Accounting I Study

What is the foundation of accounting?

• Assets = Liabilities + Owner's Equity

• Assets + Liabilities = Owner's Equity

• Assets - Liabilities = Owner's Equity

• Liabilities = Assets + Owner's Equity

Owner's Equity Credit

• An entry that decreases the owner’s equity account.

• An entry that increases the owner’s equity account. Ex. Money was put into the owner's equity account.

• An entry that transfers funds from the owner's equity account to liabilities.

• An entry that records expenses related to owner's equity.

Stockholder's Equity

• The total assets owned by a corporation.

• The equity of stockholders in a corporation, similar to owner’s equity but in a corporate structure where stockholders receive a dividend if there are positive earnings.

• The amount of money a corporation owes to its creditors.

• The profits retained in the business after dividends are paid.

Purchase on Account

• A purchase made with a promise to pay later, recorded as accounts payable.

• A cash transaction completed at the time of purchase.

• A purchase made with a credit card that requires immediate payment.

• A purchase that is returned for a refund.

Liability Debit

• An entry that increases a liability account.

• An entry that decreases a liability account. Ex. your company pays on an accounts payable that it owes someone else

• An entry that has no effect on a liability account.

• An entry that transfers a liability to an asset account.

Accrual Basis Accounting

• An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

• An accounting method that records revenue only when cash is received and expenses only when cash is paid.

• An accounting method that focuses solely on cash transactions and ignores non-cash activities.

• An accounting method that requires all transactions to be recorded at the end of the fiscal year.

Trial Balance

• A report that lists the balances of all general ledger accounts to ensure that debits equal credits.

• A financial statement that summarizes the revenues and expenses for a specific period.

• A document that outlines the company's cash flow for the month.

• A summary of the company's assets, liabilities, and equity at a specific point in time.

Assets

• Resources owned by a business that have value, like cash, inventory, and equipment.

• Liabilities that a business owes to creditors.

• Expenses incurred by a business during operations.

• Revenue generated from sales of goods and services.

Asset Debit

• An entry that decreases an asset account.

• An entry that increases an asset account. Like cash received.

• An entry that transfers an asset to a liability account.

• An entry that records a loss in asset value.

Owner's Equity

• The owner's interest in the business after deducting liabilities from assets.

• The total value of all assets owned by the business.

• The amount of money invested by the owner in the business.

• The profits retained in the business after dividends are paid.