Basic Terms
A resource owned by a company.
What is an asset?
Which side do assets increase on?
Debit side.
What is the purpose of a balance sheet?
Shows financial position at a specific time.
When a business purchases equipment with cash, this account decreases.
What is cash?
This U.S. holiday is associated with filing personal income tax returns.
What is Tax Day (April 15)?
An obligation the company owes.
What is a liability?
Which side do liabilities increase on?
Credit side.
What does an income statement show?
Company's revenues and expenses over time.
If a company receives cash from a customer for a previous sale, this account decreases.
What is accounts receivable?
GAAP stands for _________.
Generally Accepted Accounting Principles.
Income earned from business activities.
What is revenue?
Do expenses increase with a debit or credit?
Debit.
Which statement shows cash inflows and outflows?
Cash Flow Statement.
This is the process of recording financial transactions in chronological order.
What is journalizing?
This famous financial principle states that every transaction has at least two equal and opposite effects.
What is double-entry accounting?
A cost incurred to generate revenue.
What is an expense?
Does revenue increase with a debit or credit?
Credit.
What financial statement shows owner's equity changes?
Statement of Owner's Equity.
This step in the accounting cycle involves transferring journal entries to the ledger.
What is posting?
This term describes an accountant who manipulates financial records unethically.
What is creative accounting?
The owner's claim on business assets.
What is owner's equity?
What is the normal balance of an asset?
Debit.
What is the equation for a balance sheet?
Assets = Liabilities + Owner's Equity.
The allocation of asset cost over its useful life.
What is depreciation?
This report, named after a government act, helps prevent financial fraud and ensures company transparency.
What is the Sarbanes-Oxley report?