Asset Liability Equity Revenue Expense Accounts Flashcards
Examples of Asset categories
Cash, Equipment, Copyrights, Buildings, Land
Define equity (capital)
Owner’s claim or investment in the business
Define asset
Properties or things of value owned by the business
Define creditor
one to whom money is owed
What is the accounting equation
assets=liabilities + stockholder equity
List asset, liability, equity. Business has a 35,000$ truck, Owner paid off 12,000$, Borrowed 23,000$
35,000 asset. 12,000 liability. 12,000 Equity
Why would the total 35,000 be an asset and not just part of it.
Because an asset is recorded at purchase price disregarding how much is paid or borrowed
Define liability
it is a debt ( amount a business owes its creditors)
Who has first claim on assets, creditor or owner
The creditor has first claim
What is important about the accounting equation?
Both sides must add up to the same amount
If business invested 17,000, and agency owes 5,000, how much does it have in assets?
$22,000= 17,000+5,000
Define Business Transaction
An event with direct monetary impact on business
Define Sole Proprietorship
One owner
Define cash account
bank deposits and money on hand
Define capital
an investment in a business, not always cash, can be equipment
Define accounting
analyzing, classifying, recording and summarizing business transactions
Classify accounts involved in following: owner deposits 52,000 cash in business account
52,000dollars is cash asset . business account is equity account.
Investing 52,000 increases/decreases which accounts
increases cash account, increases equity account
Define double entry accounting
Every transaction is recorded in two accounts(can be on the same side of the Accounting Equation)
Double entry example. Business (not the owner)spends 38,000 of its cash on equipment
Assets decreases cash by 38,000
Asset also has Equipment increased by 38,000. Liability and Equity Do not come into play
What is an account?
A specific account name that is is either an asset account, liability account , or equity account
A business adding equipment increases which account
equipment account
A business buying on credit increases which account
accounts payable
Note, from now on accounting equation is shortened to AE and account is ACC
Note, from now on accounting equation is shortened to AE and account is ACC
If the business (not the owner) pays 2,000 of liabilities, what changes on AE
Assets decrease by 2,000
Liabilities decrease by 2,000
If the business (not the owner) pays 2,000 of liabilities, what changes on ACC
cash decreased, accounts payable decreased
Define present worth
current fair market value
If the owner sets up an account named adventure, what account is used for equity investment
The account name + the word capital. Thus: Adventure, Capital
