The process of recording, summarizing, analyzing, and interpreting financial (money-related) activities to permit individuals and organizations to make informed judgments and decisions.
The equation that expresses the relationship between the accounting elements in a simple mathematical form: Assets = Liabilities + Owner's Equity.
A period that is typically one year; however, it can be any length of time for which accounting records are maintained, often for a month.
A listing of a firm's assets, liabilities, and owner's equity at a specific point in time. Other terms used to describe the balance sheet are statement of financial position and position statement.
In its most basic meaning, cash is currency (paper money) and coin. The definition in a business context also includes checks, money orders, traveler's checks, cashier's checks, bank drafts, and receipts from credit card sales.
The principle that states that, when purchased, all assets are recorded at their actual cost regardless of market value.
The principle that states that all business transactions are recorded as having at least two effects on the basic accounting elements.
The costs of operating a business. Unlike the cost of an asset, the cost of an expense does not provide a future benefit to the business. Therefore, its effect is a reduction in owner's equity.
A summary of a business's revenue and expenses for a specific period of time, such as a month or a year. Other terms used to describe the income statement are earnings statement, operating statement, statement of operations, and profit and loss statement.
A business that earns its revenue by buying goods and then reselling those goods. Also called a trading business
Occurs when revenue earned during an accounting period exceeds the expenses of the same period.
The excess of assets over liabilities (also called capital, proprietorship, and net worth).
The principle that states that revenue should be recorded when it is earned, even though cash may not be collected until later.
shift in assets
Occurs when one asset is exchanged for another asset, such as when supplies are purchased for cash.
statement of owner's equity
A summary of the changes that have occurred in owner's equity during a specific period of time, such as a month or a year. Another term used to describe the statement of owner's equity is capital statement.