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Unit 1: Introduction to Accounting

Self Assessment Notes

Fill in the blanks:
13. Accounts recording transactions with a person or group of persons are known as
…………………… .

14. An account recording transactions with an individual human being is termed as a
…………………… .
15. Accounts relating to properties or assets are known as …………………… .

16. Accounts relating to income, revenue, gain expenses and losses are termed as
…………………… .

1.6 Accounting Terminology

Account

An account is a record used to properly classify the activity recorded in the General Ledger.

Accounting

Accounting is recording and reporting of financial transactions, including the origination of the
transaction, its recognition, processing, and summarization in the financial statements.

Accrual Basis

Accrual basis is a method of accounting that recognizes revenue when earned, rather than when
collected and expenses when incurred rather than when paid. The college uses the accrual basis
for its accounting.

Asset

An asset is anything of use to future operations of business and belonging of an enterprise. An
asset is what the college owns. For example- land, property, buildings, equipment, cash in bank
accounts, other investments and accounts receivable.

Credit

A credit is an entry on the right side of a double-entry accounting system that represents the
reduction of an asset or expense or the addition to a liability or revenue.

Debit

A debit is an entry on the left side of a double-entry accounting system that represents the
addition of an asset or expense or the reduction to a liability or revenue.

Double-Entry Accounting

Double-entry accounting is a method of recording financial transactions in which each transaction
is entered in two or more accounts and involves two-way, self-balancing posting. Total debits
must equal total credits. The college uses this method of accounting.

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