Accounting Essay

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Accounting Chapter 1 & 2 Accounting: process of identifying, measuring, and reporting financial information of an entity. Accounting Equation: assets = liabilities + equity. Accounting payable: money owed to creditors, vendors, etc. Account receivable: a claim against the customer created by selling merchandise or services on credit. Assets: property with cash value that is owned by a business or individual. Balance Sheet: summary of a company’s financial status, including assets, liabilities, and equity, usually at the close of the last day of a month or a year. Bookkeeping: recording financial information. Capital account: an account used for a proprietorship that represents the owner’s equity. Cash-Basis Accounting: a method in which income and expenses are recorded when they are paid. Cash Flow: a summary of cash received and disbursed showing the beginning and ending amounts. Chart of Accounts: a listing of a company’s accounts and their corresponding numbers. Closing the Books/Year End Closing: the process of reversing the income and expense for a fiscal or calendar year and netting the amount into “retained earnings”. Cost Accounting: a type of accounting that focuses on recording, defining, and reporting costs associated with specific operating functions. Cost Concept: a concept of accounting that determines the amount initially entered into the accounting records for purchases. Credit: amount entered on the right side of an account. Debit: an account entry with a positive value for assets, and negative value for liabilities and equity and is entered on the left side of an account. Depreciation: recognizing the decrease in the value of an asset due to age and use. Dividends: amounts paid to shareholders out of current or retained earnings. Double-Entry Accounting system: system of accounting for

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