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event

A happening of consequence. Generally is the source or cause of changes in assets, liabilities and equity. May be external or internal

Transaction

An external event involving a transfer or exchange between two or more entities

Account

A systematic arrangement that shows the effect of transactions and other events. Companies keep seperate for each asset, liability, revenue and expense and for capital.

Real and nominal Accounts

Real (Permanant) accounts are asset, liability and equity accounts; they appear on the balance sheet. Nominal (temporary) accounts are revenue, expense and dividend accounts; except for dividends, they appear on the income statement. Companies periodically nominal accounts but dont close real accounts

Ledger

The book containing the accounts

Journal

The book of original entry where the company initially records transactions

Posting

The process of transferring the essential facts and figures from the book of original entry to the ledger accounts

Trial Balance

The list of all open accounts in the ledger and their balances taken immediately after all adjustments have been posted is called an adjusted trial balance.

Adjusting Entries

Entries made at the end of an accounting period to bring all accounts up to date on an accrual basis

Accrual Basis

A method of accounting in which each item is entered as it is earned or incurred regardless of when actual payments are received or made

Financial Statements

Includes balance sheet, income statement, statement of cash flow and statement of retained earnings

Closing Entries

Formal process by which the enterprise reduces all nominal accounts

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