Accounting Terms

Question 1

Accounting

Answer 1

Used to measure, record, report, and interpret the financial assets of business; The language of business

Question 2

Accounting Equation (Assets)

Answer 2

Liabilities + Owner’s Equity

Question 3

Accounts Payable

Answer 3

Money that the organization owes to creditors (other businesses)

Question 4

Accounts Receivable

Answer 4

Money that is owed to a business from other businesses

Question 5

Accrual

Answer 5

Things that accumulate as assets or equities

Question 6

How is net profit measured?

Answer 6

Revenue - Expenses

Question 7

Amortization

Answer 7

The process of gradually paying off a liability over a period of time

Question 8

Assets

Answer 8

Something of monetary value

Question 9

Balance Sheet

Answer 9

Shows the assets, liabilities, and owner’s equity at a given point in time

Question 10

Cash

Answer 10

Money in the till or bank

Question 11

Cash Flow

Answer 11

The source and application of funds; The actual movement of cash within a business

Question 12

Cash Flow Formula

Answer 12

Cash Inflow - Cash Outflow

Question 13

Cost of Production (Goods Sold)

Answer 13

(Inventory at the Beginning of the Accounting Period + New Inventory Purchases + Labor) - Inventory at the End of the Accounting Period

Question 14

Current Assets

Answer 14

Cash or other assets that can be converted into cash within 1 yr

Question 15

Current Liabilities

Answer 15

Money that you owe which will usually be paid off within 1 yr

Question 16

Current Liabilities

Answer 16

Money owed that will be paid off w/in 1 yr

Question 17

Depreciation

Answer 17

Reduction in the useful value of fixed assets due to wear and tear, time, and obsolescence

Question 18

Earnings Year-to-Date

Answer 18

Profit made this year but not yet distributed

Question 19

Equities

Answer 19

Claims against assets

Question 20

Owner’s Equity

Answer 20

Claims/rights that the owner has to the assets

Question 21

Liabilities

Answer 21

Claims of lenders/creditors

Question 22

Expenses

Answer 22

Costs of doing business besides those related to production

-Result in decr owner’s equity

Question 23

Expenditures

Answer 23

Costs that incr fixed assets and won’t be used in a yr

Question 24

FIFO

Answer 24

First In, First Out; A method of accounting for inventory

Question 25

Fixed Assets

Answer 25

Property, plant, and equipment; Things not normally intended to be sold, so they’re used over and over again

Question 26

Fixed Costs

Answer 26

Operating expenses that tend to remain constant, regardless of variations in the volume of sales
-Real estate taxes, Property insurance, and Depreciation of buildings

Question 27

Income (P&L) Statement

Answer 27

Summarizes the revenues and expenses of a company over a period of time and reflects the differences btwn the two as a profit or loss

Question 28

Intangible Asset

Answer 28

Patents, Logo, Trademark, Franchises, and Good Will

Question 29

Lease

Answer 29

A rental contract

Question 30

Liabilities

Answer 30

Debts and accounts that are payable

Question 31

LIFO

Answer 31

Last In, First Out; A method of accounting for inventory

Question 32

Liquidity

Answer 32

The ease with which assets can be converted to cash

Question 33

Long-Term Liabilities

Answer 33

Money owed that won’t be repaid during that yr

-A mortgage

Question 34

On Account

Answer 34

If you are buying on credit, its an account payable

If you sell on credit, it is an account receivable

Question 35

Original Investment

Answer 35

Business owner uses their own money to start the company

Question 36

Owners Equity

Answer 36

Part of the assets that the owner has claims to after all their liabilities are paid

Question 37

Pre-Paid Expenses

Answer 37

Payments made in advance for which the company has not yet received the benefits

Question 38

Profit

Answer 38

What is left over after paying all expenses including taxes

Question 39

Gross Profit

Answer 39

Sales - Cost of Goods Sold

Question 40

Net Profit/Income

Answer 40

Gross Profit - Expenses

Question 41

Straight Line Depreciation

Answer 41

Method of allocating the estimated net cost of a fixed asset in equal amounts over a set period of time

Question 42

Tax Liabilities

Answer 42

Money owed to the govt for taxes

Question 43

Variable Costs

Answer 43

Expenses that are directly related to the volume of sales

-Manufacturing, Labor, Raw Materials, and Sales Cost