Accounting Book #2 Flashcards
Asset
Anything of value owned by a business.
Equities
Claims against the business assets.
Creditor
Anyone to whom a business owes money.
Liability
Any amount of money owed to a creditor.
Capital
The net worth of a business to its owners after all debts are paid.
Basic Accounting Equation
Assets= Liabilities + Capital.
Transaction
An action that changes the value of the assets, liabilities, and capital of a business entity.
Account
A record that summarizes all the characteristics of a single item of the equation.
Account Title
The name given to any account.
Account Balance
The computed balance of an account after all debits and credits have been paid.
Chart of Accounts
A list of all accounts used by an entity indicating the identifying number, the account title and classification of each accounting equation item.
Balance Sheet
A form that shows the financial position of a business on a specific date.
Liquidity
ease of converting an item to cash
Adequate disclosure
To provide all necessary information on the financial statements of a business so a reader an determine the financial condition of that business.
Business Transaction
Every time a business transaction takes place, changes are made within the accounting equation. Every business transaction changes at east two different accounts in the equation.
Going concern
Every financial report is prepared as if the business will exist forever.
Objective evidence
Providing a document that supports a business transaction before it is recorded in the accounting system.
Units of measurement
Applying a value to a business transaction that is represented by a common unit of measurement. I. e dollars and cents in the U.S
Journal
a business form used for recording accounting information in chronological order
Entry
a transaction recorded in a journal
Book of Original Entry
any journal used in an accounting system
Book of Secondary Entry
any ledger used in an accounting system
Source Document
a document that provides the necessary information to make a journal entry
Journalizing
recording information in chronological order in the journal, using the source document as evidence of the business transaction
Debit
refers to any entry made in the left-hand amount column of a general journal
Credit
refers to any entry made in the right-hand amount column of a general journal
Ledger
a group of accounts
Owners Equity (capital)
the financial l interest of the owner of a business; determined by subtracting total liabilities from total assets
Beginning Balance Sheet
a balance sheet prepared on the day the business starts.
General Ledger
contains all the accounts needed to prepare financial statements.
Opening an Account
writing the account name and number as the heading for the account.
Posting
the process of transferring the information from a journal entry to the ledger accounts
