Accounting Fact-orials Definitions

Account

The thing being affected by a financial transaction. For example, if I receive $100, that means that my Cash Account has increased (debited) by $100.

Accrual Accounting

A method of accounting where transactions are recorded based on the Revenue Recognition and Matching Principles. 

Asset

Things a financial organization owns, such as cash, inventory, land, and buildings.

Cash Accounting

A method of accounting where transactions are recorded based on the receipt and payment of cash.

Credit

The right side of a T account.

Debit

The left side of a T account.

Equity

The financial value of a financial organization. This equals the Assets - Liabilities. Accounts within this category are New Equity, Stock, and Retained Earnings.

Expense

Value paid in order to earn Income. Accounts can include Salaries, Utilities, and Taxes.

Financial Entity

Any person, group, or organization upon which the financial position and activity is reported, separated from the activity of any other owners or other financial entities. 

 General Journal

The journal where all transactions are listed. Entries in this journal are then recorded in each individual journal.

Income

Valued earned by a financial organization earned in the ordinary course of business. Accounts can include Sales, and Returns.

Journal

The list of transactions related to a particular account.

Liability

Things a financial organization owes, such as debts and loans.

Matching Principle

An accounting principle that states that expenses should be recorded only when the associated income has been earned.

Revenue Recognition Principle

An accounting principle that states that revenue/income should be recorded based on when it's earned, regardless of when cash is received.

T Account

A simplified journal in the shape of a T that lists out transactions.