Bookkeeping lessons

Accounting glossary: the terms behind an explainable ledger

Keep the account, date, currency and source together. These definitions help you ask what a balance means and how it was recorded.

This glossary explains general bookkeeping and the project’s terminology. It is educational documentation, not a tax interpretation, professional review or claim that a planned module is available.

Account

An account is a named category used to collect transactions of the same financial kind, such as cash, rent expense or a loan. Its balance reflects the accumulated posted entries. In PHP Ledger, its stable identity matters separately from its display name.

Accrual

Accrual is the recognition of financial effects in the period to which they relate, rather than simply when cash changes hands. Applying it needs evidence and an appropriate accounting policy; a date field cannot decide when revenue has been earned.

Balance sheet

A balance sheet is a statement of financial position at a specified date, showing assets, liabilities and equity. It answers what the business holds and owes at that date. PHP Ledger position summaries are previews, not complete statutory statement packages.

Base currency

Base currency is the currency used to express a book’s accounting totals; the more precise term is functional currency. A transaction can use another currency. Its original amount and the recorded base amount must remain distinguishable in a multi-currency ledger.

Bank reconciliation

Bank reconciliation is the process of explaining differences between a bank statement and the business’s cash ledger. Timing differences can be valid, while missing bank charges may need a posting. Matching a statement line does not itself create an accounting entry.

Chart of accounts

A chart of accounts is the organised list of accounts a business uses to record and report its activity. Codes help people find accounts, but do not establish their meaning. Classification and reporting mappings need a deliberate accounting design.

Closing balance

A closing balance is the account balance after all included movements through the selected end date. It depends on the opening balance and the period’s debits and credits. Always retain the account, date range and currency alongside the number.

Control account

A control account is a general-ledger account representing a total supported by more detailed records, such as individual customer amounts. The detail should reconcile to that total. A free-text party name on a journal is not an open-item ledger.

Credit

A credit is an entry on the right-hand side of a traditional account. It normally increases liabilities, equity and income, and decreases assets and expenses. The word does not mean money received in every context; first identify whose books you are reading.

Cutover

Cutover is the controlled move from an earlier accounting record to a new ledger at an agreed date. It requires verified opening amounts and retained supporting schedules. Re-entering old unpaid invoices after posting their opening control balance can count the same amount twice.

Debit

A debit is an entry on the left-hand side of a traditional account. It normally increases assets and expenses and decreases liabilities, equity and income. Debit is a direction within an account, not a synonym for a loss or an undesirable transaction.

Double entry

Double entry is a recording method in which the debits and credits of each transaction are equal. A transaction can have more than two lines. Equality checks the relationship between recorded amounts, but does not establish that the underlying transaction is valid.

Drawings

Drawings are resources an owner takes from the business for personal use where that terminology fits the entity. They are not automatically operating expenses. The correct owner, partner or shareholder treatment depends on the legal entity and applicable policies.

Equity

Equity is the residual interest after liabilities are deducted from assets. Contributions, distributions and accumulated results affect it in different ways. Cash in the bank is only one asset, so it cannot by itself tell an owner what the business is worth.

Fiscal period

A fiscal period is a defined range of accounting dates used to organise transactions and reviews. A period may be a month, quarter or financial year. Its date boundaries are accounting choices and should not shift when a user changes display timezone.

General journal

A general journal is a flexible document for recording reviewed debit and credit lines that do not belong to a narrower transaction form. It does not remove the need for evidence. PHP Ledger separates saving its draft from posting the balanced entry.

Journal entry

A journal entry is a dated set of balanced debit and credit lines with a description and source reference. Once posted, it contributes to account balances. PHP Ledger retains the entry and uses linked corrections rather than allowing its posted amounts to be overwritten.

Ledger

A ledger is the organised record of posted account activity. It connects opening balances, period movements and closing balances to their source entries. A useful account ledger explains the total, not just the most recently displayed page of transactions.

Liability

A liability is an obligation of the business under the relevant accounting framework. Loans and unpaid supplier amounts are familiar examples, but classification requires context. Receiving money can create a liability rather than income, as when a lender advances funds.

Opening balance

An opening balance is the amount brought into the start of a record or reporting range. A report’s opening balance may be calculated from earlier postings. That calculation is different from confirming a reconciled opening trial balance when first installing a new ledger.

Period close

Period close is the review process used to make a period’s records ready for the required reporting. A software period lock is one control within that process. It does not prove that accruals, reconciliations, valuations, disclosures or tax obligations are complete.

Posting

Posting is the action that makes a reviewed document’s accounting effect part of the ledger. A saved draft has no such effect. PHP Ledger validates the posting as one transaction, so a failed operation should not leave half of its journal recorded.

Posting role

A posting role is a software meaning attached to an account, such as cash/bank or receivables, that lets a service select appropriate accounts. It is separate from the account code and name. Assigning a role does not activate a complete business module.

Profit and loss

Profit and loss is a report of income and expenses over a stated period. The resulting profit is not necessarily the change in cash. Unpaid transactions, asset purchases, borrowing and owner funding are examples of why those two amounts can differ.

Receipt

A receipt is a record of money received, or evidence of that receipt, depending on context. Before posting it, identify why the money arrived. A service payment, loan advance and owner contribution all increase cash but belong against different accounting categories.

Reversal

A reversal is a new entry that offsets an earlier posted entry while retaining the original. Its date and reason remain visible. A reversal explains a correction; it is not permission to delete history or to reopen a closed accounting period without authority.

Running balance

A running balance is the balance after each transaction in a defined order. Its starting amount must include earlier activity, even when the visible list is filtered or paginated. Consistent ordering matters when several entries share the same posting date.

Subledger

A subledger is detailed accounting information supporting a general-ledger balance, such as amounts outstanding against individual documents. The detail and control account must reconcile. PHP Ledger’s internal open-item foundation is not a finished customer invoicing or supplier-bill workflow.

Tender

Tender is the money or payment method offered to settle a sale. In a cash example, the amount handed over can exceed the sale and require change. A recorded tender does not establish support for card processing or an external payment provider.

Trial balance

A trial balance is a list of account balances that checks total debit balances against total credit balances. It can expose certain recording or extraction errors. Equal totals do not detect every omission, duplicated balanced entry or posting to the wrong account.

Unposted draft

An unposted draft is a saved working document that has not yet affected the ledger. It can be reviewed and corrected before posting. A screenshot of a draft, or its presence in a list, is not evidence that the business’s balances changed.

Asset

An asset is an economic resource controlled by the business under the applicable accounting framework. Cash and equipment are common examples. Buying an asset does not necessarily create an immediate expense for its entire cost; the policy depends on the facts.

Functional currency

Functional currency is the currency in which a book’s accounting amounts are maintained. In PHP Ledger it is fixed when the book is created. Changing a display symbol or choosing a transaction currency must never silently rewrite the functional-currency amounts of posted history.

Open item

An open item is an individually identifiable accounting amount that remains available for settlement or allocation. Its outstanding amount comes from recorded activity against that identity. A total customer balance alone cannot show which documents remain unpaid or how a payment was allocated.

Source reference

A source reference is the durable connection between a posting and the business evidence or document that produced it. It helps a reviewer follow a balance back to its cause. A human description is useful but should not be the only duplicate-prevention mechanism.

Transaction currency

Transaction currency is the currency of the original amount being recorded, such as a foreign-currency sale or bank receipt. Its amount is distinct from the converted base amount. Preserve the applied exchange-rate evidence; later rates do not restate earlier postings.

Reconciliation, general

Reconciliation is a comparison of independently meaningful records with every difference explained. It may involve cash, customers, suppliers or opening schedules. Agreement reached by inserting an unexplained balancing amount does not establish that the underlying records are complete or correct.

Journal, short name

Journal is the common short name for a journal entry or a collection of entries. In these lessons, an entry is a particular posting with its own identity. Use its source, date and lines when discussing a correction, rather than relying on a list position.

How should you use these definitions?

Start with double-entry bookkeeping, then test a small transaction with debits and credits. Use the synthetic cash guide to connect a source, journal and report. An unfamiliar term is a reason to inspect the underlying record before changing it.

When PHP Ledger is not the right choice

A glossary cannot supply the accounting judgment your business needs. Use another system if your immediate work requires advanced warehouse operations, payroll, statutory filing or independently accepted reporting. The comparison questions and product boundaries help separate learning from an operational commitment.