Chap 2 Flashcards
Accounts payable
amounts a business must pay in the future
accounts receivable
claims for future collection from customers
Assets
property owned by a business
Balance sheet
a formal report of a business’s financial condition on a certain date; reports the assets, liabilities, and owner’s equity of the business; assets = (vs) liabilities
break even
a point at which revenue equals expenses
business transaction
a financial event that changes the resources of a business
capital
financial investment in a business; equity
equity
an owner’s financial interest in a business
expense
an outlaw of cash, use of other assets, or incurring of a liability
fair market value
the current worth of an asset or the price the asset would bring if sold on the open market
fundamental accounting equation
relationship between assets and liabilities plus owner’s equity
income statement
a formal report of business operations covering a specific period of time; also called a profit and loss (P&L) statement or a statement of income and expenses; revenue into net income or net loss
liabilities
debts or obligations of a business
net income
the result of an excess of revenue over expenses
net loss
the result of an excess of expenses over revenue; expenses exceed revenue
on account
an arrangement to allow payment at a later date; “net 30”; also called a charge account or open-account credit
owner’s equity
the financial interest of the owner of a business; also called proprietorship or net worth
revenue
inflow of money or other assets that results from the sales of goods or services or from the use of money or property; also called income
statement of owners equity
a formal report of changes that occurred in the owners financial interest during a reporting period; equity with net income/loss + less withdrawals + increase of capital
withdrawals
funds taken from the business by the owner for personal use
