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Chapter 2

STUDY
PLAY
free enterprise system
An economic system in which individuals depend on supply and demand and the profit margin to determine what to produce, how to produce, how much to produce, and for whom to produce. The quest for improvement financially and materially motivates consumers and producers.
profit
the advantageous quality of being beneficial
loss
the act of losing
entrepreneur
someone who organizes a business venture and assumes the risk for it
capital
wealth in the form of money or property owned by a person or business and human resources of economic value
service business
a business that performs an activity for a fee
merchandising business
a business that purchases and sells goods
manufacturing business
A business that makes finished goods from raw materials by hand or machinery
sole propietorship
A business owned by only one person
partnership
a contract between two or more persons who agree to pool talent and money and share profits or losses
corporation
a business firm whose articles of incorporation have been approved in some state
charter
a document incorporating an institution and specifying its rights
accounting system
a planned process for providing financial information that will be useful to management
manual accounting system
A system in which accounting information is recorded and proccessed by hand
computerized accounting system
A system in which finical information is recoreded by entering it into a computer
GAAP
a collection of rules and procedures and conventions that define accepted accounting practice
financial reports
Summarized information about the financial status of a business
financial accounting
Accounting information and analyses prepared for people outside the organization.
management accounting
focuses on reporting information to management.
business entity
Exists independently of its owner's personal holdings; The accounting records and reports are maintained separately and contain financial information related only to the business
accounting period
A period of time covered by an accounting report
going concern
A business assumes it will continue to operate for many years. At retirement the owner will sell the business to someone else who will continue its operation. This is an example of the application of this accounting concept.