Unit 1 Accounting (Basic Accounting Principles)

Basic Accounting Equation

Assets=Liabilities+Owner's Equity

Expanded Accounting Equation

Assets=Liabilities+Capital-Withdrawals+Revenue-Expenses

Owner's Equity

Capital-Withdrawals+Revenue-Expenses

Drawing Account

Another term for Withdrawal Account

Ledger

A book of accounts

Journal

A book of original entry

Assets

Things of value with a specific dollar amount owned by a business/person.

Liabilities

Debts or obligations owed to another for merchandise received or services rendered; such as dividends payable, notes payable, salaries payable

Net Profit

When revenue exceeds expenses

Net Loss

When expenses exceed revenue

Revenue

The money that your business takes in from the sale of goods or services

Expenses

The costs associated with doing business

Capital

The money invested into the business by the owner using his or her own funds

Withdrawals

Money the owner takes back out of the business, or monies that the owners pay themselves back from the business

Fees

Monies earned by services (Lawyers/Doctors/Dentists)

EACH TRANSACTION AFFECTS....

Assets,Liabilities,Capital/Withdrawal, Revenue,Expenses (These are all separate accounts)

Accounting

Recording, classifying and summarizing financial information and interpreting the results

Proprietor

Owner of a business

Investment

Assets used in the business that were provided by the owner

Accounts Payable

Short-term debts owed for credit purchases

Creditors

Companies and individual to whom money is owed

Balance Sheet

Itemized list of assets, liabilities and owner's equity, showing financial position of a business on a certain date. "Snapshot of a date"

Business Transactions

Business activities involving the exchange of one item of value for another.