![]() ![]() Every transaction creates a corresponding set of debit and credit entries in a specific journal. The accounting products have General, Disbursements, Receipts, Sales, Purchases, and Purchases journals. Journals: Account ledgers where entries are recorded. Gross Profit: Represents your revenue from sales of inventory or services, less Cost of Goods Sold, before overhead expenses. In the accounting products, when you enter any transaction, the General Ledger accounts are automatically updated. General Ledger: An accounting record where all of your accounts are maintained. Every accounting transaction is comprised of debits that equal credits.Įquity (Capital): The owner's interest in the business, which is the total assets minus the total liabilities of a company, seen on the balance sheet and represented in as 3-xxxx accounts in your Chart of Accounts.Įxpenses: Costs incurred in the business used to generate revenue, seen on the Profit and Loss report and represented in your Chart of Accounts as 6-xxxx accounts. This is typically a liability account.ĭouble Entry Accounting: The accounting products follow the convention of Double Entry Accounting. For more information please see this article.ĭeferred Revenue: Represents income received, but not yet earned. Credits and debits affect accounts in different ways depending on what type of account is being used. ![]() For more information please see this article.Ĭurrent Year Earnings: This account represents year to date earnings, not yet recorded into the Retained Earnings account.ĭebit: When we are talking about debits in relation to double-entry accounting - we are talking about one half of a transaction (the other side being a credit). Seen on the Profit and Loss and represented as 5-xxxx accounts in your Chart of Accounts.Ĭredit: When we are talking about credits in relation to double-entry accounting - we are talking about one half of a transaction (the other side being a debit). Then they are passed over to the COGS (5-xxxx) account. ![]() These costs are kept in the Inventory asset account (1-xxxx) until they are sold. Cash received is recorded as income when received and expenses are recorded when paid.Ĭhart of Accounts: A list of categories or accounts where transactions are recorded.Ĭost of Goods Sold (COGS): Represents the cost of items or services sold to customers. In this environment, you do not track receivables and payables. Entries do not affect your financial statements until cash changes hands. For example, salaries earned by your employees and paid in a subsequent month are accrued as a liability until they are paid.Īccrued Revenue: Represents revenue that is earned and recorded but not yet received in the form of cash.Īsset: The things a company owns, seen on the Balance Sheet and represented as 1-xxxx accounts in your Chart of Accounts.īalance Sheet: The primary financial statement that shows detailed assets, liabilities and equity at a point in time.Ĭash Based Accounting: Represents a method of recording accounting transactions most easily described as accounting for cash transactions. The accounting software uses an Accrual based accounting system.Īccrued Liabilities: Represents expenses that are incurred prior to being paid. Accounts Payable: Money or other obligations owed to creditors for services and materials, a Liability on the Balance Sheet.Īccounts Receivable: Money or other obligations due for services rendered or items sold on terms, an Asset on the Balance Sheet.Īccrual Based Accounting: Represents a method of recording accounting transactions when they occur, whether or not cash has changed hands.
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