Account
An accounting form used to record the increases and decreases in each financial statement item.
Balance of the account
The amount of the difference between the debits and the credits that have been entered into an account.
Capital account
An account used for a proprietorship that represents the owner’s equity.
Chart of accounts
A list of the accounts in the ledger.
Correcting journal entry
An entry that is prepared to correct an error to an entry that has already been journalized and posted.
Credit
Amount entered on the right side of an account.
Debit
Amount entered on the left side of an account.
Double-entry accounting system
A system of accounting for recording transactions, based on recording increases and decreases in accounts so that debits equal credits.
Drawing account
The account used to record amounts with-drawn by an owner of a proprietorship.
Four-column account
A form of account that has Debit and Credit columns for recording transactions as well as Balance (Debit and Credit) columns for indicating the account balance after each transaction.
Horizontal analysis
Financial analysis that compares an item in a current statement with the same item in prior statements in terms of the amount and percentage of change.
Journal
The initial record in which the effects of a transaction are recorded.
Journal entry
The record of a transaction entered in a journal, made up of at least one debit and one credit.
Journalizing
The process of recording a transaction in a journal.
Ledger
A group of accounts for a business.
Normal balance of an account
The side of an account (debit or credit) in which the balance normally appears based on the type of account and whether it is increased by debits or credits.
Posting
The process of transferring the debits and credits from the journal entries to the accounts.
Rules of debit and credit
In the double-entry accounting system, specific rules for recording debits and credits based on the type of account.
T account
The simplest form of account that has a framework resembling the letter T and consists of an account title, a debit side, and a credit side.
Trial balance
A summary listing of the titles and balances of accounts in the ledger, which is used to verify that debits equal credits.
Two-column journal
A form of journal in which there are only two amount columns, one for debits and one for credits.
Unadjusted trial balance
A trial balance prepared at the end of an accounting period before adjusting entries are made.
Unearned revenue
The liability created by receiving a cash payment in advance of providing a service.
