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Chapter 2 test

TermDefinition
Account A separate record used to summarize changes in each asset, liability, and owner's equity of a business.
Account title Provides a description of the particular type of asset, liability, owner's equity, revenue, or expense.
accounting equation The accounting equation consists of the three basic accounting elements: Assets = Liabilities + Owner's Equity.
accounting period concept The concept that income determination can be made on a periodic basis.
accounts payable An unwritten promise to pay a supplier for, assets purchased or services received.
accounts receivable An amount owed to a business by its customers as a result of the sale of goods or services.
Asset An item that is owned by a business and will provide future benefits.
balance sheet Reports assets, liabilities, and owner's equity on a specific date. It is called a balance sheet because it confirms that the accounting equation is in balance.
business entity An individual, association, or organization that engages in economic activities and controls specific economic resources.
business entity concept The concept that nonbusiness assets and liabilities are not included in the business entity's accounting records.
business transaction An economic event that has a direct impact on the business.
Capital Another term for owner's equity, the amount by which the business assets exceed the business liabilities.
Drawing Withdrawals that reduce owner's equity as a result of the owner taking cash or other assets out of the business for personal use.
Expenses The decrease in assets (or increase in liabilities) as a result of efforts to produce revenues.
fiscal year Any accounting period of 12 months' duration.
income statement Reports the profitability of business operations for a specific period of time.
Input Business transactions provide the necessary input for the accounting information system.
Liability Something owed to another business entity.
Liquidity A measure of the ease with which an asset will be converted to cash.
net income The excess of total revenues over total expenses for the period.
net loss The excess of total expenses over total revenues for the period.
net worth Another term for owner's equity, the amount by which the business assets exceed the business liabilities.
notes payable A formal written promise to pay a supplier or lender a specified sum of money at a definite future time.
Operating statement Another name for the income statement, which reports the profitability of business operations for a specific period of time.
Output The financial statements are the output of the accounting information system.
owner's equity The amount by which the business assets exceed the business liabilities.
Processing Recognizing the effect of transactions on the assets, liabilities, owner’s equity, revenues, and expenses of a business.
profit and loss statement Another name for the income statement, which reports the profitability of business operations for a specific period of time.
Revenues The amount a business charges customers for products sold or services performed.
statement of financial condition Another name for the balance sheet, which reports assets, liabilities, and owner's equity on a specific date.
statement of financial position Another name for the balance sheet, which reports assets, liabilities, and owner's equity on a specific date.
Statement of owner’s equity Reports beginning capital plus net income less withdrawals to compute ending capital.
Withdrawals Reduce owner's equity as a result of the owner taking cash or other assets out of the business for personal use.
Created by: user-1707001
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