Accounting Flashcards
vocab
Accounting
Is the systematic process of identifying, measuring and communicating financial information about an entity to interested parties so they can make informed decisions.
Revenue
Is the income that a business has from its normal business activities, usually from the sale of goods and services to customers.
Expenses
Are the economic costs the business incurs through its operations to earn revenue.
Cost of Goods Sold
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a business. This amount includes the cost of the materials and labour directly used to create the goods. COGS is deducted from revenues (sales) in order to calculate gross profit and gross margin.
Profit
Is when the amount of revenue received is greater than the expenses.
Loss
Is when expenses are greater than expenses.
Income Statement
Shows the income (revenue) and expenses of a business over a certain period of time e.g. a year.
Service Business
Provides intangible products e.g banking.
Trading Business
Sells physical products through shop outlets e.g retail stores or dairy.
Assets
Items or resources the business owns (even if they are not yet fully paid for) e.g. vehicles.
Current Assets
Current assets are short-term assets, such as cash or cash equivalents, that can be turned into cash within a year or during an accounting period e.g trade receivables.
Non- Current Assets
Non-current assets, also known as fixed assets, are assets that your business holds for longer than 12 months and uses as a source of long-term revenue generation e.g Land and Buildings
Liabilities
Money the business owes to other people/firms e.g. loans.
Current Liabilities
Current liabilities are a company’s short-term liabilities that are expected to be settled within a year or during an accounting period e.g trade payables.
Non- Current Liabilities
Non-current liabilities are the debts a business owes, but isn’t due to pay for at least 12 months. They’re also called long-term liabilities e.g Mortgage.
