Definitions
The systematic process of recording, classifying, summarizing, analyzing, and reporting financial transactions of a business or organization.
Accounting
The simplest, most common, unincorporated business structure owned and operated by one individual.
Sole Proprietorship
Creditors are people we owe money, and they show up in this section of the balance sheet.
Liabilities
The minimum number of accounts that can be affected in one transaction.
Two
If liabilities are $25,000 and assets are $75,000, owner's equity will carry this balance.
$50,000
A comprehensive, eight-step, repeatable process used by organizations to identify, record, and process financial transactions during a specific period - starting with transaction analysis and ending with closing the books.
This type of business provides intangible expertise, labor, or time to customers rather than physical products - for example a handyman.
Service Business
The major categories of a balance sheet, in order.
Assets, Liabilities, Owners Equity
This standard states that accounting must be recorded on the basis of source document evidence - no room for guessing.
The objectivity principle.
Name three things that source documents should have.
Date of sale, payment terms (discount/when due), seller's name, buyers name, items sold, price, shipping terms.
A specific, often 12-month, timeframe used by businesses, organizations, and governments to close their books, track financial performance, and report taxes.
Fiscal Period
This type of business produces finished goods from raw materials, components, or parts using labor, machines, and tools - it makes things.
Manufacturing Business
Put these in the order that they would appear at the top of a balance sheet.
December 31st 2026 (a)
Parker's Pizza Incorporated (b)
Balance Sheet (c)
(Who) Parker's Pizza Incorporated
(What) Balance Sheet
(When) December 31st 2026
The owner hires Randy, who will begin working next Thursday, for $3,000 per week.
No transaction.
Two of these are assets
Accounts receivable, accounts payable, capital, office supplies, the owners Bugatti.
Accounts receivable and office supplies.
A person whose job is to keep records of the day to day financial affairs of a business - for example recording receipts.
Bookkeeper
Business owners can undergo this process, involving legal filings, in order to protect themselves from liability - creating a separate legal entity
Incorporation / Corporation
On the balance sheet, assets are listed in this order.
Liquidity / how hard it is to turn into cash.
This GAAP standard clarifies that the owner's personal assets are separate from the businesses.
Business entity concept
In a remixed accounting equation, the liabilities should be equal to this.
Liabilities = Assets - Owners Equity
The independent, systematic examination of an organization's financial records, operational processes, or compliance systems to ensure accuracy, legality, and efficiency
Auditing
This type of organization is formed to serve public, social or community causes, with all excess revenue being reinvested for the cause.
A debtors account would be in this section of the balance sheet.
Debtor - owes us money - accounts receivable - asset.
Which account increases and decreases when we receive $100 on account.
Cash/bank increases, accounts payable decreases.
Cash, accounts receivable, supplies, equipment, land.