Basic Accounting Terms Flashcards
1
Q
Fundamental terms
A
- assets
- liabilities
- equity
- revenue
- expenses
2
Q
Resources owned by the business that have value.
A
Assets
3
Q
Example of assets
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- cash
- inventory
- equipment
- accounts receivable
4
Q
Debts or obligations owed by the business.
A
Liabilities
5
Q
Debts or obligations owed by the business.
A
Liabilities
6
Q
example of liabilities
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- accounts payable
- loans
- taxes payable
7
Q
The owner’s stake in the business.
A
Equity
8
Q
Income earned from the sale of goods or services.
A
Revenue
9
Q
Costs incurred in the process of generating revenue.
A
Expenses
10
Q
Example of expenses
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- rent
- salaries
- utilities
- advertising
11
Q
Financial Statements
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- income statements
- balance sheet
- cash flow statement
12
Q
Shows the business’s profitability over a specific period.it includes revenue, expenses, and net income (or loss).
A
Income statement
13
Q
A snapshot of the business’s financial position at a particular point in time. It lists assets, liabilities, equity.
A
Balance sheet
14
Q
Reports the inflows and outflows of cash during a period. It helps assess the business’s ability to meet short-term obligations.
A
Cash flow statement
15
Q
Accounting methods
A
- accrual basis
- cash basis
16
Q
revenue and expenses are recognized when they are earned or incurred, regardless of when the cash is received or paid.
A
Accrual basis
17
Q
Revenue and expenses are recognized when cash is received or paid.
A
Cash basis
18
Q
Money owed to the business by customers for goods or services sold on credit.
A
Accounts receivable
19
Q
Money owed by the business to suppliers for goods or services purchased on credit.
A
Accounts payable
20
Q
The allocation of the cost of a long-term asset over its useful life.
A
Depreciation
21
Q
Goods held for sale or use in production.
A
Inventory
22
Q
The percentage of revenue that remains as profit after deducting expenses.
A
Profit margin
23
Q
Is the span of time covered by a set of financial statements. This period defines the time range over which business transactions are accumulated into financial statements.
A
Accounting period
24
Q
A document used by a company’s accounts payable department to document an invoice received from the supplier and set up the accounts payable.
A
Accounts payable voucher
25
The amount of money a company owes creditors in return for goods and/or services they have delivered.
Account payables
26
Constitute the money a company owes its vendors for inventory-related goods, such as business supplies or materials that are part of the inventory
Trade payables
27
Constitute the money a company owed for non-inventory-related goods such as payroll, reimbursement etc
Non-trade payables
28
The amount of money owed by the customers or clients to business after goods of services have been delivered and/or used.
Accounts receivables
29
The recognition of an expense or revenue that has occurred but has not yet been recorded.
Accrual
30
Are expenses an organization incurs that are not directly tied to a specific function such as manufacturing, production or sales.
Administrative expense
31
An economic resource that is expected to be of benefit in the future. Probable future economic benefits obtained as a result of past transactions or events.
Asset
32
Are those that will be converted to cash within one year
Current assets
33
Are long-term and will likely provide benefits to a company for more than one year such as real estate, land or major machinery
Fixed assets
34
A professional examination of a company’s financial statement by a professional accountant or group determine that the statement has been presented fairly and prepared using Generally Accepted Accounting Principles (GAAP).
Audit
35
A financial report that summarizes a company’s financial position, assets, liabilities, and the owner or shareholder equity, at a given time.
Balance sheet
36
A process by which an accountant determines whether and why there is a difference between the balance shown on the bank statement and the balance of the cash account in the firm’s book balance or record.
Bank reconciliation
37
The process of recording financial transactions and keeping financial records
Bookkeeping
38
Net of cash receipts and cash disbursements relating to a particular activity during a specified accounting period.
Cash flow
39
Is an index of all the financial accounts in the general ledger of a company. In short, it is an organizational tool that provides a digestible breakdown of all financial transactions that a company conducted during a specific accounting period, broke down into subcategories.
Charts of Accounts (COA)
40
GAAP
Generally accepted accounting principles
41
Is a combination of a check and a voucher , also known as a “remittance advice”, which includes pertinent information about the parties to the transactions and thus creates an auditable paper trail about the check’s payment.
Check voucher
42
Procedures used for rationally classifying, recording, and allocating current or predicted costs that relate to a certain product or production process
Cost accounting
43
Figure representing the cost of buying raw materials and producing finished goods.
Cost of goods sold
44
An accounting entry that may either decrease assets or increase liabilities and equity on the company’s balance sheets depending on the transactions.
Credit (CR)
45
An accounting entry where there is either and increase in assets or a decrease in liabilities on a company’s balance sheet.
Debit (DR)
46
Expense allowance made for wear and tear on an asset over its estimated useful life.
Depreciation
47
Payment by cash or check
Disbursement
48
EBITDA
earnings before interest, taxes, depreciation and amortization
49
Is a measure of a company’s overall financial performance
EBITDA
50
Residual interest in the assets of an entity that remains after deducting its liabilities. Also, the amount of business’ total assets less total liabilities. Also, the third section of a balance sheet, the other two being assets and liabilities
Equity
51
Refers to a common set of accounting principles, standards and procedures issued by the financial Accounting standards board(FASB)
GAAP
52
FASB
Financial accounting standards board
53
Collection of all asset, liability, owner’s equity, revenue, and expense accounts. A subsidiary ledger is a record or breakdown of the details to support a general ledger account.
General ledger
54
Is the profit a company makes after deducting the cost associated with making and selling its products, or the costs associated with providing its services.
Gross profit
55
Summary of the effect of revenues and expenses over a period of time
Income statement
56
Is a type of tax that governments impose on income generated by business and individuals within their jurisdiction.
Income tax
57
Is the term for the goods available for sale and raw materials used to produce goods available for sale
Inventory
58
Is a method of accounting for inventory that records the sale or purchase of inventory immediately through use of computerized point-of-sale systems and enterprise asset management software.
Perpetual inventory
59
Is a method of inventory valuation for financial reporting purposes in which a physical count of the inventory is performed at specific intervals
Periodic inventory system
60
A notation in general ledger to update balances. it records a single transaction.
Journal entry/ accounting entry
61
The sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer.
Labor cost
62
Include wages for the employees that produce a product, including workers on an assembly line
Direct costs
63
Are associated with support labor, such as employees who maintain factory equipment
Indirect costs
64
Debts or obligations owed by one entity (debtor) to another entity (creditor) payable in money, goods or services
Liability
65
also called net earnings, is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses
Net income
66
Is an expense a business incurs through its normal business operations. Often abbreviated as OPEX, operating expenses include rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and funds allocated for research and development.
Operating expenses
67
Is the income generated from normal business operations and includes discounts and deductions for retuned merchandise. It is the top line or gross income figure from which costs are subtracted to determine net income
Revenue
68
Is a time-stamped commercial document that itemize and records a transaction between a buyer and a seller
Sales invoice
69
Types of invoice may include
- paper receipt
- a bill of sale
- debit note
- sales invoice
- online electronic record
70
An original record that contains the detail that supports or substantiates a transaction that will be entered into an accounting system.
Source document
71
Money received by an individual or company for a service or product that has yet to be provided or delivered.
Unearned revenue
72
VAT
Value-Added Tax
73
Consumption tax levied on the value added to a product at each stage of its manufacturing cycle as well as at the time of purchase by the ultimate customer
Value-added tax (VAT)
74
The amount of an employee’s pay withheld by the employer and sent directly to the government as partial payment of income tax
Withholding tax compensation
75
The amount duw to supplier withheld by the buyer and sent directly to the government as partial payment of income tax
Withholding tax expanded
