Accounting Terms Ch. 1 Unit 2

Accounting Period

1 Month, 1 Quarter (3 months), 1 Year

Financial Statements

Prepared at the end of period, report summary amount totals

Balance Sheet

Summarizes two opposite aspects, assets and sources of assets

B.S. Assets

List business owned and used assets at their original value

Sources of Assets

Creditors, owners, and profits

Creditors

Borrow money of interest bearing loan, liabilities

Owners

Invest capital (money)

B.S. Profits

Retain part or all of annual profits, increase surplus

B.S. Surplus

Retained earnings

Accounting Equation

$Assets = $Liabilities + $Capital + $Retained earnings

B.S. Owners Equity

Recorded net worth

Double entry bookkeeping

Both sides of transactions are recorded

Income Statment

Profit and loss, summary of sales, revenue, other income, offset by expenses and losses during the period

Statement of Cash Flows

Summary of cash inflows and outflows during a period

Primary Financial Statments

Balance sheet, income statement, cash flow

GAAP

Generally accepted accounting principles

GAAP define

Set of rules with details, complexities, legalities

FASB

Financial Accounting Standards Board