Accounting glossary

The words of bookkeeping, one at a time. Each page says what a term means, gives a small example, and leads to the terms it goes with.

• AccountAn account is a named place where the business keeps one kind of figure: Cash, Sales, Rent expense, Bank loan.
• Accounting equationThe accounting equation says Assets = Liabilities + Equity: what the business has is paid for by what it owes plus what its owners put in.
• Accounts payableAccounts payable is what the business owes its suppliers for purchases made on credit.
• Accounts receivableAccounts receivable is the money customers owe the business for sales made on credit.
• AssetAssets are what the business owns or is owed and can use: cash, bank balances, stock, equipment, money customers owe.
• Balance sheetThe balance sheet is a photograph of the business on one date: what it owns (assets) on one side, and on the other what it owes (liabilities) and what the owners have in it (equity).
• Chart of accountsThe chart of accounts is the organised list of every account a business uses, grouped under assets, liabilities, equity, income and expenses.
• CreditCredit is the right side of an account and of an entry.
• CurrencyThe currency is the money the books are kept in, chosen when the company is opened, written as three letters: USD, EUR, HNL.
• DebitDebit is the left side of an account and of an entry.
• Double entryDouble entry means every event is recorded twice, in equal amounts: once as a debit and once as a credit.
• EntryAn entry is one event recorded in the books: a date, a concept, and at least two lines, with total debits equal to total credits.
• EquityEquity is the owners' share of the business: what is left of the assets once the liabilities are paid.
• ExpenseExpenses are what the business spends to operate: rent, wages, supplies, electricity.
• Fiscal yearThe fiscal year is the twelve months over which a business measures its results and then closes its books.
• General ledgerThe general ledger gathers the lines of all entries account by account, so you can see everything that happened in one account and its balance after each movement.
• Group accountA group account only adds up the accounts hung under it; you never record an entry in a group itself.
• IncomeIncome is what the business earns from its activity: sales, fees, interest received.
• Income statementThe income statement shows what the business earned and what it spent over a period, and the difference: the profit or the loss.
• JournalA journal is a subdivision of the journal book kept for one kind of entry: sales, purchases, bank, cash, opening balances.
• Journal bookThe journal book is where every entry is written first, in the order it happened, with its date, its accounts, its debit and credit amounts and its concept.
• LiabilityLiabilities are what the business owes to others: loans, suppliers waiting to be paid, taxes due, wages owed.
• Normal balanceThe normal balance is the side where an account usually grows: assets and expenses grow on the debit side, liabilities, equity and income on the credit side.
• Opening balanceAn opening balance is what an account already held on the day you start keeping the books in Aconta Online: cash in the till, money in the bank, debts owed.
• PeriodA period is one month of a fiscal year.
• Posting to the ledgerPosting is copying each line of an entry from the journal book to the account it names in the general ledger, so each account gathers all its movements.
• Retained earningsRetained earnings are the profits the business has kept instead of paying them out to its owners, added up year after year.
• ReversalA reversal is the entry that exactly undoes another: the same accounts, each amount on the opposite side.
• Trial balanceThe trial balance lists every account with its sums and its balance and checks that the total of the debits equals the total of the credits.
• Year-end closingClosing the year empties every income and expense account into retained earnings with a single entry, so the next year starts those accounts at zero while the profit or loss joins equity.