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The process of planning, recording, analyzing, and interpreting financial information.

accounting

A planned process designed to compile financial data and summarize the results in accounting records and reports.

accounting system

Financial reports that summarize the financial condition and operations of a business.

financial statements

A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

net worth statement

Anything of value that is owned.

asset

An amount owed.

liability

The difference between personal assets and personal liabilities.

personal net worth

The difference between assets and liabilities.

equity

The principles of right and wrong that guide an individual in making decisions.

ethics

The use of ethics in making business decisions.

business ethics

A business that performs an activity for a fee.

service business

A business owned by one person.

proprietorship

A formal written document that describes the nature of a business and how it will operate.

business plan

Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities.

GAAP

Financial rights to the assets of a business.

equities

The amount remaining after the value of all liabilities is subtracted from the value of all assets.

owner's equity

The equation showing the relationship among assets, liabilities, and owner's equity.

accounting equation

Any business activity that changes assets, liabilities, or owner's equity.

transaction

A record that summarizes all the transactions pertaining to a single item in the accounting equation.

account

The name given to an account.

account title

The difference between the increases and decreases in an account.

account balance

An account used to summarize the owner's equity in a business.

capital account

A person or business to whom a liability is owed.

creditor

An increase in equity resulting from the sale of goods or services.

revenue

A sale for which payment will be received at a later date.

sale on account

The cost of goods or services used to operate a business.

expense

Assets taken from the business for the owner's personal use.

withdrawals