Accounting Cengage Chapter 1 Flashcards

Questions and Answers

What is an account?

A record that summarizes all transactions for a single item in the accounting equation (correct)

The total liabilities of a business

A type of financial statement

An expense incurred by a business

What is account balance?

The difference between the increases and decreases in an account.

What is the account title?

The name given to an account.

What is accounting?

The process of planning, recording, analyzing, and interpreting financial data. Signup and view all the answers

What is the accounting equation?

The equation showing the relationship among assets, liabilities, and owner's equity. Signup and view all the answers

What is an accounting system?

A planned process designed to compile financial data and summarize the results. Signup and view all the answers

What is an asset?

Anything of value that is owned. Signup and view all the answers

What are business ethics?

The use of ethics in making business decisions. Signup and view all the answers

What is a business plan?

A formal written document that describes the nature of a business and how it will operate. Signup and view all the answers

What is a capital account?

An account used to summarize the owner's equity in a business. Signup and view all the answers

Who is a creditor?

A person or business to whom a liability is owed. Signup and view all the answers

What are equities?

Financial rights to the assets of a business. Signup and view all the answers

What is equity?

The difference between assets and liabilities. Signup and view all the answers

What are ethics?

The principles of right and wrong that guide an individual in making decisions. Signup and view all the answers

What is an expense?

The cost of goods or services used to operate a business. Signup and view all the answers

What are financial statements?

Financial reports that summarize the financial condition and operations of a business. Signup and view all the answers

What does GAAP stand for?

Generally Accepted Accounting Principles. Signup and view all the answers

What is a liability?

An amount owed. Signup and view all the answers

What is a net worth statement?

A formal report that shows what an individual owns, what an individual owes, and the difference. Signup and view all the answers

What is owner's equity?

The amount remaining after the value of all liabilities is subtracted from the value of all assets. Signup and view all the answers

What is personal net worth?

The difference between personal assets and personal liabilities. Signup and view all the answers

What is a proprietorship?

A business owned by one person. Signup and view all the answers

What is revenue?

An increase in equity resulting from the sale of goods or services. Signup and view all the answers

What is a sale on account?

A sale for which payment will be received at a later date. Signup and view all the answers

What is a service business?

A business that performs an activity for a fee. Signup and view all the answers

What is a transaction?

Any business activity that changes assets, liabilities, or owner's equity. Signup and view all the answers

What is a withdrawal?

Assets taken from the business for the owner's personal use. Signup and view all the answers

Study Notes

Accounting Fundamentals

An account summarizes transactions related to a specific item in the accounting equation.
Account balance represents the net difference between increases and decreases in an account.
Account title refers to the designated name of an account.

Accounting Process and Systems

Accounting involves planning, recording, analyzing, and interpreting financial data.
The accounting equation illustrates the relationship between assets, liabilities, and owner's equity.
An accounting system is a structured method for compiling financial data and summarizing results in reports.

Key Financial Concepts

An asset is any valuable item owned by an entity.
Business ethics apply moral principles to business decision-making.
A business plan is a written document outlining a business's nature and operational strategy.
The capital account summarizes the owner's equity in a business.

Financial Obligations and Rights

A creditor is an entity owed money or an obligation.
Equities signify financial rights associated with a business's assets.
Equity is calculated as the difference between total assets and total liabilities.
Ethics guide right and wrong decision-making processes.

Operational Costs and Financial Reporting

An expense is related to costs incurred for goods or services in running a business.
Financial statements detail a business's financial status and operations.
GAAP stands for Generally Accepted Accounting Principles, dictating standards for financial recording and reporting.

Liabilities and Personal Financial Position

A liability denotes any amount owed to external parties.
A net worth statement reports individual assets, liabilities, and their difference.
Owner's equity is the residual amount after deducting liabilities from total assets.
Personal net worth evaluates the difference between personal assets and liabilities.

Business Ownership Models

A proprietorship refers to a business owned by a single individual.
Revenue represents increases in equity from selling goods or services.
A sale on account indicates a transaction where payment is due at a future date.
A service business provides paid activities rather than goods.

Transaction and Withdrawal Definitions

A transaction constitutes any business action affecting assets, liabilities, or equity.
A withdrawal involves assets taken for the owner's personal use.

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Description

Test your knowledge of key terms from Accounting Chapter 1 of Cengage. This quiz covers important concepts such as accounts, balances, and account titles. Perfect for students looking to reinforce their understanding of foundational accounting principles.