Accounting & Financial Terms Flashcards
Balance Sheet
A snapshot of the current stage of the company’s property, debt, and ownership at one given point in time, showing: Assets, Liabilities and Equity.
The neat thing about the Balance sheet is that it’s always balanced. Every action, every transaction changes the three components but it’s always in harmony.
Assets
What the company owns: Building, Equipment, Cash, Inventory, along with some other intangible items.
Liabilities
What the company owes: Loans, overdraft, bills to be paid, etc. Debt is like negative assets.
Equity (Net worth)
Calculate by taking Assets subtract Liabilities.
Income Statement
A record of the business performance through a period of time, given it a quarter or a year. The Income Statement directly tells you how the company is doing in terms of making money, the heart of any business.
From the top to bottom, the Income Statement shows the Revenues, Costs, and Profits. That’s why often, Profits is referred to as the “bottom line”.
Cash Flow Statement
The Cash Flow statement just strictly monitors the cash flow in or out, categorized in different sections. Three of them are: Operation, Financial and Investing
Operation Cash Flow Statement
Illustrates how much cash the company can generate from its products and services.
Financial Cash Flow Statement
Includes the sources of cash from investors or banks and the uses of cash paid to shareholders.
Investing Cash Flow Statement
Includes any sources and uses of cash from a company’s investments.
Cost of goods sold
The direct cost of the product or service sold.
Marketing Expenses
Expenses that directly relates to the selling of the product or service
Administration Expenses
Expenses that indirectly relate to the selling of a product or service.
Depreciation & Amortization
A big cost the company pays up front for a big thing. But that big thing adds values over a long period of time and therefore being allocated throughout a longer period.
Amortization is just the different version of deprecation used for intangible assets, such as patents, licences etc.
Interest Expenses
An amount charged for the use of money you borrowed for business expenses.
Taxes
Deduct various federal, state, local, and foreign taxes directly attributable to your trade or business or business expenses.
