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Chapter 1
Accounting 1
| Term | Definition |
|---|---|
| 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 | Financial reports that summarize the financial condition and operations of a business |
| 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 |
| 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 |
| 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 |
| 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 |
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