credit balances

The account category that normally increases with right-side entries, encompassing liabilities, capital, and revenues.

Account

A formal record used to track increases, decreases, and cumulative totals for a specific asset, liability, or equity item.

Chart of accounts

A complete list of account titles and numbering codes utilized by an entity to organize financial records.

Normal balance

The customary side (debit or credit) on which an account increases based on its classification in the accounting equation.

Double-entry system

A bookkeeping method requiring that every transaction be recorded with equal debit and credit values.

Account balance

The net difference computed between the total debits and total credits recorded in a specific ledger record.

Footing

The process of calculating and writing the total sum of a vertical column of figures.

Single ruling

A single horizontal line drawn to indicate that a mathematical operation has been performed.

Double ruling

Two horizontal parallel lines drawn under an amount to signify a final total or finished balance.

Journalizing

The procedure of entering business transactions chronologically into a book of original entry.

Journal

A chronological record of transactions, commonly referred to as the book of original entry.

General journal

An all-purpose book of original entry used to record any type of transaction or adjusting entry.

Special journals

Dedicated books of original entry designed to handle high-frequency, repetitive transactions of a specific type.

Simple entry

A journal transaction that contains only one debit and one credit.

Compound entry

A journal transaction that involves more than one debit, more than one credit, or multiple of both.

Audit trail

A documented sequence of references that allows a reviewer to trace transactions between source documents and financial statements.

Posting

The process of transferring recorded debit and credit amounts from the journal to individual ledger accounts.

Ledger

The book of final entry containing the collection of all asset, liability, and equity accounts for a business.