General Terms Flashcards
This communicates the span of time that is reported in all financial statements.
Accounting Period
Describes the procedure of assigning funds to various accounts or periods.
Allocation
The legal structure or type of business.
Business Entity
The term that describes the inflow and outflow of cash in a business.
Cash Flow
An increase in a liability or equity account, or a decrease in an asset or expense account.
Credit
An increase in an asset or expense account, or a decrease in a liability or equity account.
Debit
A method of reducing risk. The goal is to allocate capital across a multitude of assets so that the performance of any one asset doesn’t dictate the performance total.
Diversification
A cost that does not change with the volume of sales. Ex: rent, salaries won’t change if a company sells more.
Fixed Cost
The complete record of a company’s financial transactions. This is used in order to prepare all the Financial Statements.
General Ledger
These are rules that all accountants abide by when performing that act of accounting.
GAAP
The amount paid on a loan or line of credit that exceeds the repayment of the principle balance.
Interest
How updates and changes are made to a company’s books.
Journal Entry
A term referencing how quickly something can be converted into cash.
Liquidity
The term that refers whether information influences decisions. Ex: If a company has revenue in the millions of dollars, an amount of $0.50 is hardly material.
Material
A purchase that will be paid at a future time, but the buyer gets to enjoy the benefit of that purchase immediately.
On Credit
Expense that relate to running the business. They do not include Expenses that make the product or deliver the service. Ex: rent and executive salaries
Overhead
The account that shows payments to employee salaries, wages, bonuses, and deductions. Often this will appear on the Balance Sheet as a Liability that the company owes.
Payroll
A term that refers to the value of an Asset today, as opposed to a different point in time. It’s is based on the theory that cash today is more valuable than cash tomorrow, due to the concept of inflation.
Present Value
A document that proves payment was made.
Receipts
Originally, this term referred to the profit that a company was making, divided by the investment required.
The term is used loosely to include returns on various projects and objectives.
Return on Investment
A listing of all accounts in the General Ledger with their balance amount (either debit or credit). The total debuts must equal the total credits.
Trial Balance
Costs that change with the volume of sales and are the opposite of Fixed Costs. These increase with more sales because they are an expense that is incurred in order to deliver the sale.
Variable Cost
