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Accounting - Planning, recording, analyzing, and interpreting financial information

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

Accounting Records - Organized summaries of a businesss financial activities

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

Service Business - A business that performs an activity for a fee

Proprietorship - 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 owned by a business

Owners 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 owners equity

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

Business Ethics - The use of ethics in making business decisions

Transaction - A business activity that changes assets, liabilities, or owners equity

Account - A 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 amount

Capital - The account used to summarize the owners equity in a business

Revenue - An increase in owners 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 owners equity resulting in from the operation of a business

Withdrawals - Assets taken out of a business for the owners personal use

Questions and Answers

Section 1-1
1. What is accounting? Accounting is Planning, recording, analyzing, and interpreting financial information.
2. Give 2 examples of service businesses. 1) Martins 2) WalMart
3. What is proprietorship? Proprietorship is A business owned by one person
4. State the accounting equation. Assets = Liabilities + Owners Equity

Section 1-2

1. The total amounts on the left side must equal the total amount on the right side of the equation
2. When you make a transaction, you will only affect the one side of the equation because you are decreasing on one

side and not the other.


3. It denotes partial payment of an account.