Accounting 1 – Study Guide

Accounting
Planning, recording, analyzing and interpreting financial infromation

Accounting System
A planned process for providing financial information that will be useful to management

Accounting records
Organized summaries of a business’s financial activities

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

Service business
A business that performs a activity for a fee

Proprieorship
A business owned by one person

Asset
Anything of value that is owned

Equities
Financial rights to the assets of a business

Liability
An amount owed by a business

Owner’s equity
The amount remaining after the value of all liabilities is subtracted from the value of all assets

Accounting equation
An equation showing the relationship among assets, liabilities, and owner’s equity

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

Business ethics
The use of ethics in making business decisions

Transaction
A business activity that changes assets, liabilities, or owner’s equity

Account
The record summarizing all the information pertaining to a single item in the accounting equation

Account title
The name given to an account

Account balance
The amount in an acount

Capital
The account used to summarize the owner’s equity in a business

Revenue
An increase in owner’s equity resulting from the operation of a business

Sale on Account
A sale for which cash will be received at a later date

Expense
A decrease in owner’s equity resulting from the operation of a business

Withdrawals
Assets taken out of a business for the owner’s personal use