Financial Terms

Question 1

Accounts Payable

Answer 1

This represents your small business’s obligations to pay debts owed to lenders, suppliers and creditors.
A/P or AP

Question 2

Accounts Receivable

Answer 2

The money owed to your small business by others for goods or services rendered.
Labeled as assets
A/R or AR

Question 3

Accrual Basis

Answer 3

An accounting method of recording income when it’s actually earned and expenses when they actually occur.

Question 4

Accruals

Answer 4

Expenses that have been incurred but haven’t yet been recorded in the business books.
Wages and payroll taxes are common examples.

Question 5

Asset

Answer 5

Anything that has value-whether tangible or intangible- and is owned by the business is considered and asset.

Question 6

Balance Sheet

Answer 6

Is essential information that gives a “snapshot” of the company’s net worth at any given time.

Summary of the business assets and liabilities.

Question 7

Bookkeeping

Answer 7

A method of accounting that involves the timely recording of all financial transactions for the business.

Question 8

Capital

Answer 8

Refers to the overall wealth of a business as demonstrated by its case accounts, assets, and investments. Often called “fixed capital” it refers to the long-term worth of the business.

Question 9

Working Capital

Answer 9

It consists of the financial resources necessary for maintaining the day-to-day operation of the business.
Is the business’s cash on hand.

Question 10

Cash Flow

Answer 10

Refers to the amount of cash that “flows” through the business and affects the business’s liquidity.