Matching key accounting terms and definitions

As you may already know, the ability to recognize, understand and use accounting terms accurately in English is extremely important. Here is an exercise for you to test your understanding of key accounting terms

Your task
List of Terms
Answer key

Your task
Read through all of the following definitions of key accounting terms and try to come up with the matching term. The list of terms to choose from is provided at the end of the exercise. If you feel ready for more of a challenge do not look at the list of terms until you need to. Answers are provided.

Definitions

1. _______________ Assets equal liabilities plus owner's equity (A = L + OE)

2. _______________ A financial information system that includes accounting forms, records, instruction manuals, flow charts, programs, and reports to fit the particular need of the business.

3. _______________ Economic resources (things of value) owned by a business that are expected to benefit future operations.

4. _______________ A record used to summarize all increases and decreases in a particular asset, such as cash, or any other type of asset, liability, owner's equity, revenue, or expense.

5. _______________ The difference in dollars between the total debits and total credits in an account.

6. _______________ A financial statement that shows the financial position of a business entity by summarizing the assets, liabilities, and owner's equity at a specific date.
7. _______________ A listing of the ledger account titles and numbers being used by a given business.

8. _______________ An amount entered on the right-hand side of an account. It is used to record a decrease in an asset or to record an increase in a liability or owner's equity.

9. _______________ The balance of an account in which the total amount of credits exceeds the total amount of debits.

10. ______________ An amount entered on the left-hand side of an account. It is used to record an increase in an asset or to record a decrease in a liability or owner's equity.

11. _______________ The balance of an account in which the total amount of debits exceeds the total amount of credits.

12. _______________ An accounting system in which every transaction is recorded in two or more accounts with debits and credits of equal amount.

13. _______________ Debts or obligations of a business. The claims of creditors against the assets of a business.

14. ________________ Liabilities evidenced by a formal written promise to pay a certain amount of money plus interest at a future date. Usually arise from borrowing.

15. ________________ The excess of assets over liabilities. The amount of an owner's net investment in a business plus profits from successful operations that have been retained in the business.

List of Terms

Adapted from: Meigs, W.B., R.F. Heigs, and W.P. Lam. Accounting: The Basis for Business Decisions. Toronto: John Deyell Co., 1985.

Answer key

1. Accounting equation: Assets equal liabilities plus owner's equity.
   (A = L + OE)
2. Accounting system: A financial information system that includes accounting forms, records, instruction manuals, flow charts, programs, and reports to fit the particular need of the business.
3. Assets: Economic resources (things of value) owned by a business that are expected to benefit future operations.
4. Account: A record used to summarize all increases and decreases in a particular asset, such as Cash, or any other type of asset, liability, owner's equity, revenue, or expense.
5. Account balance: The difference in dollars between the total debits and total credits in an account.
6. Balance sheet: A financial statement that shows the financial position of a business entity by summarizing the assets, liabilities, and owner's equity at a specific date.
7. Chart of accounts: A listing of the ledger account titles and numbers being used by a given business.
8. Credit: An amount entered on the right-hand side of an account. It is used to record a decrease in an asset or to record an increase in a liability or owner's equity.
9. Credit balance: The balance of an account in which the total amount of credits exceeds the total amount of debits.
10. Debit: An amount entered on the left-hand side of an account. It is used to record an increase in an asset or to record a decrease in a liability or owner's equity.
11. Debit balance: The balance of an account in which the total amount of debits exceeds the total amount of credits.
12. Double-entry system: An accounting system in which every transaction is recorded in two or more accounts with debits and credits of equal amount.
13. Liabilities: Debts or obligations of a business. The claims of creditors against the assets of a business.
14. Notes payable: Liabilities evidenced by a formal written promise to pay a certain amount of money plus interest at a future date. Usually arise from borrowing.
15. Owner's equity: The excess of assets over liabilities. The amount of an owner's net investment in a business plus profits from successful operations that have been retained in the business.

Take a moment to reflect on this exercise. How did you do? What did you have difficulty with? What can you do to feel more comfortable with these terms?

Adapted from the Occupational Workshop for foreign-trained accountants, The STIC Project, 1998.

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