Accounting 1 chapter 1

Unit of measure concept. The unit of measure concept requires that economic data be recorded in dollars. Money is a common unit of measurement for reporting financial data and reports.

the rights of owners.

$2,500 net increase in assets and $2,500 increase in liabilities. Note: Assets will have a net increase of $2,500 (due to an increase to Equipment of $3,500 and a decrease of $1,000 cash). Liabilities (likely in the form of Accounts Payable) will be increased by $2,500.

Income statement.

cash, inventory, buildings, and equipment.

Supplier.

$705. Note: Assets will be $1,130 and liabilities will be $425 as of December 31, 2014. Thus, the accounting question is:$1,130 = $425 + Owner's equity, resulting in $705 as the owner's equity balance at the end of 2014. Assets = Liabilities + owner's equity. 1000 = 425 + ? +130 = 0 + ? 1130 = 425 ? 1130 - 425 = $705.

the rights of creditors come before the rights of stockholders. note: The rights of creditors to a business's assets come before the rights of the owners or stockholders.

the purchase of land with cash. note: The asset purchased (land) increases assets by the same amount as cash (an asset) decreases. There is no effect on the accounting equation and no change to either liabilities or owner's equity.

assets, liabilities, and owner's equity accounts.

manufacturing business. note: Manufacturing businesses purchase materials to be transformed into a product and sold to another business.

GAAP allows a company's management to record and report data as it sees fit.

Provides economic data reports on the operation and condition of the business that are useful for banks and other creditors in deciding whether to lend money to the business. note: Managerial accounting uses both financial accounting and estimated data to help management in running day-to-day operations and in planning future operations.

total stockholders' equity. Note: Corporations refer to total owner's equity as total stockholders' equity.

increased risk.

Assets + Owner's Equity = Liabilities. note: In its traditional form, the accounting equation is Assets = Liabilities + Owner's Equity.

Income Statement. note: the income statement repots the revenues and expenses for a period of time, based on the matching concept. This concept is applied by matching the expenses incurred during a period with the revenue that those expenses generated.

Corporations Note: Although corporations only comprise 20$ of the business organizations in the U.S., they generated 90% of the business revenues.