Accounting information Essay

Submitted By kwain2
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Pages: 3
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Booklet 2:
 Journal: a book of original entry that records the effects if business transactions
 Ledger: a book where individual accounts are categorised into groups
 Trial balance: a list of all names of the accounts in the ledger and the balances of these accounts at a particular point of time
 Asset: items of value owned by the business
 Liability: amounts owed by a business
 Owner’s Equity: value of the owners investment in the business, and therefore the amount that the business owes back to the owner
 Expense: costs incurred by a business
 Revenue: income earned by a business
 Capital: name of the account used to record the owner’s contribution to a business
 Drawings: name of the account used to record the amount of assets that the owner withdraws from a business for personal use
 Balance:
 Inventories:
 Cost of goods sold:
 Double entry system: states that for every transaction there is a debit (DR) entry and a corresponding credit (CR) entry of equal value
 Transaction analysis table: the process used to break down a transaction into its debit and credit parts
 Narration:
 Chart of accounts:
 Pencil balancing: the working balance of each account in a T-format ledger
 Accounts receivable: the account used to record when a credit customer owes the business money/stock/inventories
 Accounts payable: the account used to record when the business owes a credit customer/business money/stock/inventories
 Retail business: a type of business that sells goods/stock/inventories to customers in order to make a profit. Eg. Woolworths, Big W, Target etc.
 Service business: a type of business that provides services to customers in order to make a profit. Eg. Accountant, Physiotherapy, podiatrist etc.
 There are many effects of a business transaction on the accounting equation. When a transaction occurs, this is recorded directly onto the source documents. This information is then placed into the general journal, then posted to the ledger. These are then pencil balanced before being placed onto a trial balance where total debits should equal total debits.
 The transaction analysis table is the record of all the transactions that have taken place in a certain period of time. It breaks down the transaction into its debit and credit parts. It also shows the nature and therefore the increase or decrease of a particular account. It is only the thinking
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