Accounting Basics
The process of recording, summarizing, analyzing, and interpreting financial information.
What is accounting?
Complete the equation: Assets = Liabilities + _____.
What is Owner’s Equity?
Anything of value that is owned by a business.
What is an asset?
An amount that a business owes to another party.
What is a liability?
The owner invests $10,000 in cash into the business. What happens to Assets and Owner’s Equity?
Both increase $10,000.
A business owned by one person.
What is a proprietorship?
If Assets are $40,000 and Liabilities are $15,000, what is Owner’s Equity?
What is $25,000?
Cash is an example of this type of account.
What is an asset?
An amount owed to a creditor for goods or services purchased on account.
What are Accounts Payable?
The business pays $2,000 toward an Accounts Payable balance. What happens?
Assets decrease $2,000 and Liabilities decrease $2,000.
A person who owns a proprietorship.
Who is the proprietor?
If Liabilities are $12,000 and Owner’s Equity is $18,000, what are Assets?
What is $30,000?
A customer owes the business $2,000. What is this amount called?
What are Accounts Receivable?
The owner's financial interest in the business.
What is Owner’s Equity?
The business earns $3,000 in cash revenue. What happens to Assets and Owner’s Equity?
Both increase $3,000.
A business activity or event that changes the financial position of a business.
What is a transaction?
If Assets are $75,000 and Owner’s Equity is $50,000, what are Liabilities?
What is $25,000?
A business purchases equipment for cash. What happens to total assets?
They remain the same.
Money earned from providing services or selling goods.
What is revenue?
The business pays $800 for rent. What happens to Assets and Owner’s Equity?
Both decrease $800.
A business organization that is treated separately from its owner for accounting purposes.
What is a business entity?
A business has Assets of $100,000 and Liabilities of $65,000. What percentage of the assets are financed by Owner’s Equity?
What is 35%?
A business collects $1,000 from a customer who owed money. What happens to Cash and Accounts Receivable?
Cash increases $1,000 and Accounts Receivable decreases $1,000.
The owner takes $500 in cash from the business for personal use. What happens to Owner’s Equity?
It decreases $500.
The business borrows $20,000 from a bank. What happens to Assets and Liabilities?
Both increase $20,000.