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Accounting Chapter 2

Terms in this set (21)

free enterprise system
people are free to produce the goods and services they choose
profit
the amount of money earned over and above the amount spent to keep the business operating
loss
businesses that spend more money than they earn
entrepreneurs
transform ideas for products or services into real-world business
capital
money supplied by investors, banks, or owners of a business
service business
provides a needed service for a fee
merchandising business
buys finished products and resells them to individuals or other businesses
manufacturing business
buys raw materials, such as wood or iron ore and transforms them into finished products through the use of labor and capital
sole proprietorship
a business owned by one person
partnership
a business owned by two or more persons, who agree to operate the business as co-owners
corporation
a business organization that is recognized by law to have a life of its own
charter
legal permission, that gives a corporation rights and privileges
accounting system
designed to collect, document, and report on financial transactions affecting the business
manual accounting system
the accounting information is processed by hand
computerized accounting system
the financial information is recorded by entering it into a computer
Generally Accepted Accounting Principles
set of accounting rules
financial accounting
focuses on reporting information to external users
management accounting
focuses on reporting information to management, also referred to as accounting for internal users
business entity
exists independently of its owner's personal holdings
accounting period
a period of time covered by an accounting report
going concern
a business is expected to understand
THIS SET IS OFTEN IN FOLDERS WITH...