Accounting Cycle for the Service Business-Cash Basis

Flashcards regarding key accounting terms and principles from the lecture notes on financial accounting.

Accounting

The process of analyzing, classifying, recording, summarizing, and interpreting business transactions.

Balances

Running totals of accounts that help in determining the state of finances.

Categories of Accounts

There are five main categories: Assets, Liabilities, Stockholders' equity, Revenue, and Expenses.

Assets

Anything of value that a business owns.

Liabilities

Debts that a business owes; claims on assets by outsiders.

Stockholders' Equity

Worth of the owners of a business; claims on assets by the owners.

Revenue

Income that results when a business operates and generates sales.

Expenses

Costs associated with earning revenue.

Fees Earned

Account name used to record income generated from providing a service.

Net Income

The difference between total revenue and total expenses for a given period.

Journal

A record book where financial transactions (events) are recorded in chronological order.

Debit

An entry on the left side of an account indicating an increase in assets or a decrease in liabilities.

Credit

An entry on the right side of an account indicating a decrease in assets or an increase in liabilities.

Chart of Accounts

A list of all accounts used by a business presented by category.