Questions and Answers
What is the term for planning, recording, analyzing, and interpreting financial information?
accounting
What are financial reports that summarize the financial condition and operations of a business called?
statements
What is a business that performs an activity for a fee called?
service business
What is a business owned by one person called?
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What do we call anything of value that is owned?
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Financial rights to the assets of a business are called liens.
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Each part of the accounting equation consists of one or more accounts.
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What is the amount remaining after the value of all liabilities is subtracted from the value of all assets called?
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What do we call a business activity that changes assets, liabilities, or owner's equity?
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An account balance is a term applied when both sides of the accounting equation are equal, or, in balance.
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What is the account used to summarize the owner's equity in a business called?
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When a business pays cash for supplies, what happens?
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A sale for which cash will be received at a later date is called accounts payable.
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Which of the following is not a transaction that will affect owner's equity: Paid cash for supplies?
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The account used to summarize the owner's equity in a business is called capital.
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A decrease in owner's equity resulting from the operation of a business is called an expense.
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What happens when a company receives cash from a customer for a prior sale?
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Understanding accounting helps managers and owners make better business decisions.
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Inaccurate accounting records are used to make the business appear to be more successful than it really is, and thereby can help the business really succeed.
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Suppliers that extend credit to a business and institutions have no stake in that organization's success or failure.
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Study Notes
Accounting Fundamentals
- Accounting involves planning, recording, analyzing, and interpreting financial information.
- Financial statements summarize a business's financial condition and operations.
- A service business provides activities for a fee, distinguishing it from product-based businesses.
Business Ownership Types
- A proprietorship is a business owned by a single individual.
- Assets are defined as anything of value that is owned by a business.
Financial Statements & Equations
- Financial rights to a business’s assets are not referred to as liens; this statement is false.
- Each component of the accounting equation comprises one or more accounts, making this statement true.
- Owner's equity is the residual value after all liabilities are subtracted from total assets.
Transactions & Their Impact
- A transaction is any business activity that alters assets, liabilities, or owner's equity.
- An account balance indicates that both sides of the accounting equation are not necessarily equal; this statement is false.
Owner's Equity and Capital
- The account summarizing a business's owner's equity is called capital.
- If a business pays cash for supplies, it results in an increase in supplies, reflecting the flow of resources.
True/False Concepts in Accounting
- Accounts payable refers to sales where cash will be received at a future date; this statement is false.
- Cash payments for supplies do not affect owner's equity directly, which is a key understanding.
- A decrease in owner's equity due to business operations is termed an expense, affirming its true status.
Cash Transactions
- When a company receives cash for a prior sale, its cash increases while accounts receivable decreases, showing the dual effect of transactions.
Importance of Accurate Accounting
- Knowledge of accounting principles aids managers and owners in making better business decisions, highlighting its significance in effective management.
- Inaccurate records create a deceptive portrayal of a business's success and can negatively impact its viability; this statement is false.
- Suppliers extending credit to businesses retain an interest in their success or failure, countering the notion that they lack stakes in business outcomes.
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Description
Test your knowledge of key accounting concepts with these flashcards from Chapter 1 of AA. Each card provides definitions and terms essential for understanding the fundamentals of accounting. Perfect for beginners or anyone looking to refresh their knowledge.
