Business Accounting Overview

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Questions and Answers

Which of the following constitutes a service concern in business?

  • Agricultural farm
  • Grocery store
  • Factory
  • Hotel (correct)

Which type of business organization requires at least five persons to form?

  • Cooperative
  • Sole Proprietorship
  • Corporation (correct)
  • Partnership

Accounts Receivable is classified under which category of assets?

  • Current Assets (correct)
  • Non-current Assets
  • Intangible Assets
  • Permanent Assets

Which of the following represents a permanent account?

<p>Liabilities (B)</p> Signup and view all the answers

What does the term 'Credit' signify in accounting?

<p>The value parted with (A)</p> Signup and view all the answers

Flashcards

Manufacturing Business

A business that produces goods using raw materials.

Merchandising Business

A business that buys and sells goods.

Current Asset

Assets expected to be used or turned into cash within one year.

Liability

An obligation of a business to pay money or deliver goods or services.

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Accounting Equation

Assets = Liabilities + Equity

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Study Notes

Nature of Businesses

  • Manufacturing: Factories
  • Merchandising: Retail, buy and sell
  • Service: Laundry, hotels, restaurants, law firms, doctors, freelancing
  • Agriculture

Major Accounts

  • Assets: Resources controlled by the business
    • Current Assets: Cash, cash on hand, inventory, accounts receivable
    • Non-Current Assets Land, building, equipment, furniture and fixtures
  • Liabilities: Obligations of the business
    • Current Liabilities: Short-term obligations (e.g., payables)
    • Long-Term Liabilities: Long-term obligations
  • Equity/Capital: Owners' investment in the business
    • Sole Proprietorship, Partnership, Corporations, Cooperatives

Forms of Business Organizations

  • Sole Proprietorship: Managed by one person.
  • Partnership: Managed by two or more.
  • Corporation: Managed by 5 or more persons.
  • Cooperative

Golden Rules of Accounting

  • Accounting equation: Assets = Liabilities + Equity
  • AWE (Asset, Withdrawal, Expenses = Liabilities, Income, Capital)

5 Point of View

  • Collected (Debit)
  • Paid (Credit)
  • Rendered Services (Credit)
  • Sold (Debit)
  • Purchased (Credit)

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