Accounting Terms Flashcards
Expanding functional vocabulary to navigate specific business contexts.
What is the accounting equation?
Assets = Liabilities + Equity
True or False: A balance sheet shows a company’s revenues and expenses.
False
Fill in the blank: The process of recording financial transactions is known as _____.
Bookkeeping
What are the three main financial statements?
Income Statement, Balance Sheet, Cash Flow Statement
Define ‘liability’.
A liability is a financial obligation or debt owed by a company.
What does GAAP stand for?
Generally Accepted Accounting Principles
True or False: Depreciation is used to allocate the cost of tangible assets over their useful lives.
True
What is the purpose of an income statement?
To show a company’s revenues and expenses over a specific period.
Identify the term: The difference between total assets and total liabilities.
Equity
What is accrual accounting?
An accounting method that records revenues and expenses when they are incurred, regardless of cash flow.
Multiple choice: Which of the following is NOT a component of equity? A) Retained Earnings B) Common Stock C) Accounts Payable
C) Accounts Payable
Fill in the blank: The _____ is a financial statement that summarizes cash inflows and outflows.
Cash Flow Statement
Define ‘assets’.
Assets are resources owned by a company that have economic value.
What is a trial balance?
A report that lists the balances of all general ledger accounts to ensure that total debits equal total credits.
True or False: A revenue account increases equity.
True
What is the definition of ‘accounts receivable’?
Money owed to a company by its customers for goods or services delivered.
Multiple choice: Which accounting method recognizes revenue when earned? A) Cash Basis B) Accrual Basis
B) Accrual Basis
Fill in the blank: The _____ principle requires that expenses be matched with revenues in the period in which they are incurred.
Matching
What does ‘liquidation’ refer to in accounting?
The process of converting assets into cash to pay off liabilities.
Define ‘general ledger’.
A complete record of all financial transactions over the life of a company.
True or False: Prepaid expenses are considered current liabilities.
False
What is the purpose of an audit?
To evaluate the accuracy and completeness of a company’s financial statements.
What is a contingent liability?
A potential obligation that may arise depending on the outcome of a future event.
Multiple choice: Which of the following is a non-current asset? A) Inventory B) Machinery C) Accounts Payable
B) Machinery
