Chapter 1 Flashcards
(37 cards)
who does accounting provide information to
managers, owners, investors, government agencies
what does accounting do
provide financial information for decision makers
what does the accounting process do
analyze, record, classify, summarize, report, interpret, communicate
what is sole proprietorship
one owner makes all the decisions for the business
what’s a disadvantage of sole proprietorship
if sued, they can take personal stuff
what is a partnership
at least 2 owners share the decision making & risk of business
what is a corporation
owned by stockholders
what is a liability corporation (LLC)
owned by a few stockholders, liable only to the extent of their investment
what is merchandising
make their own products/sell products made by another supplier
what is manufacturing
companies that make their own products
what is GAAP (generally accepted accounting principles)
procedures & guidelines that must be followed during the accounting process
what is bookkeeping
recording function of the accounting process
what is the accounting equation
assets = liabilities + owner’s equity
what are assets
properties of value OWNED by a business (cash, supplies, office equipment)
what is a liability
future obligation (rights of creditors)
what is accounts payable
promise to pay the creditor (liability)
what are equities
total claims (of creditors & owners) against the assets
what are creditors
companies that are owed money & have a claim to assets
what is capital
owner’s investment in a company
what is a shift in assets
make-up of the assets has changed, but the total remains the same
what is revenue
amounts earned by performing services, increases owner’s equity (will always be cash/accounts receivable)
when do assets increase
cash (if client pays right away) or accounts receivable
what is accounts receivable
client promises to pay in the future (assets)
what are expenses
cost incurred in efforts to create revenue, decreases owners equity, paid in cash/can be charged
