Accounting Review

Which standards and rules help ensure that companies follow the same guidelines and practices

General Accepted Accounting Principles (GAAP)

In the accounting equation, what equals liabilities plus owner’s equity

Assets

A disadvantage to a sole proprietorship

Unlimited liability

What are financial statements?

Business reports

Anything of value that is owned is called an

asset

What is a liability

Amount owed

The difference between what an individual owns and what they owe can be reflected on

Net worth statement

What type of business performs activities for fees

Service

What is revenue?

Equity increase

What are withdrawals?

Assets taken from the business by the owner

What is a person or business to whom a liability is owed?

Creditor

What is buying on account?

A purchase made that allows a business to buy now and pay later

What must the accounting equation always be?

Balanced

Which of the following is not part of the process of accounting

Recording, planning, analyzing and interpreting (all of these are part of accounting)

T or F: Assets plus liabilities = net worth

False

A formal document that describes the nature of a business and how it will operate is called a

business plan

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

transaction

T or F: If a business paid cash for supplies, two assets are affected

True

T or F: Prepaid insurance is an asset

True

The two accounts affected for a sale on account are

Accounts receivable and owner’s equity

“Paid cash on account to Paws & Claws Co”

- Cash, - Accounts payable

“Received cash on account from Dr. Shepherd“

+ Cash, - Accounts receivable