Journal Entries: Debits and Credits definitions Flashcards
Journal Entries: Debits and Credits definitions
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Transaction An event involving the exchange of value between accounts, impacting at least two accounts in the accounting records. Debit An entry on the left side of an account, used to increase assets and expenses or decrease liabilities, equity, and revenue. Credit An entry on the right side of an account, used to increase liabilities, equity, and revenue or decrease assets and expenses. Asset A resource owned by a company, such as cash or land, that provides future economic benefit. Liability An obligation or debt owed by a company to outsiders, representing claims against assets. Equity The residual interest in the assets of a company after deducting liabilities; represents ownership. Revenue Income earned from the sale of goods or services, increasing equity through credits. Expense Costs incurred in the process of earning revenue, decreasing equity and increased by debits. Account A record used to track increases and decreases in specific assets, liabilities, equity, revenue, or expenses. Accounts Receivable A type of asset representing amounts owed to a company by customers for goods or services provided. Accounts Payable A liability account showing amounts a company owes to suppliers or creditors for purchases made on credit. Retained Earnings Cumulative net income of a company that has been kept rather than distributed to shareholders. Investment Account An account used to record the value of investments held by a company, such as stocks or bonds. Journal Entry A formal record of a transaction, showing which accounts are debited and credited and by what amounts. Double-Entry System An accounting method where every transaction affects at least two accounts, ensuring debits equal credits.
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