Accounting Basics
The Accounting Equation
Assets = Liabilities + Owner's Equity (Net Worth)
The cost of borrowing money.
Interest
The account we use if the owner takes out money for personal use.
Withdrawals
The act of recording transactions in the journal.
Journalizing
The term we use in Personal Accounting when Expenses are higher than Revenue.
Deficit
Right side
Credit
This type of business buys products at a low cost and resells them at a higher price.
Merchandising
The account we use when a customer owes us money.
Accounts Receivable
What we must always record at the top of the date column in a journal.
the year
The term we use in Business Accounting when Revenue is higher than expenses.
Net Income
Left side
Debit
An accounting firm is an example of this type of business.
Service
The account we use when we owe money to someone.
Accounts Payable
The acronym that represents the order in which we list the types of accounts.
ALORE
When do we record revenue?
On the date the work is completed
The mnemonic we use to remember which
accounts increase on the left side, and which accounts increase on the right side.
AWE CLR
A 12-month accounting period that isn't required
to end on December 31.
Fiscal Year
The account we use if a customer gives us a deposit for future work.
Unearned Revenue
The term we use when a business provides services and allows the customer to pay at a later date.
Also known as: on credit.
On Account
The type of accounting we are learning.
Accrual Based Accounting
A book in which transactions are recorded chronologically.
Journal
The amount of time covered by our financial statements. This can be a month, three months, or a year.
Accounting Period
An asset account in which we record the value
associated with a prepayment.
Prepaid Expense
A journal entry which involves 3 or more accounts.
Compound Journal Entry
Name three financial statements.
Balance Sheet
Income Statement
Statement of Owner's Equity