Ch 2 - Analyzing Bus Trans VOCAB

Question 1

Define accounts payable.

Answer 1

amounts a business must pay in the future

Question 2

Define accounts receivable.

Answer 2

Claims for future collections for customers.

Question 3

Define assets.

Answer 3

Property owned by a business

Question 4

Define balance sheet. (2)

Answer 4

1. formal report on a business’s financial condition on a certain date
2. reports the assets, liabilities and equity of the business

Question 5

Define break even.

Answer 5

A point at which revenue equals expenses

Question 6

Define business transaction.

Answer 6

a financial event that changes the resources of a firm.

Question 7

Define capital. (2)

Answer 7

1. financial investment in a business

2. aka - equity

Question 8

Define equity.

Answer 8

owner’s financial interest in a business.

Question 9

Define expense. (3)

Answer 9

1. outflow of cash,
2. use of other assets, or
3. incurring of a liability

Question 10

Define fair market value. (2)

Answer 10

1. current worth of the asset

2. price the asset would bring if sold on the open market

Question 11

Define fundamental accounting equation.

Answer 11

relationship between assets and liabilities plus owner’s equity

Question 12

Define income statement. (3)

Answer 12

1. formal report of business operations covering a specific period of time
2. aka: profit and loss statement
3. aka: statement of income and expenses

Question 13

Define liabilities.

Answer 13

debts or obligations of a business

Question 14

Define net income.

Answer 14

result of an excess of revenue over expenses

Question 15

Define net loss

Answer 15

result of an excess of expenses over revenue

Question 16

Define on account. (3)

Answer 16

1. arrangement to allow payment at a later date
2. aka: charge account
3. aka: open-account credit

Question 17

Define owner’s equity. (3)

Answer 17

1. financial interest of the owner of the business
2. aka: proprietorship
3. aka: net worth

Question 18

Define revenue. (2)

Answer 18

1. inflow of money or other assets that results from the sales of goods or services or from use of money or property
2. aka: income

Question 19

Define statement of owner’s equity.

Answer 19

formal report of changes that occurred in the owner’s financial interest during a reporting period

Question 20

Define withdrawals.

Answer 20

funds taken from the business by the owner for personal use.