Chapter 1 Flashcards
What is Accounting?
the process of planning, recording, analyzing, and interpreting financial info.
What is an accounting system?
a planned process designed to compile financial data and summarize the results in accounting records and reports.
What is a net worth statement?
allows the person extending the loan to see the financial position of a borrower on specific date and make a lending decision.
What is an an asset?
anything of value that is owned
What is a liability?
an amount owed
What is personal net worth?
the difference between personal assets and personal liabilities
Net worth is also called?
equity
What is equity?
the difference between assets and liability
What is ethics?
the principals of right and wrong that guide an individual in making decisions
What is business ethics?
the use of ethics in making business decisions
What is a service business?
a business that performs an activity for a fee
What is a proprietorship?
a business owned by one person
A proprietorship is sometimes referred to as a?
sole proprietorship
What is a business plan?
a formal written document that describes how a business will operate
The standards and rules that accountants follow while recording and reporting financial activities are commonly referred to as?
Generally accepted accounting principles or GAAP
What are equites?
financial rights to the assets of a business
What is owners equity?
the amount remaining after the value of all liabilities is subtracted from the value of all assets
What is the accounting equation?
the equation showing the relationship among assets, liabilities, and owners’ equity
What is an account?
a record that summarizes all the transactions pertaining to a single item in the accounting equation
What is an account title?
the name given to an account
What is an account balance?
the difference between the increases and decreases in an account
What is a capital account?
an account used to summarize the owners’ equity in a business
What is revenue?
an increase in equity resulting from the sale of goods or services
What is a sale on account?
a sale for which payment will be received at a later date
What is a expense?
the cost of goods or services used to operate a business
What is a withdrawal?
assets taken from the business for the owner’s personal use
