Accounting Flashcards
what is an asset?
things that have value that are owned by the business
what are liabilities?
debts or amounts that are owed to others
what is owners equity?
the amount of assets minus the amount of liabilities aka net income
what is accounts receivable
money owed to the company by someone else
what is accounts payable?
money you owe to other companies
what is liquidity?
assets that can be turned into cash very quickly
what is solvent
the ability to pay your bills on time
what are creditors?
a person or company whom money is owed
what is a fiscal year
a period used for calculating annual income statements in businesses/ other organizations
what is the balance sheet equation?
assets - liabilities = owners equity
what is the cost principle
the value of an asset is always recorded as the actual cost to the business
what is depreciation?
when an asset *depreciations or loses value over time the asset value on the books remains the same.
what are the three types of financial statements
- the balance sheet: shows you what the business is worth
- the income statement: shows you profit or loss over a given period
- the cash flow statement: Summarizes the cash flow into or out of a business over a given period
