Types of Business
a business that purchases finished products and resells them to consumers
Merchandising business
a business owned by one person
Sole proprietorship
Accountants call any business activity that changes assets, liabilities, or owner’s equity
A transaction
The equation showing the relationship among
assets, liabilities, and owner’s equity
The accounting equation
A record that summarizes all the transactions pertaining to a single item in the accounting equation
An account
a business owned by one person
sole proprietorship
The name given to an account
account title
increase in equity resulting from the sale of goods or services
Revenue
Financial rights to the assets of a business
Equity
The difference between the increases and decreases in
an account
account balance
A business owned by two or more people
A partnership
formal written document that describes the nature of a business and how it will operate
Business plan
A person or business to whom a liability is owed
A creditor
The standards and rules that accountants follow while recording and reporting financial activities
GAAP
An account used to summarize the owner’s equity in a business
Capital account
A business that hold a charter with the state
A corporation
Assets taken from the business for the owner’s personal use
Withdrawal
sale for which payment will be received at a later date
sale on account
The amount remaining after the value of all liabilities
is subtracted from the value of all assets
owner's equity
Unlike a liability, which is an amount that is owed, the cost of goods or services used to operate a business is called
An expense