Accounting

Debits

Increase assets and decrease liabilities and equity.

Credits

Decrease assets and increase liabilities and equity.

T-Accounts

Visual representation used to track the effects of transactions on individual accounts.

Adjusting Entries

Entries made at the end of an accounting period to update accounts before preparing financial statements.

Closing Entries

Entries made to transfer balances from temporary accounts to permanent accounts at the end of an accounting period.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

Income Statement

A financial statement that summarizes revenues, expenses, and profits over a period.

Statement of Retained Earnings

A financial statement showing changes in retained earnings over a specific period.

Current Ratio

A liquidity ratio measuring a company's ability to pay short-term obligations.

Inventory Turnover

A measure of how many times a company's inventory is sold and replaced over a period.

Days Inventory Outstanding (DIO)

A measure of how many days inventory remains before being sold.

Receivables Turnover

A measure of how efficiently a company collects its receivables.

Debt Ratio

A financial ratio that indicates the proportion of assets financed by debt.

Times-Interest-Earned Ratio (TIE)

Measures the ability of a company to cover its interest payments with operating income.

Return on Assets (ROA)

Shows how effectively a company utilizes its assets to generate profit.

Return on Equity (ROE)

Measures the profitability of a company relative to shareholder's equity.