Accounting 101
These are the 4 main sheets prepared by accountants
1. Balance Sheet
2. RE/owner's equity
3. Income Statement
4. Cash flow statement
What are items owned by the company that have monetary value called?
assets
It is anything of value that a person or business owns and therefore controls
assets/property
What type of account are: Asset, Liability, Owners Capital
permanent accounts
When a business buys a computer with cash, its cash ______, but its computer equipment ________
decreases, increases
This is the purpose of accounting
1)identify, 2)record and 3)communicate financial information
Name 2 ways the fundamental accounting equation can be stated.
1) Assets-Liabilities=Owner's Equity
2) Assets=Owner's Equity+Liabilities
3) Assets- Owner's Equity = liabilities
The business or person selling the item on credit, can be any person/business you owe money to
creditor
What type of account are: revenue, expenses, owner's withdrawals
temporary accounts
In addition to an owner, these people also have claims against a company's assets.
creditors
the types of business organizations
1)sole proprietorships, 2)partnerships and 3)corporations?
This line on the balance sheet refers to money owed by a company
Liabilities/ Accounts Payable
Identify the accounts affected
Classify the account affected
Determine the amount of increase or decrease for each account affected
"The business bought a new computer for the office for 400$ but did not yet pay for it"
office equipment increases by 400
Accounts payable increases by 400
When you buy something and agree to pay for it later, what is it called?
buying on credit, accounts payable
If a business closes, the claims of these individuals are settled first.
creditors
Name 3 accounting certifications
Certified Public Accountant (CPA), Certified Management Accountant (CMA), Chartered Global Management Accountant (CGMA), Certified Internal Auditor (CIA), and Certified Fraud Examiner (CFE)
What is the difference (subtracting)between total assets and total liabilities.
Owner's Equity
What decreases both assets and owner’s equity?
withdrawal
Property or items of value owned by a business
assets
This rule is used to record a transaction in the general journal to ensure a complete effect.
double-entry
An accounting branch that involves testing business records and procedures for accuracy.
auditing
The term used to explain how quickly a company can convert assets into cash.
liquidity
What are the 8 steps of the accounting cycle?
identifying and analyzing transactions, recording transactions in a journal, posting journal entries to the general ledger, preparing an unadjusted trial balance, making adjusting entries, preparing an adjusted trial balance, creating financial statements, and closing the books to start the next period
It is a list of all accounts used by a business.
chart of accounts
Income earned from the sale of goods or services is called?
revenue