Unit 1-Chapters 3, 4, & 5

Question 1

property

Answer 1

anything of value that a business or person owns

Question 2

financial claim

Answer 2

legal right to an item

Question 3

credit

Answer 3

an agreement to pay for a purchase at a later time; an entry on the right side of the account

Question 4

creditor

Answer 4

a business or person to whom money is owned

Question 5

assets

Answer 5

property or items of value owned by a business

Question 6

equities

Answer 6

the total financial claims to the assets of a business

Question 7

owner’s equity

Answer 7

the owners claims to the assets of a business

Question 8

liabilities

Answer 8

amounts owed to the creditors; the claim of creditors to the assets of a business

Question 9

business transaction

Answer 9

an economic event that causes a change in assets, liabilities, or owner’s equity

Question 10

account

Answer 10

a subdivision under assets, liabilities, or owner’s equity that summarizes the changes and shows the balance for a specific item

Question 11

accounts receivable

Answer 11

the amount of money owed to a business by its credit customers (owes money to business)

Question 12

accounts payable

Answer 12

the amount of money owed or payable to the creditors of a business (business owes money)

Question 13

investment

Answer 13

money or other property provided for the purpose of making a profit

Question 14

on account

Answer 14

the purchase of an item on credit (buy now, pay later)

Question 15

revenue

Answer 15

income earned from the sales of goods and services

Question 16

expense

Answer 16

the cost of goods or services used to operate a business

Question 17

withdrawal

Answer 17

the removal of cash or another asset from the business by the owner for personal use

Question 18

accounting equation

Answer 18

assets = liabilities + owner’s equity

Question 19

chart of accounts

Answer 19

a list of all accounts used by a business

Question 20

ledger

Answer 20

a group of accounts; also referred to as a general ledger

Question 21

double-entry accounting

Answer 21

a system that recognizes the different sides of business transactions as debits and credits

Question 22

debit

Answer 22

an entry on the left side of an account

Question 23

credit

Answer 23

an agreement to pay for a purchase at a later time; an entry on the right side of an account

Question 24

T account

Answer 24

a visual representation of a ledger account; a tool used to analyze transactions

Question 25

normal balance

Answer 25

the increase side of an account
(normal=usual)

Question 26

temporary accounts

Answer 26

accounts used to collect information that will be transferred to a permanent capital account at the end of the accounting period (examples: revenue, expenses, and owner’s withdrawal account)

Question 27

permanent accounts

Answer 27

accounts that are continuous from one accounting period to the next; balances are carried forward to the next period (examples: assets, liabilities, and owner’s capital accounts)

Question 28

revenue recognition

Answer 28

the GAAP principle that revenue is recorded on the date it is earned even if cash has not been received