Business Transactions and The Basic Accounting Equation

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account subdivision under the three sections of the basic accounting equation used to summarize increases and decreases in assets, liabilities, and owner's equity accounts payable an amount owed to a creditor for goods or services bought on credit accounts receivable an amount to be received from a customer for goods or services sold on credit assets property or economic resources owned by a business or individual basic accounting equation assets = liabilities + owner's equity; shows the relationship between assets and total equities business transaction a business event, such as buying, selling, or exchange of goods, that causes a change in the assets, liabilities, or owner's equity of a business capital the money invested in a business by an owner; the owner's equity in a business; the owner's claim or right to a business's assets credit an agreement to pay for a purchase at a later time; an entry to the right side of the T account creditor a person or business that has a claim to the assets of a business; a person or business to which money is owed equity the total financial claims to the assets, or property, of a business expense the cost of the goods or services that are used to operate a business; expenses decrease owner's equity liabilities amounts owed to creditors; the claims of creditors to the assets of the business on account buying on credit; agreeing to pay for an item later owner's equity the owner's claims to or investment in the assets of the business property items of value that are owned or controlled by a business; economic resources of a business property rights creditors' and owners' financial claims to the assets of a business revenue income earned by a business from its operations; revenue increases owner's equity withdrawal the removal of cash or another asset from the business by the owner for personal use