Fundamentals of Accounting Vocabulary #1

Vocabulary ACCOUNTINGplanning, recording, analyzing, and interpreting financial information ACCOUNTING SYSTEMplanned process to provide financial information that is useful to management ACCOUNTING RECORDSorganized summaries of a business’s financial activities FINANCIAL STATEMENTSfinancial reports that summarize the financial condition and operations of a business

Vocabulary SERVICE BUSINESSa business that performs an activity for a fee PROPRIETORSHIPa business owned by one person (aka sole proprietorship) ASSETanything of value that is owned

Vocabulary EQUITIESfinancial rights to the assets of a business (2 types) LIABILITYan amount owed by a business OWNER’S EQUITYthe amount remaining after the value of all liabilities is subtracted from the value of all assets ACCOUNTING EQUATION ASSETS = LIABILITIES + OWNER’S EQUITY

Vocabulary ETHICSthe principles of right and wrong that guide an individual in making decisions BUSINESS ETHICSthe use of ethics in making business decisions

Vocabulary TRANSACTIONa business activity that changes assets, liabilities or owner’s equity ACCOUNTa record summarizing all the information pertaining to a single item in the accounting equation ACCOUNT TITLEthe name given to an account ACCOUNT BALANCEthe amounts in an account CAPITALthe account used to summarize the owner’s equity in a business

Vocabulary REVENUEincrease in owner’s equity resulting from the operation of a business SALE ON ACCOUNTa sale for which cash will be received at a later date EXPENSEdecrease in owner’s equity resulting from the operation of a business WITHDRAWALSassets taken out of a business for the owner’s personal use