Chapter 1 Vocabulary (Accounting I)

A vocabulary-style set of flashcards covering key Chapter 1 accounting terms and concepts from the notes.

Service Business

A business that performs an activity for a fee.

Proprietorship

A business owned by one person.

Business Plan

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

GAAP

Generally accepted accounting principles. The standards and rules that accountants follow while recording and reporting financial activities.

Equities

Financial rights to the assets of a business.

Accounting

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

Accounting System

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

Financial Statements

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

Net Worth Statement

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

Asset

Anything of value that is owned.

Liability

An amount owed.

Personal Net Worth

The difference between personal assets and personal liabilities.

Equity

The difference between assets and liabilities.

Ethics

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

Business Ethics

The use of ethics in making business decisions.

Owner’s Equity

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

Accounting Equation

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

Transaction

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

Account

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

Account Title

The name given to an account.

Account Balance

The difference between the increases and decreases in an account.

Capital Account

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

Creditor

A person or business to whom a liability is owed.

Revenue

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

Sale on account

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

Expense

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

Withdrawals

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