Account 1-2

Learning Goal

Classify accounts as assets, liabilities, or equity

Analyze the effects of transactions on the accounting equation

Distinguish between cash and on account transactions

Terms

Service Business-A business that performs an activity for a fee

Proprietorship-is a business owned by one person(unlimited liability)

Rule of 72- length of time it takes money to double at a set interest rate (72 / 6 = 12 years)

Gaap (gap) Standards and rules that accountants follow

Equities-financial right to the assets of a business

2 types of equities

1st equity of those to whom money is owed

2nd equity of the owner

Accounting equation Assets = Liabilities + Owner’s Equity

Totals on the left must = totals on the right

Terms

Transaction-a business activity that changes the accounting equation

Account- a single item in the accounting equation

Account title-name given to an account (cash)

Account balance-the difference between the increase and decreases in an account

Capital account-an account used to summarize the owner’s equity(Michael Delgado, Capital)

Creditor-a person or business to whom a liability is owed