The Accounting Equation

Question 0

Liabilities

Answer 0

Claims against a firm’s assets by creditors

Question 1

Assets

Answer 1

Any things of value owned or leased by a business

Question 2

Owner’s Equity

Answer 2

The portion of a company’s assets that belongs to the owners after obligations to all creditors have been met

Question 3

Accounting Equation

Answer 3

The equation stating that assets equal liabilities plus owner’s equity
Assets=Liabilities+Owner’s Equity
Assets-Liabilities=Owner’s Equity

Question 4

Double entry bookkeeping

Answer 4

Method of recording financial transactions that requires a debit entry and credit entry for each transaction to ensure that the accounting equation is always kept in balance

Question 5

Matching principle

Answer 5

Fundamental principle requiring that expenses incurred in producing revenue be deducted from the revenues they generate during an accounting period

Question 6

Accrual basis

Answer 6

Accounting method in which revenue is recorded when a sale is made and an expense is recorded when it is incurred

Question 7

Cash basis

Answer 7

Accounting method in which revenue is recorded when payment is received and an expense is recorded when cash is paid

Question 8

Depreciation

Answer 8

Account procedure for systematically spreading the cost of a tangible asset over its estimated useful life