Audit Your Understanding ch 1

What is a proprietorship?

A proprietorship is a business owned by one person.

What is accounting?

Accounting is planning, recording, analyzing, and interpreting financial information.

What should be done if a balance sheet is not balanced?

If the balance sheet is not balanced when you reach the end, you must backtrack in order to find out where the mistake came from.

What must be done if a transaction increases the left side of the accounting equation?

If the left side of the accounting equation increases, the right side must increase as well.

State the accounting equation?

The accounting equation is Assets = Liabilities + Owner's Equity

How can a transaction affect only one side of the accounting equation.

The only way to affect only one side of the accounting equation is to charge on account.

To what does the phrase "on account" mean?

The phrase "on account" means to buy items and pay for them at a future date.

List the three sections of a balance sheet.

The three sections of a balance sheet are assets, liabilities, and owner's equity.

What kinds of accounts are listed on the left side of a balance sheet?

The type of accounts that are listed on the left side of a balance sheet are assets.

What kinds of accounts are listed on the right side of the balance sheet?

The types of accounts that are listed on the left side of a balance sheet are accounts Liabilities and Owner's Equity.

Give two examples of service business?

Two examples of a service business are Jo's Tire Repair, or T.O Hoss. These two both give service to people that need their vehicle fixed or repaired.