ACCOUNTING
CHAPTER I
VOCABULARY
Accounting: the process of planning, recording, analyzing and interpreting financial information
Accounting system: a planned process designed to compile financial data and summarize the results in
accounting records and reports.
Account: a record that summarizes all the transactions pertaining to a single item in the accounting equation
(cuenta)
Sale on account: a sale which payment will be received a later date (venta por la cual el pago será recibido
en una fecha posterior)
Interest: an amount paid for the use of money for a period of time
Compound interest: Interest paid on an original amount deposited in a bank plus any interest that has been
paid. (interés pagado sobre una cantidad original depositada en un banco más cualquier interés que se haya
pagado)
Capital account: an account used to summarize the owner’s equity in a business
Account balance: the difference between the increases and decreases in an account
Account title: the name given to an account
Accounting equation: an equation showing the relationship among assets, liabilities and owner’s equity
Asset: anything of value that is owned (activo)
Liability: an amount owed (deuda)
Equity: the difference between assets and liabilities (patrimonio neto)
Owner’s equity: the amount remaining after the value of all liabilities is subtracted from the value of all
assets
Equities: financial rights of a business (derechos de propiedad)
Personal net worth: the difference between personal assets and personal liabilities (valor neto)
Expense: the cost of goods or services used to operate the business (gasto)
Revenue: an increase in equity resulting from the sale of goods or services (ganancia)
Withdrawal: assets taken from the business for the owner’s personal use (retiros)
Ethics: the principles of right and wrong that guide an individual in making decisions (ética)
Business ethics: the use of ethics in making business decisions (ética de negocios)
Service business: a business that performs an activity for a fee (negocio que provee un servicio)
Proprietorship: a business owned by one person (empresa de propietario único)
Business plan: a formal written document that describes the nature of a business and how it will operate (plan
de negocios)
GAAP-Generally accepted accounting principles: the standards and rules that accountants follow while
recording and reporting financial activities (Principios de cotabilidad generalmente aceptados)
Transaction: a business activity that changes assets, liabilities or owner’s equity
Creditor: a person or business to whom a liability is owed
Financial statements: financial reports that summarize the financial condition and operations business
Net worth statement: a formal report that shows what an individual owns, what a individual owes and the
difference between.
PHRASES
-Accounting is the language of business
-A creditor would favor a positive net worth
-Keeping personal and business records separate in an application of the business entity concept
-Assets such as cash and supplies have values because they can be used to operate a business
-The relationship among assets, liabilities and owner’s equity can be written as an equation
-When items are bought and paid for later, this is referred to as buying on account
-When cash is received from sale, the total amount of both assets and owner’s equity is increased
-The accounting concept Realization of Revenue is applied when revenue is recorded at the time goods or
services are sold
-A withdrawal decreases owner’s equity
