Chapter 1 Review

A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

• net worth statement

• personal net worth

• accounting equation

• account

Planning, recording, analyzing, and interpreting financial information.

• accounting

• account

• accounting system

• GAAP

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

• accounting equation

• accounting

• accounting system

• account

A business activity that changes assets, liabilities, or owner’s equity.

• transaction

• GAAP

• sale on account

• accounting

A planned process for providing financial information that will be useful to management.

• accounting system

• accounting

• transaction

• asset

The standards and rules that accountants follow while recording and reporting financial activities.

• GAAP

• accounting

• sale on account

• net worth statement

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

• capital account

• asset

• expense

• revenue

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

• Owner's equity

• asset

• revenue

• expense

A record summarizing all the information pertaining to a single item in the accounting equation.

• account

• transaction

• sale on account

• asset

The difference between personal assets and personal liabilities.

• personal net worth

• net worth statement

• transaction

• accounting