Equity Basics
What is owner's equity?
Owner's claim on a business's assets.
What is the result when revenues exceed expenses?
Net Income
Numbering System to keep track of accounts
Chart of Accounts
Period of time in which earnings are measured
Fiscal Period or Financial Period
What happens to owner's equity during a net loss?
Owner's equity decreases.
What is the result when expenses exceed revenues?
Net Loss
Trial Balance
Accounting standard that provides that accounting will take place over specific time periods
Time Period Concept
What are owner withdrawals called?
Drawings.
Debit or Credit? Money added to our Bank Account
Debit
Document used to display Net Income (or Losses) over a period of time
Income Statement
Principle that states that each expense item related to revenue earned must be recorded in the same period as the revenue it helped to earn.
Matching Princicple
What impact does net income have on owner's equity? (assuming it is greater than the drawings)
Owner's equity increases.
Debit or Credit?
Withdrawing money for personal uses
Debit
Document used to display financial position
Balance Sheet
Also known as the bottom line
Net Income
What is the formula for the basic equity equation?
Beginning Capital + Net Income - Drawings = Ending Capital.
Debit or Credit?
New investment into the business
Credit
Group or File of accounts
Ledger
Money paid out to a creditor to decrease amount owed
Payment on Account