business - accounting

accounting

planning, recording, analyzing, and interpreting financial information

accounting system

a planned process for providing financial information that will be useful to management

accounting records

organized summaries of a business’s financial activities

service business

a business that performs an activity for a fee

proprietorship

a business owned by one person

asset

anything of value that is owned

equities

financial rights to the assets of a business

liability

an amount OWED by a business

owner’s equity

amount remaining after all liabilities of subtracted from the value of all assets

accounting equation

equation showing the relationship among assets, liabilities, and onwer’s equity

transaction

business activity that changes assets, liabilities, or owner’s equity

account

record summarizing all the information pertaining to a single item in the accounting equation

account title

name given to an account

account balance

amount in an account

capital

account used to summarize the owner’s equity in a business

balance sheet

a financial statement that reports assets, liabilities, and owner’s equity

true

T or F: accounting is the language of business

true

T or F: keeping personal and business records separate is an application of the business entity concept

true

T or F: assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business

true

T or F: the relationship among assets, liabilities, and owner’s equity can be written as an equation

false

T or F: the equation is called the accounting equation and does not have to be in balance to be correct

false

T or F: the sum of assets and liabilities of a business always equal the investment of the business owner

false

T or F: recording business costs in terms of hours required to complete projects and sales in terms of dollars is an application of the unit measurement concept

true

T or F: the capital account is an owner’s equity account

false

T or F: if two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance

false

T or F: when a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the owner owes future coverage

true

T or F: when items are bought and paid for later this is referred to as buying *on account*

false

T or F: when cash is paid on account, a liability is increased

true

T or F: the Going Concert account concept affects the way financial statements are prepared

true

T or F: on a balance sheet, a single line means that amounts are to be added or subtracted