Chapter 3: Property and Financial Claims

Accounts Receivable is an example of a liability

False

An account is a record of only the increases in the balance of a specific item such as cash or equipment.

False

Income earned from the sale of goods and services is called profit

False

Revenues are the prices paid for goods or services used to operate a business.

False

The owner's claims to the assets of a business are liabilities.

False

The total financial claims do not have to equal the total cost of the property.

False

Revenue

Income earned from the sale of goods or services

Investments

Money or other property paid out in order to produce profit.

Is accounts payable an account category

No

Anything of value that is owned or controlled by an individual or a business is called ____.

Property

Assets

Property or items of value owned by a business

Equities

The accounting term for the financial claims to these assets

Accounts Payable

The amount owed, or payable, to the creditors of a business.

Creditor

The business or person selling you the item on credit is

Expense

The cost of products or services used to operate a business.

Liabilities

The creditor's claims to the assets of the business

Owners Equity

The owner's claims to the assets of the business

Accounts Receivable

The total amount of money owed to a business—money to be received later because of the sale of goods or services on credit.

A creditor has a financial claim to the assets of a business.

True

After each transaction, the basic accounting equation should remain in balance.

True

Any property or item of value owned by a business is an asset

True

Free enterprise system is based on the right to own and sell property.

True

The debts of a business are called its liabilities

True

The increases and decreases caused by business transactions are recorded in specific accounts.

True

Credit

When you buy something and agree to pay for it later, you are buying on

Financial Claim

A legal right to an item.

Business Traction

An economic event that causes a change— either an increase or a decrease—in assets, liabilities, or owner's equity.

Accounting Equation

What is ASSETS = LIABILITIES + OWNER'S EQUITY

On Account

When a business buys an item on credit, it is buying

Withdraw

When an owner takes cash or other assets out of a business for personal use, the transaction

Account

A subdivision under assets, liabilities, or owner's equity.

Property

Anything of value that a person or business owns and therefore controls.

The owner's investment in the business is represented by the ____ account.

Capital

Each of the following is a business expense except a payment for

Cash Withdraw

If John Smith deposits $30,000 in a checking account in the name of his business, the two accounts affected are ____.

Cash in bank and John Smith, Capital

A business transaction that involves a purchase on account is considered to be a(n) ____.

Credit transaction

Financial Claims are claims to assets by

Creditors and Owners