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Questions and Answers
Match the following accounting terms with their definitions:
Match the following accounting terms with their definitions:
Asset = Item of value owned by the business Revenue = Costs incurred while earning income Liability = Amount owed by the business to external parties Owner's Equity = Amount of owner's investment in the business
Match the following accounting terms with their characteristics:
Match the following accounting terms with their characteristics:
Drawings = Negative owner's equity account Capital = Value of owner's contributions to the business Revenue = Income earned from normal business activities Liability = CR by nature
Match the following examples with their corresponding accounting terms:
Match the following examples with their corresponding accounting terms:
Cash at bank = Asset Sales = Revenue Loans to bank = Liability Wages = Expense
Match the following equations to their corresponding accounting concepts:
Match the following equations to their corresponding accounting concepts:
Match the following accounting documents with their purposes:
Match the following accounting documents with their purposes:
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Study Notes
Key Financial Terms
- Asset: Represents items of value owned by a business, classified as a debit (DR) by nature. Examples include cash at bank, motor vehicles, and land.
- Revenue: Income generated from the normal operations of a business, classified as a credit (CR) by nature. Examples consist of rent revenue, interest revenue, and sales.
- Owner’s Equity: Reflects the owner's interest or investment in the business, recognized as a credit (CR). Includes capital (investment) and drawings (withdrawals).
- Expenses: Costs incurred while generating income, categorized as a debit (DR) by nature. Common examples are wages, electricity, and advertising costs.
- Liability: Amounts owed by the business to external parties, categorized as a credit (CR) by nature. Examples include accounts payable, loans to banks, and bank overdrafts.
- Drawings: Cash or asset amounts withdrawn from the business by the owner, treated as a debit (DR); negatively impacts owner's equity.
- Capital: Represents the value of the investment made by the owner into the business, classified as a credit (CR), and is part of owner’s equity.
- Balance Sheet: An accounting report that provides a snapshot of a business’s assets, liabilities, and owner’s equity at a specific point in time.
Accounting Equations
- Owner's Equity (OE) = Assets (A) - Liabilities (L)
- Assets (A) = Liabilities (L) + Owner's Equity (OE)
- Liabilities (L) = Assets (A) - Owner's Equity (OE)
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