Intro to Accounting Vocabulary Flashcards
Sole Proprietorship
Business owned by one person, easy to set up
Partnership
A business owned by two or more people, profits must be shared
Skills
Activities you do well
Values
The principles you live by
Lifestyle
The way you use your time, energy, and reosurces
Personality
A set of unique qualities that makes us different from all other people.
Corporation
A business organization that is recognized by law to have a life of its own (stockholders), easy to transfer ownership
For-profit business
Operated to earn money for their owners.
CPA
Must pass a national test and meet specified experience and education to practice accounting.
Profit
The amount of money earned over and above the amount spent to keep the business oeprating.
Free enterprise system
People are free to produce the goods and services they choose.
Loss
Businesses that spend more money than they earn.
Entrepreneurs
People who transform ideas for products or services.
Manufacturing Business
Buys raw materials and transforms them into finished products through the use of labor and capital.
Merchandising Business
Buys finished products and resells them to individuals or other businesses.
Accountant
Handles a broad range if responsibilities, makes decisions, and prepares financial reports.
Personal interest tests
Tests that help you identify the things you like to do
Networking
A way to find out about particular careers by asking people to share information.
For- profit business
A business that operates to earn money for their owners.
Not-for-profit business
A business such as a charity or environmental organization.
Public accounting
A firm that provides accounting services to their clients.
Service business
Provides a needed service for a fee.
Charter
Gives a corporation certain rights and privileges.
Free enterprise system
Individuals are free to use their money as they wish.
Profit
The amount of money earned over and above the amount spent to keep the business operating.
Loss
Business that spend more money than they earn.
Entrepreneurs
Transform ideas for products or services into real-world businesses.
Service Business
Provides a needed service for a fee.
Includes: Travel agencies, repair shops … etc
Capital
Money supplies by investors,banks,or owners of a business,
Merchandising Business
Buys finished products and resells them to individuals or other businesses.
Ex. Department stores, supermarkets
Manufacturing Business
Buys raw materials, such as wood or iron and transforms them into finished products through the use of labor and capitals. It then sells the finished products to individuals or other businesses.
Accounting System
Designed to collect,document,and report on financial transactions affecting the business.
Manual Accounting System
The accounting information is processed by hand.
Computerized Accounting System
The financial accounting information is recorded by entering it into a computer.
Generally Accepted Accounting Principal “GAAP”
Provide a way to communicate financial information in a form understood by those interested in the operations and financial condition of a business.
Financial Reports
Summarized information about the status of a business.
Financial Accounting
Focuses on reporting information to external users.
Management Accounting
Focuses on reporting information to management or internal users of accounting information.
Business Entity
Exists independently of it’s owner’s personal holdings.
Accounting Period
A period of time covered by an accounting report.
Property
Anything of value that is owned or controlled.
Creditor
Any person or business to which you owe money.
Credit
When you buy property and agree to pay for it later.
Equity
Financial claim to assets.
Assets
Property or items of value owned by a business, normal balance is a debit, increases on the debit side, decreases on the credit side
Investments
Are assets, generally long-term in nature,that are not intended to be converted to cash or to be used in the normal operations of the business in the next accounting period.
Owner’s Equity
The Owner’s claims to the assets of the business, normal balance is a credit, increases on the credit side, decreases on the debit side
Accounting Equation
ASSETS = LIABILITIES + OWNER’S EQUITY.
Liabilities
The creditor’s claims to the assets of the business, normal balance is on the credit side, increases on the credit side, decreases on the debit side
Business Transaction
An economic event that causes a change either an increase or decrease - in assets,liabilities, or owner’s equity.
Account
Shows the balance for a specific item.
Accounts Recievable
The total amount of money owed to a business.
Its an asset because it represents a claim to assets of other people or business. (Asset)
On Account
When a Business buys an item on credit.
Accounts Payable
The amount of money owed, or payable, to the creditors of a business. (Liability)
Revenue
Income earned from the sale of goods and services, normal balance is a credit, increases on the credit side
Expense
The price paid for goods or services used to operate a business, normal balance is a debit, increases on the debit side
Withdrawal
When the owner takes cash or other assets from the business for personal use, normal balance is a debit, increases on the debit side
Advantaage of a Sole Proprietorship
Easy to set up
Accounting Assumptions
Accounting period, business entity, going concern
Temporary Accounts
Withdrawals, Revenue, Expense, Income Summary (get closed to zero at the end of the accounting period)
Permanent Accounts
Assets, Liabilities, Capital - accounts that continue from one period to another.
