Key Terms

• Accounts 


  Financial records, where business transactions are entered
• Ledger


  The set of accounts of a business
• Assets


  Items owned by a business
• Liabilities


  Items owed by a business
• Capital/Equity


  The amount of the owner's/shareholders' stake in the business
• Trade Receivables


  Individuals or businesses who owe money in respect of goods or services supplied by the business
• Trade Payables


  Individuals or businesses to whom money is owed by the business
• Purchases


  Goods bought, either on credit or by cash, which are intended to be resold or used in production
• Credit Purchases


  Goods bought, with payment to be made at a later date
• Cash Purchases


  Goods bought and paid for immediately
• Sales


  The sale of goods, whether on credit or for cash, in which the business trades
• Credit Sales


  Goods sold, with payment to be received at an agreed date in the future
• Cash Sales


  Goods sold, with immediate payment received
• Sales Revenue


  The total of sales, both cash and credit, for a particular time period
• Profit/loss


  The profit or loss made by a business from selling goods or services in a particular time period
• Expenses


  The costs of running the business
• Trial Balance


  List of the balances of all the double-entry accounts from the general ledger
• Ledger Accounts


  Where double-entry bookkeeping transactions are recorded
• Debit Entry


  The account which gains value, or records an asset or an expense
• Credit Entry


  The account which gives value, or records a liability, or an income item
• Capital


  The amount of money invested in the business by the owner
• Non-Current Asset


  Item purchased by a business for use on a semi-permanent basis
• Capital Expenditure


  The purchase of non-current assets for use by the business
• Revenue Expenditure


  The expenses incurred in the day-to-day running of the business
• Drawings


  Money taken from the business by the owner in cash or from the bank for personal use
• Purchases Account


  Used to record the purchase of the goods in which the business trades
• Sales Account


  Used to record the sale of the goods in which the business trades
• Credit Purchases


  Goods bought, with payment to be made at a later date
• Credit Sales


  Goods sold, with payment to be received at a later date
• Purchases Returns


  Where a business returns goods to a supplier
• Sales Returns


  Where a customer returns goods to the business
• Carriage In


  The cost of carriage paid on purchases
• Carriage Out


  The coast of carriage paid on sales
• Prompt Payment Discount


  An allowance off the invoice amount for quick payment
• Discounts Allowed


  Prompt payment discount allowed to customers
• Discounts Received


  Prompt payment discount received from suppliers
• Balance of Account


  The total amount of the account to date
• Control Account


  Summary account which records the totals of entries to a particular set of accounts
• Trial Balance


  List of the balances of every account from the general ledger setting out debit balances and credit balances in separate columns
• Error of Principle


  Transaction entered in the wrong type of account