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Accounting Chapter 1
Terms in this set (45)
A record that summarizes all the transactions pertaining to a single item in the accounting equation
the difference between the increases and decreases in an account
the name given to an account
The process of planning, recording, analyzing, and interpreting financial information.
The equation showing the relationship among assets, liabilities, and owner's equity.
A planned process designed to compile financial data and summarize the results in accounting records and reports.
Anything of value that is owned
The use of ethics in making business decisions
a formal written document that describes the nature of a business and how it will operate
An account used to summarize the owner's equity in a business.
A person or business to whom a liability is owed
Financial rights to the assets of a business
the difference between assets and liabilities
the principles of right and wrong that guide an individual in making decisions
the cost of goods or services used to operate a business
Financial reports that summarize the financial condition and operations of a business
Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities.
an amount owed
net worth statement
A formal report that shows what an individual owns, what an individual owes, and the difference between the two.
the amount remaining after the value of all liabilities is subtracted from the value of all assets
personal net worth
The difference between personal assets and personal liabilities
A business owned by one person
an increase in equity resulting from the sale of goods or services
sale on account
a sale for which payment will be received at a later date
a business that performs an activity for a fee
Any business activity that changes assets, liabilities, or owner's equity.
Assets taken from the business for the owner's personal use.
accounting is the language of business
a creditor would favor a positive net worth
The principles of right and wrong that guide an individual in making personal decisions is called business ethics
keeping personal and business records separate is any application of the business entity concept
Generally Accepted Accounting Principles, GAAP, allows for flexibility in reporting
recording business costs in terms of hours required to complete projects in an application of the unit of measurement concept
Assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business
The relationship among assets, liabilities, and owner's equity can be written as an equation.
The accounting equation does not have to be in balance to be correct
When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage
When items are bought and paid for later this is referred to as buying on account
when cash is paid on account, a liability is increased
When cash is received from a sale, the total amount of both assets and owner's equity is increased.
The accounting concept Realization of Revenue is applied when revenue is recorded at the time goods or services are sold.
When cash is paid for expenses, the business has more equity
If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance
When a company receives cash from a customer for a prior sale, the transaction increases the cash account balance and increases the accounts receivable balance.
A withdrawal decreases owner's equity
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