Term
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Definition
| Planning, recording, analyzing, and interpreting financial data. |
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Term
| What is an accounting system? |
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Definition
| A planned process for providing financial information that will be useful to management. |
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Term
| What are accounting records? |
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Definition
| Organized summaries of a business's financial activities. |
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Term
| What often contributes to business failures or bankruptcy? |
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Definition
| Inaccurate accounting records. |
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Term
| What is a service business? |
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Definition
| A business that performs an activity for a fee. |
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Term
| What is a proprietorship? |
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Definition
| A business owned by one person. |
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Term
| What does Encore Music do? |
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Definition
| They rent office space and the instruments used to teach music lessons. |
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Term
| What is the equity equation? |
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Definition
| Assets = Liabilities + Owner's Equity |
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Term
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Definition
| Anything of value that is owned. |
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Term
| What are some examples of assets? |
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Definition
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Term
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Definition
| Financial rights to the assets of a business. |
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Term
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Definition
| An amount owed by a business. |
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Term
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Definition
| The amount left over after subtracting liabilities from assets. |
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Term
| What is important to remember about the Accounting Equation? |
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Definition
| It MUST be in balance in order to be correct. This means that the total of the accounts on the left side of the equation must always equal the total of accounts on the right side. |
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Term
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Definition
| A business activity that changes assets, liabilities, or owners equity. |
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Term
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Definition
| A record summarizing all the information pertaining to a single item in the accounting equation. |
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Term
| What is an account title? |
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Definition
| The name given to an account. |
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Term
| What is the cash account for? |
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Definition
| The Cash account is used to summarize information about the amount of money the business has available. |
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Term
| What is an account balance? |
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Definition
| The amount in an account. |
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Term
| What is a capital account? |
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Definition
It is the account that is used to summarize the owner's equity in a business.
The capital account is the owner's equity account. |
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Term
| What is Encore Music's Capital account called? |
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Definition
Barbara Trevino, Capital
This account summarizes the owner's equity in Encore. |
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Term
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Definition
| A financial statement that reports assets, liabilities, and owner's equity on a specific date |
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Term
| What are the major sections of a balance sheet? |
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Definition
Assets - located on the left side of the accounting equation, which means that the assets are also listed on the left side of the balance sheet.
Liabilities - located on the right side of the accounting equation, which means that liabilities are also listed on the right side of the balance sheet.
Owners Equity - located on the right side of the accounting equation, which means that Owner's Equity is also listed on the right side of the balance sheet. |
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Term
| What are the steps to preparing a balance sheet? |
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Definition
1. Write the heading centered on the top three lines of the balance sheet.; the name of the business, the name of the report (Balance Sheet), and the data of the report.
2. Prepare the Assets section. Center the word "Assets" on the first line or the wide column on the left. Under this heading, write each asset account and amount.
3. Prepare the Liabilities section. Center the word "Liabilities" on the first line of the wide column on the right. Under this heading, write each liability account and amount.
4. Prepare the Owner's Equity section. Center the words "Owner's Equity" on the next blank line under the Liabilities section. Under this heading write the Owner's Equity account title and amount.
5. Add all the asset accounts. Add the liabilities and the Owner's equity amounts. If the totals equal, the balance sheet is in balance (correct).
6. Rule a single line across each amount column, A single line means that the amounts are to be added or subtracted.
7. On the next line of the left side, write Total Assets and write the total asset amount under the single rule. On the right side, write Total Liabilities and Owner's Equity amount under the single rule.
8. Rule double lines below the amount column totals. Double rules means that the totals have been verified as correct. |
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