The basic accounting equation shows that assets equal liabilities plus owner's equity. This relationship is fundamental to maintaining balance in double-entry accounting.

Cash is a resource that a company owns, making it an asset. In contrast, accounts payable is a liability and common stock represents equity.

GAAP stands for Generally Accepted Accounting Principles, which provide standardized guidelines for financial reporting. This ensures consistency and transparency when preparing financial statements.

The income statement summarizes revenues and expenses to show net income or loss over a period. It is distinct from the balance sheet, which details a company's assets, liabilities, and equity.

A debit is recorded on the left side of an account and typically increases asset or expense accounts. This concept is fundamental in double-entry accounting to maintain balanced records.

Credit entries increase accounts such as revenues, liabilities, and equity. In this context, a revenue account increases with a credit entry, reflecting its role in recognition of income.

The trial balance is used to ensure that the sum of all debits equals the sum of all credits in the ledger. This check is crucial for detecting any discrepancies before financial statements are finalized.

Under the accrual basis of accounting, revenues are recorded when earned, not necessarily when cash is received. This principle ensures that financial statements accurately reflect the economic activity of a period.

Straight-line depreciation allocates the cost of an asset evenly over its useful life. This method is favored for its simplicity and consistent expense recognition over time.

Subtracting accumulated depreciation from an asset's cost yields its book value, reflecting the asset's remaining value. This adjustment is important for accurately presenting asset values on the balance sheet.

Accounts Receivable is the asset account that records revenues that have been earned but not yet collected in cash. It reflects amounts due from customers, essential to the accrual accounting process.

Accounts Payable is a current liability representing amounts owed to suppliers. Classifying this correctly is essential for understanding a company's short-term financial obligations.

The double-entry accounting system requires that every financial transaction affects at least two accounts, with one debit and one credit entry. This interrelationship helps maintain the balance of the accounting equation.

LIFO assumes that the most recent inventory purchases are sold first. This method can influence the cost of goods sold and net income, especially in periods of rising prices.

The quick ratio assesses a company's short-term liquidity by comparing liquid assets to current liabilities, excluding inventory. It provides insight into the company's ability to meet immediate obligations.

Accrued expenses are recognized for costs that have been incurred but not yet paid at the end of the period. This adjusting entry ensures that expenses are matched to the period in which they occur, maintaining the integrity of the financial statements.

Deposits in transit are amounts that have been recorded by the business but not yet reflected in the bank statement. They are added to the bank's ending balance during the reconciliation process to align the records.

The LIFO method matches the more recent, higher costs with current revenues, providing a more accurate reflection of profitability during inflation. This approach typically results in lower taxable income when prices are rising.

When bonds are issued at a premium, the premium is amortized over the life of the bonds, reducing the effective interest expense recorded each period. This results in the interest expense being lower than the actual cash interest paid.

The weighted-average cost is computed by dividing the total cost of inventory by the total number of units available. In this case, ($10*100 + $15*100) equals $2500, and dividing by 200 units results in a cost of $12.50 per unit.