wanderbooks/docs/glossary.md

Glossary

For agents (and humans) new to accounting. The engine's naming follows these definitions exactly.

• Debit / Credit — The two sides of every journal line. Not "good" and "bad": debit = left, credit = right. What they do depends on the account type (see normal balance).
• Normal balance — The side that increases an account. Assets and expenses are debit-normal (a debit increases them); liabilities, equity, and revenue are credit-normal. AccountType::normal_side().
• Chart of accounts — The registry of all accounts, organized by code (e.g. 1000 Cash, 6000 Rent Expense). Five types, no more.
• Journal entry — A set of balanced lines with a date and description. The atomic unit: it posts whole or not at all.
• Ledger — The books: the chart plus the append-only log of posted entries. (In this codebase Ledger is also the command surface.)
• Posting — Validating a draft entry and appending it to the log. One-way.
• Trial balance — A listing of every account's debit or credit balance. Total debits must equal total credits; if they don't, the books are broken.
• Balance sheet — Assets = Liabilities + Equity, at a point in time.
• Profit & loss (income statement) — Revenue − Expenses = Net income, over a period.
• Reversing entry — An entry that exactly undoes a posted entry (same lines, sides flipped), linked to the original. The correction mechanism.
• Placeholder account — A header in the chart (e.g. "Current Assets") that organizes other accounts but takes no postings itself.
• Closing the books — Period-end ritual: move revenue/expense balances into retained earnings so the new period starts clean. (Future: R-FUTURE-2.)
• Current earnings — Net income to date on an unclosed book. We fold it into equity so the accounting equation holds before close.
• Placed in service (in-service date) — The day an asset is ready and available for its use. Depreciation starts here (Asset::in_service_date; journaled under its old name purchase_date).
• Acquired date — The day the company got the asset: the date of the entry that put it on the books (its purchase or a member's contribution), never later than the in-service date. The register holds the asset from here (Ledger::asset_acquired_date).
• Accumulated depreciation, posted and scheduled — What the books carry for an asset (its depreciation runs, less any reversed: Ledger::accumulated_posted), and what its schedule says is due by a date (accumulated_depreciation, accumulated_scheduled_through in the tools). Book value is cost less the posted figure.
• §723 basis — The company's tax basis in property a member contributed: the member's adjusted basis at contribution (IRC §723).
• Adjusted basis — Cost plus improvements, less depreciation allowed or allowable (IRC §1016(a)).
• Depreciable basis — What tax depreciation starts from: the cost for something bought; the §723 basis for business property contributed; for property contributed from personal use, the lesser of its fair market value and the member's adjusted basis (Treas. Reg. §1.168(i)-4(b)).
• Built-in gain or loss (§704(c)) — Property's fair market value less its §723 basis when contributed (Treas. Reg. §1.704-3(a)(3)(ii)). A built-in loss counts only for the member who contributed it (IRC §704(c)(1)(C)).
• §704(c) method — How the tax items of contributed property are shared among the members so the built-in gain or loss stays with its contributor: traditional, traditional with curative allocations, or remedial (Treas. Reg. §1.704-3(b)-(d)), chosen property by property.
• Tax-basis capital — A member's capital account as Schedule K-1 Item L reports it: cash plus the adjusted tax basis of property contributed, plus their share of income as figured for tax, less cash and the adjusted tax basis of property distributed (Form 1065 instructions, Item L).