Mostly GAAP Concepts
This GAAP principle assumes that a business will continue to operate in the foreseeable future without the need to liquidate its assets.
What is the Going Concern principle?
This is property owned by a business that has value and can help generate income.
What is an asset?
This is the formula that shows the relationship between assets, liabilities, and owner’s equity.
What is the accounting equation?
This is the first step in double-entry accounting, where you determine which specific accounts are involved in a transaction.
What is identifying which accounts are affected?
This type of business provides work or assistance to customers rather than physical products.
What is a service business?
This principle states that a business must keep its finances separate from the personal finances of its owners or other businesses.
What is the Business Entity principle?
This is the financial claim creditors have on the assets of a business, representing money the business owes.
What is a liability?
In the equation Assets = Liabilities + Owner’s Equity, this must always be true to ensure accuracy in accounting records.
What is that the equation must be balanced?
When classifying accounts in double-entry accounting, these are the three main types to consider.
What are assets, liabilities, and owner’s equity?
This type of business buys goods and sells them to customers without altering the products.
What is a merchandising business?
This principle divides the life of a business into equal time periods for reporting financial results.
What is the Accounting Period principle?
This represents the owner’s financial claim to the assets of the business.
What is owner’s equity?
If a business has assets of $50,000 and liabilities of $30,000, the owner’s equity must be this amount to balance the equation.
What is $20,000?
In accounting, this term represents an entry on the left side of a T-account and may increase assets or decrease liabilities and equity.
What is a debit?
This type of business produces products by transforming raw materials into finished goods.
What is a manufacturing business?
This principle mandates that revenue should only be recorded when it is earned, regardless of when cash is received.
What is the Revenue Recognition principle?
Equipment and buildings owned by a business are classified as this.
What are assets?
If liabilities are $15,000 and owner’s equity is $10,000, then assets must be this amount to balance the equation.
What is $25,000?
This type of account has a normal debit balance, meaning it typically increases on the debit side.
What is an asset?
A hair salon and a consulting firm are examples of this type of business.
What is a service business?
This type of business ownership is defined by a single owner who has complete control but also assumes all liability.
What is a Sole Proprietorship?
Money borrowed from a bank that must be repaid is classified as this.
What is a liability?
Accounts like cash, equipment, and inventory fall under this classification in accounting.
What are assets?
This tool is used to visually track debits and credits for each account and helps ensure transactions are balanced.
What is a T-account?
This type of business includes companies like car manufacturers and furniture makers, which create products from raw materials.
What is a manufacturing business?