Accounting chapter 1 Flashcards
Accounting
Is the process of planning, recording, analyzing, and aninterpreting financial information.
Accounting systems
Is a planned process designed to compile financial data and summarize the results in accounting records and reports.
Financial statements
Financial reports that summarize the financial condition and operation of a business
Net worth statement
A formal report that shows what an individual owns, what an individual owes, and the difference between the two
Asset
Anything of value that is owed
Liability
An amount owed
Personal net worth
The difference between personal assets and personal liabilities
Equity
Is the difference between assets and liabilities
Total assets - total liabilities = net worth
Owned) (Owed) (equity
Ethics
The principles of right and wrong that guide an individual in making decisions
Business ethics
The use of ethics in making business decisions
Service business
A business that before as an activity for a fee
Proprietorship
Is a business owned by one person
Business plan
Is a formal written document that describes the nature of the business and how it will operate
GAAP
Generally excepted accounting principles
Equities
Financial rights to the assets of a business
Owners equity
The amount remaining after the value of all liabilities is subtracted from the value of all assets
Accounting equation
That equation showing the relationship among assets liabilities and owners quality
Transaction
Any business activity that changes assets liabilities is owners equity
Account
A record that summarizes all the transactions pertaining to a single item in the accounting equation
Account title
The name given to an account
Account balance
The difference between the increases and decreases in an account
Capital account
An account used to summarize the owners equity in a business
Creditor
A person or business to whom a liability is owed.
Revenue
An increase in equity resulting from the sales of goods or services
