What is an account?
A record summarizing all the information pertaining to a single item in the accounting equation.
What is an account balance?
The amount in an account.
What is an account title?
The name given to an account.
What is accounting?
Planning, recording, analyzing, and interpreting financial information.
What is an accounting equation?
An equation showing the relationship among assets, liabilities, and owner's equity.
What are accounting records?
Organized summaries of a business's financial activities.
What is an accounting system?
A planned process for providing financial information that will be useful to management.
What is an asset?
Anything of value that is owned.
What are business ethics?
The use of ethics in making business decisions.
What is a capital?
The account used to summarize the owner's equity in a business.
What are equities?
Financial rights to the assets of a business.
What are ethics?
The principles of right and wrong that guide an individual in making decisions.
What is an expense?
A decrease in owner's equity resulting from the operation of a business.
What are financial statements?
Financial reports that summarize the financial condition and operations of a business.
What is a liability?
An amount owed by a business.
What is owner's equity?
An increase in owner's equity resulting from the operation of a business.
What is a proprietorship?
A business owned by one person.
What is revenue?
An increase in owner's equity resulting from the operation of a business.
What is sale on account?
A sale for which cash will be received at a later day.
What is a service business?
A business that performs an activity for a fee.
What is a transaction?
A business activity that changes assets, liabilities, and owner's equity.
What are withdrawals?
Assets taken out of a business for the owner's personal use.
True or False: Accounting is the language of business.
True
True of False: Keeping personal and business records separate is an application of the business entity concept.
True
True or False: Assets such as cash and supplies have value because they can acquire other assets or be used to operate a business.
True
True or False: The relationship among assets, liabilities, and owner's equity can be written as an equation.
True
True or False: The accounting equation does not have to be in balance to be correct.
False
True or False: The sum of the assets and liabilities of a business always equals the investment of the business owner.
True
True of False: Recording business costs in terms of hours required to complete projects is an application of the unit of measurement concept.
False
True or False: The capital account is an owner's equity account.
True
True or False: If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.
False
True or False: When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owns future coverage.
True
True or False: When items are bought and paid for later this is referred to as buying on account.
True
True or False: When cash is paid on account, a liability is increased.
False
True or False: When cash is received from a sale, the total amount of both assets and owner's equity is increased.
True
True or False: A sale for which cash will be received at a later date is called a charge sale.
True
True or False: The accounting concept Realization of Revenue is applied when Revenue is recorded at the time goods or services are sold.
True
True or False: When cash is paid for expenses, the business has more equity.
False
When a company receives cash from a customer for a prior sale, the transaction increases the cash account balance and increases the accounts receivable balance.
False
A withdrawal decreases owner's equity
True
What is a chart of accounts?
A list of accounts used by a business
What is a credit?
An amount recorded on the right side of a T account
What is a debit?
An amount recorded on the left side of a T account
What is a normal balance?
The side of the account that is increase
What is a T account?
An accounting device used to analyze transactions
The values of all things owned (assets) are on the account equation's ___________
Left side
The values of all equities or claims against the assets (liabilities and owner's equity) are on the accounting equation's ___________
Right side
An amount recorded on the left side of a T account is a _____________
Debit
An amount recorded on the right side of a T account is a ____________
Credit
The normal balance side of any asset amount is the _____________
Debit side
The normal balance side of any liability account is the ____________
Credit side
The normal balance side of an owner's capital is the ____________
Credit side
Debits must equal credits _____________
For each transaction
Decreases in an asset account are shown on a T account's _____________
Credit side
Increases in an asset account are shown on a T account's ___________
Debit side
Decreases in any liability account are shown on a T account's _________
Debit side
Increases in a revenue account are shown on a T account's _________
Credit side
The normal balance side of any revenue account is the _________
Credit side
The normal balance side of any expense account is the ________
Debit side
The normal balance side of an owner's drawing account is the ________
Debit side