Accounting Concepts
The accounting concept that requires that the personal financial records of the owner be kept separate from the business financial records.
Business Entity
A business form that list the account titles used by a business is:
The Chart of Accounts
What is the financial function of a balance sheet
to report the financial position of a business on a specific date
The financial obligations of a business to another entity is called:
A Liability
The accounting formula Assets=Liabilities + Capital is known as:
The Accounting Equation
When an accountant prepares financial statements with the intent that the business will exist forever
Going Concern
What is the purpose of the first digit of an account number?
indicates the classification of the account
The body of the balance sheet contains:
Assets, Liabilities, and Capital
All financial statements have the same general heading containing:
Business name, name of statement, and date of preparation
What is the total capital of the business below:
Assets = 5,300
Liabilities = 2,300
Capital = ?
3,000
The first critical step in an accounting system is to:
analyze the transaction into individual parts
The number of accounts used by a business is dependent upon:
Size of the business
In preparing a balance sheet, what are the three major sections
Assets, Liabilities, and Capital
Using a single line across an accounting column indicates:
add or subtract the amounts in that column
Any item owned
Asset
The second critical step in an accounting system is to:
Journalize
What is the purpose of the second digit of an account number
indicates its location within a division of the ledger
Any amount owed
Liability
The "letter" used in accounting that helps illustrate the effects of a transaction is:
T
If a transaction decreases one side of the accounting equation, the other side of the equation must:
Decrease
The third critical step in an accounting system is to:
Post
The posting reference column in the journal and ledger are used to:
cross-reference system to make tracing a transaction easier
Assets, liabilities and capital are listed on which side of the balance sheet?
Liabilities and Capital=Right
A business form used to summarize all transactions that affect a single accounting equation item:
Account
When the owner invests in the asset of the business, how does it affect the account equation?
Asset Increase and Capital Increases