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Ch1 and 2 test
Accounting definitions
27
Accounting
Undergraduate 3
02/04/2011

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Term
sole proprietorship
Definition
An incorporated business owned by one person
Term
Main advantage:
sole proprietorship
Definition
owner has complete control over the business
Term
Main disadvantage:
sole proprietorship
Definition
Owner is personally liable for the debts of the business
Term
Partnership
Definition
Unincorporated business owned by two or more people
Term
Main Advantage:
Partnership
Definition
Business has access to more money
Term
Main disadvantage:
Partnership
Definition
Partners are personally liable for the debts of the business
Term
Corporation
Definition
An equal enitiy created under the laws of a certain state
Term
Main advantage:
Corporation or "C" Corporation
Definition
Owners are not personally liable for the debts of the business
Term
Main disadvantage:
Corporation or "C" Corporation
Definition
double taxation
Term
Main advantage:
"S" Corporation
Definition
business is taxed like a partnership
Term
Main disadvantage:
"S" Corporation
Definition
Restrictions on the number of owners
Term
Main advantage:
LLC
Definition
Business may choose to be taxed as a partnership
Term
Purpose of Accounting
Definition
to provide information about an organization's finacial transactions
Term
Journal
Definition
A journal is a book in which transactions are recoreded
Term
General Ledger
Definition
A book that shows "how much" of an item an organization has (how much cash, inventory and sales revenue)
Term
Subsidiary Ledger
Definition
A book that shows the detail of one specific general ledger page
Term
7 basis accounting catorgories
Definition
Asset Expense
Liability Gain
Owner's eqity Loss
Revenue
Term
Asset
Definition
Something of value that the business owns (I-D)
Term
Liability
Definition
A debt that the business owns (D-I)
Term
Owner's equity
Definition
the amount that the owner has invested into the business(D-I)
Term
Revenue
Definition
the selling price of (a) merchandise sold to costomers or (b) services provided to customers (D-I)
Term
Expense
Definition
the cost of services recieved by others (I-D)
Term
Gain
Definition
the excess of the selling price of an asset(except inventory) over its carrying amount (D-I)
Term
Loss
Definition
the excess of the (carrying account) of an asset (except inventory) over its selling price (I-D)
Term
Debit column
Definition
the left hand "amount" column on a general ledger page
Term
Debit account
Definition
a general ledger page on which a number is entered into the left handed "amount" column
Term
Credit column
Definition
the right handed "amount"
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