Lesson 1-1 Accounting in Action

Equity

The difference between assets and liabilities (Business).

Liability

An amount owed.

Financial Statements

Financial reports that summarize the financial condition and operations of a business.

Ethics

The principles of right and wrong that guide an individual in making decisions.

Accounting

The process of planning, recording, analyzing, and interpreting financial information.

Business Ethics

The use of ethics in making business decisions.

Equation

Total Assets (Owned) - Total Liabilities (Owed) = Net Worth (Also known as Equity)

Net Worth Statement

A formal report that shows what an individual owes, and the difference between the two.

Accounting System

A planned process designed to compile financial data and summarize the results in accounting records and reports.

Asset

Anything of value that is owned.

Personal Net Worth

The difference between personal assets and personal liabilities.