accounting final 12/20 - accounting cycle

what are the 4 main types of financial statements?

- balance sheet - income statement - statement of owner's equity - statement of cash flow

why is accounting important?

- its an integral part of running a business - accounting expertise helps business people regardless of their job - important to a person's financial literacy

what are the steps of the accounting cycle?

1. collect + analyze source documents 2. journalize each transaction chronologically 3. post to the general ledger 4. prepare trial balance 5. prepare financial statements 6. perform post-closing journal entries 7. perform post-closing trial banace

what is the basic accounting equation?

Assets = Liabilities + Owner's Equity

other expenses definition

bills that the business pays that aren't considered part of the operating expense of running a business; numbered 700-799.

assets definition

different types of economic resources that are owned by a business, numbered 100-199

other revenue definition

income generated by the business that isn't considered part of running the business; numbered 600-699.

revenue definition

money generated by the business and is the reason it is in business; numbered 400-499.

what do financial statements do?

report specific financial data to show decision makes how the business has performed

liablities deifniton

represent the creditor's claim to the assets of the business. things you owe to others; numbered 200-299

expenses definition

the costs of doing business, these represent the company's expenditures which allow it to stay in business; numbered 500-599.

owner's equity definition

the owner's claim to the assets of the business as well as the value of the owner's investment in the business; numbered 300-399.

how does the accounting cycle end?

with temporary account balances (revenue, expenses and withdrawals) are transferred to the owner's capital account. then the accounts state the next cycle with zero balances