test 3 Flashcards
business entity
assumption that a business is an accounting unit separate from its owners…
time-period
assumption that the economic life of the business can be divided into time periods
going concern
assumption that a business will continue into the future
full-disclosure principle
financial reporting must include all significant info
objectivity principle
accounts should be based on facts and not on personal opinions or feelings
revenue recognition principle
revenue is recognized in the accounting period in which it is earned
matching period
each cost related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn
Property
anything of value that is owned or controlled
property rights
financial claims to property
equity
financial claim to business assets
economic event
business transaction
accounts receivable
amounts owed by our customers to us
accounts payable
amounts owed to our creditors
on account, on credit
when a business uses credit to buy items
revenue
money earned from seeling goods/services
expense
price a business pays for goods/services
withdrawal
money taken from the business by the owner
business transaction
economic event that causes a change in assests, liabilities, owner’s equity
account
shows balance for a specific item, record of increase/decrease of item
basic accounting equation
assets=liabilities + owner’s equity
assets
property or items of value owned by a business
liabilities
creditor’s claims to the assets of the business
balance sheet
report of the balances in all asset, liability, equity, at the end of a period
income statement
states net income or net loss of the priod
