CHAPTER 2: Accounting Terms and Definitions

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source document

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Any document that provides information regarding one or more transactions.

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invoice

Back

A bill for goods or services that summarizes amounts owed from one party to another: a type of source document.

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check

Back

A source document that provides information regarding payment that is received from a customer or made to a supplier.

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bank statement

Back

A source document that outlines a business’s banking activity for a single month.

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purchase order

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A source document prepared by the purchasing company and sent to the seller to indicate a desire to purchase items.

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sales order

Back

Primarily used as an internal document that verifies the seller’s intent to accept the terms of the purchase order.

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recurring entry

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A journal entry that is recorded in the same manner for every accounting period.

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cost principle

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A generally accepted accounting principle; dictates that every asset must be recorded at the amount paid for the item.

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time-period principle

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A generally accepted accounting principle; dictates that accounting activity may be expressed over specific periods of time.

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revenue principle

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A generally accepted accounting principle; dictates that revenue must be recorded in the same period it’s earned.