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  1. Business Entity
    - An individual, Association, or organization that engages in economic activities and controls specific economic resources

    - The business entity's fincances are kept separate from the owner's nonbusiness assets and liabilities. (Business Entity Concept)
  2. Assets
    Items owned by a business that will provide future benefits. "Owned Not Rented"

    Example:Cash,Merchandise,Supplies,Furniture, Fixtures,Machinery,Buildings, & Land.
  3. Accounts Receivable
    - The amount of money owed to the business by its customers as a result of making sales "on account" or "on credit"

    - Simply, customers who have promised to pay sometime in the future.

    Money Someone Owes Us
  4. Liabilities
    - A probable future outflow of assets as a result of a past transaction or event.

    - Debts or obligations of the business that can be paid with cash, goods, or services.

    Examples: Accounts Payable, Notes Payable,
  5. Accounts Payable
    -An unwirtten promise to pay a supplier for assets purchased or services rendered

    -Referred to as making a purchased "on account" or "on credit"

    Money We Owe
  6. Notes Payable
    Formal written promises to pay suppliers or lenders specified sums of money at definite future times.
  7. Owner's Equity
    Amount by which the business assets exceed the business liabilities.

    Also Called: Net Worth or Capital

    • Example: If a business has a total assets of $100,000 & total liabilities of $60,000.
    • What is the owner's equity?
    • $100,000 - $60,000=$40,000

    • Assets - Liabilites = Owner's Equity.
    • Assets= Liabilities + Owner's Equity.
    • Once the debts are paid, the remaing assets belong to the owner.
Card Set:
2012-01-25 08:26:38
Accounting Definitions

Chapter 1
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