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Accounting Vocabulary

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Accounting Vocabulary Accounting Financial information Planning Goal setting Needs assessment Recording Keep track of where money comes from and where it is going ... – PowerPoint PPT presentation

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Title: Accounting Vocabulary


1
Accounting Vocabulary
2
Accounting
  • Financial information
  • Planning
  • Goal setting
  • Needs assessment
  • Recording
  • Keep track of where money comes from and where it
    is going

3
Accounting (contd)
  • Analyzing
  • Where is our money coming from
  • Where is our money going
  • How do we compare with our competitors
  • Did we improve when compared with last period
  • Interpreting
  • What does the information mean for the future
    health and viability of our company

4
Accounting System
  • A planned process for providing financial
    information that will be useful to management
  • Organized
  • Computer-based (?)
  • Consistent
  • Transparent

5
Accounting Records
  • Organized summaries of a business financial
    activities
  • Journals
  • Ledgers
  • Worksheets
  • Reports

6
Financial Statements
  • Financial reports that summarize the financial
    conditions and operations of a business
  • Balance Sheet
  • Income Statement
  • Statement of Cash Flows
  • Supplemental information
  • Legal Requirements

7
Service Business
  • A business that performs an activity for a fee
  • Does not manufacture (produce) anything
  • Examples include..

8
Proprietorship
  • A business that is owned by one person
  • Most common form of business in the US
  • Income from a proprietorship represents personal
    income for the owner
  • Partnerships are proprietorships owned by 2 or
    more people
  • A proprietorship is not a separate legal entity

9
Asset
  • Anything of value that is owned
  • Cash
  • Supplies
  • Prepaid insurance
  • Account receivables
  • Other assets include inventory, equipment,
    land,

10
Liability
  • An amount owed by a business
  • Accounts payable
  • Other liabilities include short term debt, long
    term debt, ..

11
Equities
  • Financial rights to the assets of a business
  • Common and preferred stock
  • Ownership in the company
  • Proprietorships do not sell any form of stock

12
Owners Equity
  • Assets Liabilties
  • The value of a company once its obligations are
    subtracted from what it has
  • Capital is a part of Owners Equity
  • Owners Equity represents what the company is
    worth
  • What does negative Owners Equity mean?

13
Business Ethics
  • The use of the principles of right and wrong in
    making business decisions
  • Scandals have led to new regulations regarding
    financial reporting
  • Ethics impact all aspects of business
  • Increased media scrutiny of corporate wrongdoing
    has raised consumer awareness

14
The Accounting Equation
  • Assets Liabilities Owners Equity
  • What we own What we owe what we are
    worth
  • End of Section 1

15
Transaction
  • A business activity that changes assets,
    liabilities or owners equity
  • Sale
  • Purchase
  • Investment

16
Account
  • A record summarizing all the information
    pertaining to a single item in the accounting
    equation
  • Assets include cash, supplies, prepaid insurance,
    accts. receivable
  • Liabilities include acct. payable
  • Owners equity includes capital and drawing

17
Account Balance
  • The amount in an account.
  • Represents the cash value of an account
  • Account balances are not negative

18
Capital Account
  • Primary component of Owners Equity
  • Investment in the company
  • Plus Net income
  • Minus Net loss
  • Minus Drawing
  • Drawing is the amount an owner takes from the
    business for personal use
  • End of section 2

19
Revenue
  • An increase in Owners Equity resulting from the
    operation of business
  • Sales is the primary revenue account

20
Sale on Account
  • A sale for which cash will be received at a later
    date
  • Money owed to a company from a sale on account is
    an account receivable
  • Receivables represent what customers owe a
    company
  • Receivables are assets

21
Expense
  • A reduction in Owners Equity resulting from the
    operation of a business
  • Expenses represent the cost of doing business
  • Rent
  • Supplies
  • Delivery
  • Miscellaneous
  • Utilities

22
Withdrawals
  • Assets taken out of the business for owners
    personal use
  • Cash is the most common
  • Problems can arise if the owner withdraws too
    many assets from a business
  • Withdrawals are accounted for in the Drawing
    account
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