The Accounting Cycle: Journalizing, Posting and Trial Balance: every key term you need (+ practice quiz)
25 flashcard terms for Financial Accounting Topic 2, written to match the course framework. Study them here, then drill them as interactive flashcards, or test yourself with the 15-question quiz — free, no account needed.
Every transaction is recorded in at least two accounts so that total debits equal total credits. The design makes the accounting equation self-checking and exposes many recording mistakes.
Debit
An entry on the left side of an account. Debits increase assets, expenses and dividends and decrease liabilities, equity and revenues. The word carries no sense of good or bad.
Credit
An entry on the right side of an account. Credits increase liabilities, equity and revenues and decrease assets, expenses and dividends. It does not mean money was received.
Normal balance
The side on which an account is expected to sit, matching the side that increases it. Assets and expenses normally hold debit balances; liabilities, equity and revenues normally hold credit balances.
T-account
A teaching shorthand for a ledger account drawn as a letter T, with the account title on top, debits entered on the left and credits on the right. Useful for quickly netting a balance.
Chart of accounts
The numbered list of every account the entity uses, grouped by element so that assets, liabilities, equity, revenues and expenses fall into predictable numeric ranges for sorting and reporting.
Source document
The underlying paperwork or electronic record such as an invoice, bank advice or time card that evidences a transaction. It supplies the objective amount and date used in the entry.
Transaction analysis
The disciplined routine of asking which accounts changed, whether each rose or fell, and which side of the account records that direction before any entry is written down.
Journal entry
The dated record of one transaction showing accounts debited first, accounts credited indented below, amounts in both columns, and a short explanation of the underlying event.
General journal
The book of original entry where transactions are recorded chronologically before being transferred to accounts. It preserves the complete story of each event in one place.
Compound journal entry
An entry touching three or more accounts, such as buying equipment partly for cash and partly on a note. Total debits must still equal total credits within the single entry.
Posting
Transferring the debit and credit amounts from the journal into the individual ledger accounts. Posting rearranges data by account without changing any amount that was journalized.
General ledger
The full collection of accounts with their running balances. It is organized by account rather than by date, which is what makes preparing statements practical.
Subsidiary ledger
A supporting file holding the detail behind one summary account, such as the balance owed by each individual customer. Its total must agree with the summary balance in the main ledger.
Control account
The general ledger account whose balance equals the sum of a subsidiary ledger, most commonly the total receivable or total payable. Any disagreement signals a posting error.
Trial balance
A list of every ledger account balance with debits in one column and credits in another, prepared to confirm the columns agree before adjustments and statements are attempted.
Transposition error
Digits recorded in the wrong order, such as writing 540 instead of 450. The resulting column difference is always evenly divisible by nine, which helps locate it quickly.
Slide error
A decimal point shifted so an amount is recorded ten or a hundred times too large or small. Like a transposition, it leaves a difference divisible by nine.
Error of omission
A transaction never recorded at all, or an entry recorded to the wrong account for the correct amount. Neither type unbalances the trial balance, so both survive that check.
Correcting entry
A later entry that removes the wrong amounts and records the right ones, or simply reverses an incorrect entry. It leaves an audit trail rather than erasing the original record.
Permanent accounts
Balance sheet accounts whose balances carry forward into the next period. Cash, equipment, notes payable and retained earnings continue rather than restarting each year.
Temporary accounts
Revenue, expense and dividend accounts that measure one period only and are reduced to zero at year end so the next period starts fresh.
Closing entries
Year-end entries that transfer revenue, expense and dividend balances into retained earnings, zeroing the temporary accounts and updating the cumulative owner claim in one step.
Income Summary
An optional clearing account used during closing to collect revenues and expenses. Its balance before closing equals net income, and it is then transferred to retained earnings.
Post-closing trial balance
A final listing prepared after closing that contains only permanent accounts. Any revenue or expense line still showing a balance proves the closing process was incomplete.