Chapter 2 Vocab

The money that a business owes to its creditors. This money is a liability of the business.

The money that is owed to a business by its customers. This money is considered an asset of the business.

Anything owned that has a dollar value.

A statement showing the financial position (the assets, liabilities, and capital) of an individual, company, or other organization on a certain date.

The accounting for a business or organization be kept separate from the personal affairs of its owner, or from any other business or organization.

The difference between the total assets and total liabilities of a business. Same as Net worth, Owner's equity.

The accounting for a business is based on the assumption that the business will continue to operate, unless it is known that it will not.

Anyone who is owed money by the business.

Anyone who owes money to the business.

The status of a business, as represented by the assets, liabilities, and owner's equity.

The equation that states that total assets are equal to total liabilities plus owner's equity.

Guidelines established by professional accountants to be followed in the preparation of accounting records and financial statements.

A debt of an individual, business, or other organization.

The sale of the assets of a business for cash.

The ease with which an asset can be converted into cash.

Accounting for a business should be fair and reasonable. Assets or profits are neither overstated nor understated.