A business that performs an activity for a fee.

is a business owned by one person.

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

An amount paid for the use of money for a period of time.

is interest paid on an original amount deposited in a bank plus any interest that has been paid.

The standards and rules that accountants follow while recording and reporting financial activities are commonly referred to as generally accepted accounting principles or GAAP.

Financial rights to the assets of a business.

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

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

Accountants call any business activity that changes assets, liabilities, or owner’s equity.

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

The difference between the increases and decreases in an account

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

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Ch 1

CH 1-2 How Business Activities Change the Accounting Equation

Term	Definition
Service business	A business that performs an activity for a fee.
Proprietorship	is a business owned by one person.
Business plan	is a formal written document that describes the nature of a business and how it will operate.
Interest	An amount paid for the use of money for a period of time.
Compound interest	is interest paid on an original amount deposited in a bank plus any interest that has been paid.
GAAP	The standards and rules that accountants follow while recording and reporting financial activities are commonly referred to as generally accepted accounting principles or GAAP.
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	The equation showing the relationship among assets, liabilities, and owner’s equity.
Transaction	Accountants call 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.

Created by: NoelRuezga18

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