Accounting Equation
Liabilities + Owner's Equity =
What are assets?
Paying cash. Explain how this affects the accounting equation.
What is a decrease in an asset?
any business activity that changes assets, liabilities, or owner's equity
What is a transaction?
a formal report that shows what an individual owns, what an individual owes, and the difference between the two
What is a net worth statement?
a business that performs an activity for a fee
What is a service business?
an amount owed
What is a liability?
Receiving cash. Explain how this affects the accounting equation.
What increases an asset?
a person or business to whom a liability is owed
What is a creditor?
the process of planning, recording, analyzing, and interpreting financial information
What is accounting?
a business owned by one person
What is a proprietorship?
supplies, cash, equipment
What are assets?
Receive a cash investment. Explain how this affects the accounting equation.
Owner's equity increases and cash (asset) increases
If only one entry is made to the equation, the equation is ...
What is unbalanced?
a planned process designed to compile financial data and summarize the results in accounting records and reports
What is an accounting system?
a formal written document that describes the nature of a business and how it will operate
What is a business plan?
Accounts payable
What is a liability?
Paid cash for supplies. Explain how this affects the accounting equation.
Increases assets (supplies) and decreases assets (cash)
Bought supplies on account. Explain how this affects the accounting equation.
Supplies increases (asset) and money owned on account (liability) increases
financial reports that summarize the financial condition and operations of a business
What are financial statements?
a record that summarizes all the transactions pertaining to a single item in the accounting equation
What is an account?
The amount remaining after the value of all liabilities is subtracted from the value of all assets.
What is owner's equity?
Paid cash for insurance. Explain how this affects the accounting equation.
Cash decreases (asset) and insurance increases (asset)
Paid cash on account. Explain how this affects the accounting equation.
Cash (asset) decreases and amount owed on account (liability) decreases
the principles of right and wrong that guide an individual in making decisions
What is ethics?
the standards and rules that accountants follow while recording and reporting financial activities
What is GAAP?