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Accounting: Chapter 1

AB
Column IColumn II
accountingThe process of planning, recording, analyzing, and interpreting financial information (p.6)
accounting systemA planned process designed to compile financial data and summarize the results in accounting records and reports. (p.6)
financial statementsFinancial reports that summarize the financial condition and operations of a business (p.6)
net worth statementA formal report that shows what an individual owns, what an individual owes, and the difference between the two. (p.7)
assetAnything of value that is owned. (p.7)
liabilityAn amount owed. (p.7)
personal net worthThe difference between personal assets and personal liabilities. (p.7)
equityThe difference between assets and liabilities. (p.7)
ethicsThe principles of right and wrong that guide an individual in making decisions. (p.8)
business ethicsThe use of ethics in making business decisions. (p.8)
service businessA business that performs an activity for a fee. (p.10)
proprietorshipA business owned by one person. (p.10)
business planA formal written document that describes the nature of a business and how it will operate. (p.10)
GAAPGenerally Accepted Accounting Principles. The standards and rules tht accountants follow while recording and reporting financial activities. (p.11)
equitiesFinancial rights to the assets of a business. (p.13)
owner's equityThe amount remaining after the value of all liabilities is subtracted from the value of all assets. (p.13)
accounting equationThe equation showing the relationship among assets, liabilities, and owner's equity. (p.13)
transactionAny business activity that changes assets, liabilities, or owner's equity. (p.14)
accountA record that summarizes all the transactions pertaining to a single item in the accounting equation. (p.14)
account titleThe name given to an account. (p.14)
account balanceThe difference between the increases and decreases in an account. (p.14)
capital accountAn account used to summarize the owner's equity in a business. (p.14)
creditorA person or business to whom a liability is owed. (p.16)
revenueAn increase in equity resulting from the sale of goods or services. (p.18)
sale on accountA sale for which paymet will be received at a later date. (p.18)
expenseThe cost of goods or services used to operate a business. (p.19)
withdrawalAssets taken from the business for the owner's personal use. (p.20)


Professor/Business Coordinator Mission Center
CCSF
San Francisco, CA

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