Trial Balance definitions Flashcards
Trial Balance definitions
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T Account Visual tool shaped like a 'T' used to organize and summarize all debits and credits for a specific account. Debit Entry on the left side of a T account, typically increasing assets or expenses and decreasing liabilities or equity. Credit Entry on the right side of a T account, usually increasing liabilities, equity, or revenue and decreasing assets. Trial Balance List of all accounts and their final balances at a specific time, used to verify that total debits equal total credits. Unadjusted Trial Balance Initial listing of account balances before any adjusting entries, serving as a starting point for financial statement preparation. Adjusted Trial Balance Updated list of account balances after adjusting entries, ensuring accuracy before preparing financial statements. Asset Resource owned by a business, such as cash, supplies, or land, expected to provide future economic benefit. Liability Obligation or debt owed by a business to outsiders, such as accounts payable, requiring future payment. Equity Owner's residual interest in the business after liabilities are subtracted from assets. Revenue Income earned from normal business operations, increasing equity through sales or services provided. Expense Cost incurred in the process of earning revenue, reducing equity in the business. Common Stock Form of equity representing ownership shares issued to investors in exchange for capital. Dividends Distributions of earnings to shareholders, reducing retained earnings and overall equity. Accounts Payable Short-term liability representing amounts owed to suppliers for goods or services received on credit. Accounts Receivable Asset representing amounts owed to the business by customers for goods or services delivered on credit.
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