Chapter 1 Vocabulary and the Accounting Equation

What are financial reports that summarize the financial condition and operations of a business?

• Financial Statements

• Personal Net Worth

• Asset

• Ethics

What is a formal report that shows what an individual owns, what an individual owes, and the difference between the two?

• Equity

• Net Worth Statement

• Liability

• Business Ethics

What type of business performs an activity for a fee, such as landscaping or providing medical services?

• Accounting System

• Service Business

• Liability

• Equity

What is a proprietorship?

• A business owned by multiple people.

• A business owned by one person.

• A business owned by a corporation.

• A business owned by the government.

What is a business plan?

• A casual conversation about business ideas.

• A formal written document describing the nature of a business and how it will operate.

• A list of potential business partners.

• A summary of past business successes.

What is owner's equity?

• The total value of all assets.

• The amount remaining after liabilities are subtracted from assets.

• The total value of all liabilities.

• The amount of cash on hand.

What is a capital account?

• An account summarizing the owner’s equity in a business.

• An account summarizing the business expenses.

• An account summarizing the business profits.

• An account summarizing the business debts.

What does an account summarize?

• All business meetings.

• All transactions for a single item in the accounting equation.

• All business profits.

• All business expenses.

What is revenue?

• An increase in equity as a result from the sale of goods or services.

• A decrease in equity due to expenses.

• Assets taken from the business for personal use.

• A sale for which payment will be received at a later date.

Which term describes the cost of goods used in business operations?

• Expense

• Revenue

• Withdrawal

• Sale on Account