Understanding Financial Terms and Statements

School: American InterContinental University - Course: ACC 101 - Subject: Accounting

Chapter 2 Key Terms Define the following key terms: 1.Balance sheet - A financial statement showing the financial position of an organization on a given date, such as June 30 or December 31. The balance sheet lists the balances in the asset, liability, and owner's equity accounts. 2.Compound entry -A transaction that requires more than one debit or more than one credit to be recorded. 3.Credit -The right side of a T account; to credit is to record an amount on the right side of a T account. Credits represent increases in liability, capital, or revenue accounts and decreases in asset, drawing, or expense accounts. 4.Debit -The left side of a T account; to debit is to record an amount on the left side of a T account. Debits represent increases in asset, drawing, or expense accounts and decreases in liability, capital, or revenue accounts. 5.Financial position - The resources or assets owned by an organization at a point in time, offset by the claims against those resources and owner's equity; shown on a balance sheet. 6.Financial statement - A report prepared by accountants that summarizes the financial affairs of a business. 7.Footing -The totals of each side of a T account.

8.Income Statement -A financial statement showing the results of business transactions involving revenue and expense accounts over a period of time. 9.Net income - The result when total revenue exceeds total expenses over a period of time. 10.Net loss - The result when total expenses exceed total revenue over a period of time. 11.Normal balance -The result when total expenses exceed total revenue over a period of time. 12.Report form -The form of the balance sheet in which assets are placed at the top and liabilities and owner's equity are placed below. 13.Slide -An error in placing the decimal point in a number. 14.Statement of Owner's Equity - A financial statement showing the activity in the owner's equity, or Capital account, over the financial period. 15.T account form - A form of account shaped like the letterTin which increases and decreases in the account may be recorded. One side of theTis for entries on the debit or left side. The other side of theTis for entries on the credit or right side. 16.Transposition -An error that involves interchanging, or switching around, digits during the recording of a number.