Compound Entry

A general journal entry that affects more than two accounts.

Chart Of Accounts

A list of all accounts used by a business.

Book Of Original Entry

The journal or the first formal accounting record of a transaction.

Correcting Entry

An entry to correct an incorrect entry that has been journalized and posted to the wrong account.

Cross-Reference

The information in the Posting Reference columns of the journal and ledger that provides a link between the journal and ledger.

General Ledger

 A complete set of all the accounts used by a business.  The general ledger accumulates a complete record of the debits and credits made to each account as a result of entries made in the journal.

General Ledger Account

An account with columns for the debit or credit transaction and columns for the debit or credit running balance.

Journal

A day-by-day listing of the transactions of a business.

Journalizing

Entering the transactions in a journal.

Posting

Copying the debits and credits from the journal to the ledger accounts.

Ruling Method

A method of correcting an entry in which a line is drawn through the error and the correct information is placed above it.

Slide Error

An error that occurs when debit or credit amounts "slide" a digit or two to the left or right.

Source Document

Any document that provides information about a business transaction.

Transposition Error

An error that occurs when two digits are reversed.

Trial Balance

A list used to prove that the totals of the debit and credit balances in the ledger accounts are equal.

Two-Column General Journal

A journal with only two amount columns, one for debit amounts and one for credit amounts.

Accrual Basis of Accounting

A method of accounting under which revenues are recorded when earned and expenses are recorded when incurred.

Adjusted Trial Balance Columns

 The third pair of amount columns on the work sheet.  They are used to prove the equality of the debits and credits in the general ledger accounts after making all end-of-period adjustments.

Adjusting Entries

Journal entries made at the end of an accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party.

Balance Sheet Columns

The work sheet columns that show the amounts that will be reported in the balance sheet and the statement of owner's equity.

Book Value

The difference between the asset account and its related accumulated depreciation account.  The value reflected by the accounting records.

Cash Basis of Accounting

A method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid.

Contra-Asset

An account with a credit balance that is deducted from the related asset account on the balance sheet.

Depreciable Cost

The cost of an asset that is subject to depreciation.

Depreciation

A method of matching an asset's original cost against the revenues produced over its useful life.

Fiscal Year

A 12-moth period for which financial reports are prepared.  (DIFFERENT from a Calendar Year)

Historical Cost Principle

A principle that requires assets to be recorded at their actual cost.

Income Statement Columns

The work sheet columns that show the amounts that will be reported in the income statement.

Market Value

The amount an item can be sold for under normal economic conditions. 

 Matching Principle

A principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce revenues.

Modified Cash Basis

A method of accounting that combines aspects of the cash and accrual methods.  It uses the cash basis for recording revenues and most expenses.  Exceptions are made when cash is paid for assets with useful lives greater than one accounting period.

Plant Assets

Assets of a durable nature that will be used for operations over several years.  Examples include buildings and equipment.

Salvage Value

The expected market value of an asset at the end of its useful life.

Straight-Line Method

The depreciation method in which the depreciable cost is divided by the estimated useful life.

Undepreciated Cost

The difference between the asset account and its related accumulated depreciation account.  Also known as book value.

Useful Life

The period of time that an asset is expected to help produce revenues.

Work Sheet

A form used to pull together all of the information needed to enter adjusting entries and prepare the financial statement.