The method of recording transaction in which each is entered in two or more accounts (Credits and Debits) and has a two-way balance. a. Total debits MUST equal total credits. b. Credit – An entry on the RIGHT side of a double-entry accounting system. This represents reducing an asset of expense OR increasing a liability or revenue. i. Examples – Increasing: Gains, Income, Revenues, Liabilities and Stockholders’ Equity. ii. Examples – Decreasing: Assets and Expenses. c. Debit - An entry on the LEFT side of a double-entry accounting system. This represents increasing an asset of expense OR decreasing a liability or revenue. i. Examples – Decreasing: Gains, Income, Revenues, Liabilities and Stockholders’ Equity. ii. Examples – Increasing: Assets and Expenses.

The recording and reporting of financial transactions, including when you paid or received, what it refers to, processing and providing a statement (summary).

The amount of money you owe to your supplier after using and/or being delivered their goods or services. (The opposite of Accounts Receivable) For Example – A restaurant receives $1,350 worth of Coca-Cola from their vendor. The vendor gives them 45 days to pay for the drinks. The restaurant’s inventory and Accounts Payable will increase by $1,350. Once the amount is paid, the Accounts Payable and Cash will decrease by $1,350.

The amount of money owed by a customer after they have used and/or delivered your goods or services. a. Example – A company sells $100 in rubber bands and gives the buyer 30 days to pay for the rubber bands. This will decrease the inventory by $100 and increase the Accounts Receivable by $100. Once the 30 days have passed and the buyer pays, your cash will increase by $100 and the Accounts Receivable will decrease by $100.

The method of accounting that recognizes revenue when earned, rather than when collected and expenses when incurred (subject to) rather than when paid.

Provides a summary of what the company owns (assets), what it owes (liabilities) and the value of the business stockholders (shareholder’s equity) at any given time. a. The sheet should always be balanced, hint the name. The company will always have to pay for the assets in possession by either borrowing money (liabilities) or receiving it from its’ shareholders (equity). b. Asset – Generally, this is property owned by the company that has value and meets debts or commitments. There are two types of Assets: Current Assets and Long-Term Assets i. Current Asset – Assets that can be made into cash OR sold or consumed within a year or less. 1. Examples – Cash, short-term investments, accounts receivable, notes receivable, inventory and prepaid expenses. ii. Long-Term Assets – Assets that CANNOT be made into cash OR sold or consumed within a year or less. 1. Examples – Investments, fixed assets (properties that have a useful life of longer than one year), other assets and intangible assets (patents, franchises, copyrights, goodwill, trademarks, organization costs).

the amount brought over from the previous accounting period

an accounting year that ends on December 31st

A reference to stockholders equity. This is the initial investment used to start a business by its owners

A current asset account that includes currency, checking accounts, and undeposited checks from customers.

A list of accounts used to define each type of item for which money or the equivalent is spent or received. a. Examples – Assets (Cash, Checking Accounts, Savings), Liabilities (Accounts Payable, Notes Payable, Sales Tax Payable), Revenue ( Sales, Services), Expenses (Advertising, Insurance, Travel, Rent, Repairs, Supplies, etc.)

An account in which the balance is the opposite of a normal balance. Ex. Accumulated depreciation, an asset account, which carries a credit balance.

The price or the amount of the items you have purchased for resale or for production of an item. Below is an example: The owner of a 'Mom & Pop' store buys beer and sodas from a vendor in order to sell in his store. The price he pays for the product is considered the COGS, and that is the amount that would be recorded in the COGS account.

The difference between assets and liabilities. Such as owners equity and stockholders equity

These are the day-to-day costs that a business incurs in the course of its operations.

A 12-month period chosen by a business as its accounting period/cycle period which may or may not be a calendar year. For Example – The Fiscal year of TaxSlayer runs from October to September.

These are assets that can not be moved. Property, plant and equipment. Fixed assets beside land are depreciated

The collection of all assets, liabilities, revenue and expense accounts.

The revenue from goods or services sold

The recording of transactions by debiting and crediting accounts in the general ledger. a. All entries must equal zero; debits MUST equal credits.

These are the amounts owed to lenders and suppliers.

These are long term assets that are not classified as investments, property, plant, equipment. Ex. Cars, cash in the bank, securities.

This is the income generated from non regular business activity.

cost associated with payroll, such as wages or salaries payable.

see Payroll Expense above