Accounting 1
Anything of value that is owned
What is an "asset"?
shows the balance for a specific item, such as cash or computer equipment
What is an "account"?
income earned from the sale of goods or services
Revenues
Planning, recording, analyzing, and interpreting financial information
What is "accounting"?
An equation showing the relationship among assets, liabilities, and owner's equity
What is the "accounting equation"?
an economic event that causes a change – either an increase or decrease – in assets, liabilities, or owner’s equity
What is a "transaction"?
Recording transactions, such as revenue and expenses, when they occur
Accrual Accounting
the price paid for goods or services used to operate a business
Expenses
Assets taken out of a business for the owner's personal use
What are "withdrawals"?
Reflects assumption that the business will continue operating instead of being closed or sold.
Going Concern Assumption
The standards and rules that accountants follow while recording and reporting financial activities
What is "GAAP"?
The amount remaining after the value of all business liabilities is subtracted from the value of all business assets
What is the "owner's equity"?
an accounting assumption that makes a legal distinction between the transactions carried out by a business and the transactions of the owner.
Business entity assumption
A business owned by one person
What is a "proprietorship"?
An amount owed by a business
What is a "liability"?
total amount of money owed to our business
Accounts Receivable
A person or business to whom a liability is owed
What is a "creditor"?
A decrease in owner's equity resulting from the operation of a business
What is an "expense"?
The amount in an account
What is an "account balance"?
An increase in owner's equity resulting from the operation of a business
What is "revenue"?
the amount of money owed, or payable, to creditors of a business
Accounts Payable
A business that performs an activity for a fee
What is a "service business"?
when the owner takes cash or other assets from the business for personal use
Withdrawals
The name given to an account
What is an "account title"?
Presumes that the life of a company can be divided into time periods, usually 1 year
Accounting Period Assumption