Accounting Concepts Flashcards

Front

What is a Transaction?

Back

An event that has a financial impact on a business and is recorded in the accounting system. Example: Selling goods to a customer, paying a supplier.

Front

What is a Journal Entry?

Back

A record of a business transaction in the journal, showing the accounts affected and the amounts debited and credited. Example: A journal entry to record a cash sale would debit Cash and credit Sales Revenue.

Front

What does Debit (Dr) mean?

Back

The left side of an accounting entry, used to increase asset, expense, and dividend accounts, and to decrease liability, owner's equity, and revenue accounts. Mnemonic: DEA (Debit = Expenses, Assets).

Front

What does Credit (Cr) mean?

Back

The right side of an accounting entry, used to increase liability, owner's equity, and revenue accounts, and to decrease asset, expense, and dividend accounts. Mnemonic: LOR (Credit = Liabilities, Owner's Equity, Revenue).

Front

What is a Ledger?

Back

A book or electronic file containing all the accounts of a business with the increases and decreases in each account shown as debits and credits. Think of it as a collection of individual account records.

Front

What is a Trial Balance?

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A list of all the accounts in the ledger with their balances at a specific point in time, used to prove that the total debits equal the total credits. It's an accuracy check before preparing financial statements.

Front

What is Revenue?

Back

The income generated from the normal business operations, such as the sale of goods or services. Example: Sales revenue, service revenue.

Front

What is an Expense?

Back

The costs incurred in the process of earning revenue. Example: Salaries expense, rent expense, utilities expense.

Front

What is an Asset?

Back

Something a business owns or controls that has future economic benefit. Example: Cash, accounts receivable (money owed by customers), equipment.

Front

What is a Liability?

Back

Something a business owes to others. Example: Accounts payable (money owed to suppliers), loans payable.