Accounting Definitions

GAAP- generally accepted accounting principles

Basic Accounting formula- The relationship between income, expenses, and the ownership of a company. Income should equal the amount of expenses plus what an owner puts up for a business.

Transaction, t-account- A visual aid used by accountants to illustrate a journal entry's effect on the general ledger accounts. Debit amounts are entered on the left side of the "T" and credit amounts are entered on the right side.

General Ledger- That part of the accounting system which contains the balance sheet and income statement accounts used for recording transactions.

Debit- The accounting term that means an entry will be made on the left side of an account.

Credit- To enter an amount on the right side of an account. Normal entries to revenue accounts are credits. Liabilities normally have credit balances.

Account balance- the remaining amount owed after bills are paid out.

Trial balance- A listing of the accounts in the general ledger along with each account's balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the credit column.

Journal- The book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the designated accounts in the general ledger.

Assets- Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land, buildings, equipment, and vehicles.

Liabilities- Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word "payable" in the account title. Liabilities also include amounts received in advance for a future