Accounting Equation
Liabilities + Owner's Equity =
What are assets?
Paying cash. Explain how this affects the accounting equation.
What is a decrease in an asset?
Any business activity that changes assets, liabilities, or owner's equity
What is a transaction?
A formal report that shows the accounting equation is in balance.
What is a balance sheet?
A business that performs an activity for a fee
What is a service business?
Accounts payable
What is a liability?
Receiving cash. Explain how this affects the accounting equation.
What increases an asset?
A person or business to whom a liability is owed
What is a creditor?
The process of planning, recording, analyzing, and interpreting financial information
What is accounting?
A business owned by one person
What is a proprietorship?
This is recorded on the side where an increase in the account is recorded.
What is normal balance?
Receive a cash investment. Explain how this affects the accounting equation.
What is Owner's equity increases and cash (asset) increases
Each transaction needs at least this.
What is one debit and one credit
A formal report showing the ending capital balance,
What is an income statement?
A record that summarizes all the transactions pertaining to a single item in the accounting equation
What is an account?
The amount remaining after the value of all liabilities is subtracted from the value of all assets.
What is owner's equity?
Paid cash for supplies. Explain how this affects the accounting equation.
Increases assets (supplies) and decreases assets (cash)
Bought supplies on account. Explain how this affects the accounting equation.
What is Supplies increases (asset) and money owned on account (liability) increases
This may balance even when some errors may still exist.
What is a trial balance?
A sales receipt, a check or a bill is an example of this.
What is a source or business document?
If Assets is equal to $650,000 and Capital is equal to $490,000. How much is Liabilities?
What is $160,000
Paid cash for insurance. Explain how this affects the accounting equation.
What is Cash decreases (asset) and insurance increases (asset)
Paid cash on account. Explain how this affects the accounting equation.
What is Cash (asset) decreases and amount owed on account (liability) decreases
This is the transfer of journal entries to the ledger accounts.
What is Posting?
The owner's claim on total assets is this.
What is owner's equity?