accy122- wk1

Assets

Items owned by a business that will provide future benefits.

Liabilities

Something owed to another business entity.

Owner’s Equity

Amount by which the business assets exceed the business liabilities.

Revenue

The amount a business charges customers for products sold or services performed.

When is revenue recognized?

Recognized when earned or received

Expenses

Represents a decrease in assets as a result of efforts made to produce revenues.

Accounting Period Concept

The concept that income determination can be made on a periodic basis.

Withdrawals

The owner taking cash or other assets from the business for personal use.

How does inc in expense affect accounting equation?

Decreases owner’s equity

How does inc in revenue affect accounting equation?

Increases owner’s equity

Statement of financial performance

Reports the profitability of business operations for a specific period of time.

Statement of Owner’s Equity

Reports the activities that affected owner’s equity for a specific period of time.

Statement of Financial Position

Reports a firm’s assets, liabilities and owner’s equity on a specific date.

Phases of Accounting Process

Input, processing, output

Net Income Formula

Expenses - Income

Ending Capital Formula

Beginning Capital + Investment + Net Income - Withdrawals

Importance of ethics in accounting

Trust, Compliance, Stakeholder interests, Reputation, Accountability,