Flashcards in Ch 2 - Analyzing Bus Trans GEN Deck (18):
What is the equation for determining how a transaction affects the business?
property = financial interest
What are the steps to analyze the effect of a business transaction? (5)
1. describe the financial event:
2. identify the property
3. identify who owns the property
4. determine the amount of increase or decrease
5. make sure equation is in balance
What are two alternate names for purchasing services on account?
1. charge account
2. open-account credit
What is another name for a balance sheet?
statement of financial position
What are two other names for owner's equity?
2. net worth
What three things does a balance sheet show?
1. amount and types of property the business owns
2. amount owed to creditors
3. owner's interest
What is the formula for the fundamental accounting equation?
assets = liabilities + owner's equity
When services are sold on account to a client, what two accounts are affected?
1. increase accounts receivable (assets)
2. increase revenue (owner's equity)
What do a firm's accounting records show? (2)
1. increases/decreases in assets, liabilities and owner's equity
2. details of all transactions involving revenue and expenses
What is a summary of transactions? (2)
1. report that summarizes transactions for given period of time
2. shows transactions and running balance
What are three alternate names for the income statement?
1. profit and loss statement
2. statement of income and expenses
3. statement of operations
What does the income statement show?
difference between income/revenue from services provided or goods sold and expenses to operate the business
What does a single line indicate on a financial report?
the amounts above it are being added or subtracted
What does a double line on a financial report indicate?
used under the final amount to indicate it is complete
When do you include and exclude $ signs? (2)
1. if the report is on a paper with ruled columns then no dollar signs
2. if on plan paper, then a dollar sign at the first entry and total
What three types of info are included on a balance sheet?
1. asset accts
2. liability accts
3. capital balance of owner's equity
What two types of accounts are included on an income statement?