Chapter 1 Flashcards

0
Q

Assets must equal…

A

the sum of liabilities and owner’s equity

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1
Q

Basic Acct Equation

A

Assets= Liabilities + Owner’s Equity

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2
Q

Assets

A

resources a business owns

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3
Q

Liabilities

A

claims against assets– existing debts and obligations

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4
Q

These can be considered liabilities

A
  • accounts payable
  • note payable
  • salaries and wages payable
  • sales and real estate taxes payable
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5
Q

Creditors

A

all of the persons or entities to whom the business owes money

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6
Q

Owner’s Equity

A

ownership claim on total assets

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7
Q

Investments by owner

A

are the assets the owner puts into the business

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8
Q

Investments by owner are recorded where

A

owner’s capital

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9
Q

Revenues

A

gross increase in owner’s equity resulting from business activities entered into the purpose of earning income

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10
Q

Common sources of revenue

A

sales, fees, services, commissions, interest, dividends, royalties, and rent

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11
Q

Drawings

A

an owner withdrawal of cash or other assets for personal use

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12
Q

Drawings decrease what…

A

owner’s equity

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13
Q

Expenses…

A

the cost of assets consumed or services used in the process of earning revenue

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14
Q

Expenses _________ owner’s equity that results from operating the business

A

decrease

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15
Q

Expanded Equations

A

Assets= Liabilities + (Owner’s Capital- Owner’s Drawings + Revenue- Expenses)

16
Q

Transactions…

A

a business’s economic events recorded by accountants

17
Q

External transactions…

A

involves economic events between the company and some outside enterprise

18
Q

Internal transaction…

A

are economic events that occur entirely within one company

19
Q

Investment by Owner

A

results in an equal increase in assets and owner’s equity

20
Q

Purchase of Equipment for Cash

A

results in an equal increase and decrease in total assets, though the composition of assets changes

21
Q

Purchase of Supplies on Credit

A

purchase on account (a credit purchase)

22
Q

Services Provided for Cash

A

represents principle revenue-producing activity

23
Q

Purchase of Advertising on Credit

A

results in an increase inn liabilities and a decrease in owner’s equity
- specific categories involved are accounts payable and expenses