Accounting Chapter 1

What is the formula for Net Worth?

• Assets = Liabilities + Owner's Equity

• Assets - Liabilities

• Assets + Liabilities

• Liabilities - Assets

What is the Accounting Equation?

• Assets - Liabilities = Net Worth

• Assets = Liabilities + Owner's Equity

• Assets + Liabilities + Net Worth

• Assets x Liabilities - Owner's Equity

What is the best definition of an ASSET?

• Something valuable that you own

• Something you owe money on

• How much a company is worth

• The owner's investment in the company

What is the best definition of LIABILITY?

• Something valuable that you own

• Something you owe money on

• How much a company is worth

• The owner's investment in the company

Why would you need to make a Net Worth Statement?

• To include on job applications

• To include on your resume

• To show a bank in order to open a checking account

• To show a bank in order to get a loan

A business that performs an activity for a fee is called a...

• service business

• sole proprietorship

• retail business

• non-profit business

Michael Delgado owns and operates his company by himself, this is known as a...

• Proprietorship (sometimes called a Sole Proprietorship)

• Partnership (sometimes called "Partners")

• A limited liability corporation (An LLC)

• A corporation (corp.)

A formal document that outlines the nature of a business and how it will operate

• Net Worth Statement

• Accounting Equation

• Business Plan

• Balance Sheet

True or False: The Accounting Equation must be equal on each side.

• True

• False

The standards and rules accountants must follow when making financial documents is known as the...

• GAAP

• FED

• IRS

• GOV