CSEC POA key terms

A system where every transaction is recorded in at least two accounts, with equal debits and credits, so that the accounting equation stays balanced at all times.

The relationship stating that assets equal liabilities plus capital. Every transaction changes at least two elements while keeping this equality intact.

The owner's claim on the business, calculated as assets minus liabilities. It increases with profit and additional investment and decreases with drawings and losses.

Money or goods taken from the business by the owner for personal use. Drawings reduce capital and are not treated as a business expense.

Resources owned or controlled by the business that are expected to bring future benefit, such as cash, inventory, equipment and amounts owed by customers.

Amounts the business owes to outsiders, such as bank loans, unpaid supplier invoices and accrued expenses. They represent claims against the business's assets.

The left-hand side of a ledger account. Debits increase assets and expenses and decrease liabilities, capital and income.

The right-hand side of a ledger account. Credits increase liabilities, capital and income and decrease assets and expenses.

The original paperwork proving a transaction occurred, such as an invoice, receipt, credit note or cheque stub. It provides the evidence used to make the bookkeeping entry.

The daybooks in which transactions are first written from source documents before posting to the ledger, namely sales, purchases, returns, cash book and the general journal.

A book of original entry listing credit sales only, recorded from copies of sales invoices and posted periodically to the sales ledger and general ledger.

A book of original entry recording credit purchases of goods for resale, taken from suppliers' invoices and later posted to the purchases account and individual supplier accounts.

A book of original entry recording goods returned to suppliers, supported by debit notes. It reduces purchases and reduces the amount owed to each supplier.

A book of original entry recording goods returned by customers, supported by credit notes. It reduces sales and reduces the amount each customer owes.

A book of original entry used for transactions that do not fit the other daybooks, such as opening entries, corrections of errors and purchase of fixed assets on credit.

The set of accounts where transactions are classified and summarised, comprising the sales ledger, purchases ledger and general ledger.

Customers who owe the business money for goods or services supplied on credit. Their individual balances appear in the sales ledger.

Suppliers to whom the business owes money for goods or services bought on credit. Their individual balances appear in the purchases ledger.

An offset between the same person's account in the sales ledger and purchases ledger, cancelling amounts owed in both directions without any cash changing hands.

A list of all ledger balances at a given date, with debits in one column and credits in another, used to check that total debits equal total credits.

A temporary account opened to hold the difference when a trial balance does not balance. Its balance is cleared once the underlying errors are found and corrected.

A mistake where an entry is made in the wrong class of account, for example treating a fixed asset purchase as a normal expense. It does not affect trial balance agreement.

A mistake where an entry is made in the correct class of account but the wrong individual account, such as debiting the wrong customer. It does not disturb trial balance totals.

A mistake where the wrong amount is entered in both the debit and credit accounts, so the trial balance still agrees even though the ledger figures are incorrect.

Two or more separate errors whose effects cancel each other out, so the trial balance still balances even though individual account balances are wrong.

A statement explaining the difference between the bank balance shown in the cash book and the balance on the bank statement, by listing unpresented cheques, uncredited deposits and bank charges.

A cheque the bank refuses to pay, often because of insufficient funds. The original receipt entry must be reversed and the customer's account reinstated as owing.

Expenses that have been incurred during the period but not yet paid or invoiced. They are added to the expense in the income statement and shown as a current liability.

Amounts paid in one period that relate to a later period. The unused portion is removed from the expense and shown as a current asset.

An estimate of the amount owed by customers that may never be collected. It is charged as an expense and deducted from trade receivables in the statement of financial position.

The systematic allocation of the cost of a non-current asset over its useful life, reflecting wear and tear, obsolescence or passage of time.

A depreciation method charging an equal amount each year, calculated as cost minus residual value, divided by the number of years of expected useful life.

A depreciation method applying a fixed percentage to the asset's carrying amount each year, giving larger charges early in the asset's life and smaller charges later.

The section of a partnership's income statement showing how profit is shared among partners after interest on capital, partners' salaries and interest on drawings.

An amount credited to each partner based on their capital balance, rewarding larger investments. It is an appropriation of profit, not an expense of the business.

In a partnership, the account recording each partner's share of profits, drawings, interest on capital and salary. Its balance moves up and down and is not fixed capital.

The value of a business's reputation, customer base and location beyond its net assets. On admission or retirement of a partner it is often raised and then written off among partners.

The amount received on issuing shares above their nominal value. It is shown in the equity section of a company's statement of financial position and is not profit.

The main class of company shares, whose holders receive dividends only after preference dividends and whose voting rights and dividend amounts vary with profits.

A long-term loan to a company, usually carrying a fixed rate of interest that must be paid whether or not the company makes a profit.

The amount members of a club or society pay periodically to remain members. It is income of the organisation and is matched to the period it relates to.

A summary of money actually received and paid during a period, prepared by non-profit organisations. It is a cash record, not an income statement.

The equivalent of an income statement for a non-profit organisation, matching income earned with expenses incurred for the period to show a surplus or deficit.

The equivalent of capital for a non-profit organisation, being total assets minus total liabilities. It increases with a surplus and decreases with a deficit.