Course Glossary
1. Course Glossary
Course Glossary
account: a page used to record financial changes for each item affecting the financial position
accountancy: the work done by an accountant
accounting: the tracking and writing down of financial information
accounting equation: assets = liabilities + owner’s equity, or the left side of the balance sheet equals the right side of the balance sheet
accounts payable: money that the business still has to pay; debt that is owed
accounts receivable: money that the business will be receiving
asset: anything of value that is owned
auditing: the evaluation of books and records of a business
auditor: a professional accountant who deals with analysis of books and records
balance sheet: a financial statement that shows the value of the assets, liabilities, and capital of a business on a specific date
beginning balance sheet: the first balance sheet a business prepares before it opens its doors to customers
chart of accounts: a list of the accounts of a business and the account numbers arranged in numerical order
credit: the amount on the right side of an account
debit: the amount on the left side of an account
debt: money that is owed
double-entry accounting system: the total of the debit entries equals the total of the credit entries the accounting equation must remain in balance
drawing: a personal withdrawal of funds or other assets by the owner
entry: each item placed into the journal
expense: an amount spent to keep the business operating
financial statements: accounting documents prepared to organize the financial picture of a company
GAAP: Generally Accepted Accounting Principles
general journal: a two-column accounting form used for sorting out transactions in chronological order
general ledger: a book or file containing all the accounts of the business
journal: a book or diary where transactions are recorded in chronological order
liability: anything that is owed, such as car payments or loans from banks
liquidate: to convert assets into cash
miscellaneous: containing various different kinds of items
opening an account: placing the account name and the account number in the ledger
opening entry: the first entry made into a journal of a new business
owner’s equity: the worth of the business; assets – liabilities = owner’s equity
permanent accounts: the accounts found on the balance sheet: assets, liabilities, and capital
posting: the process of transferring information from the journal to the ledger
revenue: money received for the operation of the business
seed money: money to pay for expenses to start a business
source document: any piece of paper that provides details about a financial change in business (e.g., invoices, cheque stubs, cash register tapes)
statutes: permanent established rules or laws
temporary capital accounts: revenue, expenses, drawing, and income summary accounts that are only open for a period of time and then are transferred into the permanent capital account
transaction: a financial event changing the financial position of a business