Unit 1

Question 1

Accounting

Answer 1

the process of planning, recording, analyzing, and interpreting financial information

Question 2

Accounting System

Answer 2

a planned process designed to compile financial data and summarize the results in accounting records and reports

Question 3

Financial Statements

Answer 3

financial reports that summarize the financial condition and operations of a business

Question 4

Net Worth Statement

Answer 4

a report that shows what an individual owns, what an individual owes, the difference between the two

Question 5

Asset

Answer 5

anything of value that is owned

Question 6

Liability

Answer 6

the amount that is owed

Question 7

Personal Net Worth

Answer 7

the difference between personal assets and personal liabilities

Question 8

Equity

Answer 8

the difference between assets and liabilities

Question 9

Ethics

Answer 9

the principles of right and wrong that guide an individual in making decisions

Question 10

Business Ethics

Answer 10

the use of ethics in making business decisions

Question 11

Service Business

Answer 11

a business that performs an activity for a fee

Question 12

Proprietorship

Answer 12

a business owned by one person

Question 13

Business Plan

Answer 13

a formal written document that describes the nature of the business and how it will operate

Question 14

GAAP (Generally Accepted Accounting Principles)

Answer 14

the standards and rules that accountants follow while recording and reporting financial activities

Question 15

Equities

Answer 15

financial rights to the assets of a business

Question 16

Owner’s Equity

Answer 16

the amount remaining after the value of all liabilities is subtracted from the value of all assets

Question 17

Accounting Equation

Answer 17

shows the relationship among assets, liabilities, and owner’s equity (assets=liabilities+owner’s equity)

Question 18

Transaction

Answer 18

any business activity that changes assets, liabilities, or owner’s equity

Question 19

Account

Answer 19

a record that summarizes all the transactions pertaining to a single item in the accounting equation

Question 20

Account Title

Answer 20

the name given to an account

Question 21

Account Balance

Answer 21

the difference between the increases and decreases in an account

Question 22

Capital Account

Answer 22

an account used to summarize the owner’s equity in a business

Question 23

Creditor

Answer 23

a person or business to whom a liability is owed

Question 24

Revenue

Answer 24

an increase in equity resulting from the scale of goods or services

Question 25

Sale on Account

Answer 25

a sale for which payment will be received at a later date

Question 26

Expense

Answer 26

the cost of goods or services used to operate a business

Question 27

Withdrawals

Answer 27

assets taken from the business for the owner’s personal use