Accounting Terms Flashcards
Accounting
Used to measure, record, report, and interpret the financial assets of business; The language of business
Accounting Equation (Assets)
Liabilities + Owner’s Equity
Accounts Payable
Money that the organization owes to creditors (other businesses)
Accounts Receivable
Money that is owed to a business from other businesses
Accrual
Things that accumulate as assets or equities
How is net profit measured?
Revenue - Expenses
Amortization
The process of gradually paying off a liability over a period of time
Assets
Something of monetary value
Balance Sheet
Shows the assets, liabilities, and owner’s equity at a given point in time
Cash
Money in the till or bank
Cash Flow
The source and application of funds; The actual movement of cash within a business
Cash Flow Formula
Cash Inflow - Cash Outflow
Cost of Production (Goods Sold)
(Inventory at the Beginning of the Accounting Period + New Inventory Purchases + Labor) - Inventory at the End of the Accounting Period
Current Assets
Cash or other assets that can be converted into cash within 1 yr
Current Liabilities
Money that you owe which will usually be paid off within 1 yr
Current Liabilities
Money owed that will be paid off w/in 1 yr
Depreciation
Reduction in the useful value of fixed assets due to wear and tear, time, and obsolescence
Earnings Year-to-Date
Profit made this year but not yet distributed
Equities
Claims against assets
Owner’s Equity
Claims/rights that the owner has to the assets
Liabilities
Claims of lenders/creditors
Expenses
Costs of doing business besides those related to production
-Result in decr owner’s equity
Expenditures
Costs that incr fixed assets and won’t be used in a yr
FIFO
First In, First Out; A method of accounting for inventory
Fixed Assets
Property, plant, and equipment; Things not normally intended to be sold, so they’re used over and over again
Fixed Costs
Operating expenses that tend to remain constant, regardless of variations in the volume of sales
-Real estate taxes, Property insurance, and Depreciation of buildings
Income (P&L) Statement
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
Intangible Asset
Patents, Logo, Trademark, Franchises, and Good Will
Lease
A rental contract
Liabilities
Debts and accounts that are payable
LIFO
Last In, First Out; A method of accounting for inventory
Liquidity
The ease with which assets can be converted to cash
Long-Term Liabilities
Money owed that won’t be repaid during that yr
-A mortgage
On Account
If you are buying on credit, its an account payable
If you sell on credit, it is an account receivable
Original Investment
Business owner uses their own money to start the company
Owners Equity
Part of the assets that the owner has claims to after all their liabilities are paid
Pre-Paid Expenses
Payments made in advance for which the company has not yet received the benefits
Profit
What is left over after paying all expenses including taxes
Gross Profit
Sales - Cost of Goods Sold
Net Profit/Income
Gross Profit - Expenses
Straight Line Depreciation
Method of allocating the estimated net cost of a fixed asset in equal amounts over a set period of time
Tax Liabilities
Money owed to the govt for taxes
Variable Costs
Expenses that are directly related to the volume of sales
-Manufacturing, Labor, Raw Materials, and Sales Cost
