Module 2: Short-Term Accounting

Question 1

Define “Accounts Receivable”.

Answer 1

Legally enforceable claims for payment held by a business for goods supplied on services rendered that customers have ordered, but not paid for.

Question 2

Define “Accounts Payable”.

Answer 2

Short-term debt that a company owes its suppliers for products received before a payment is made. These are paid in the “near-future”.

Question 3

Define “Accrued Expenses”.

Answer 3

Liabilities that build up over time and are due to be paid.

Question 4

Define “Prepaid Expenses”.

Answer 4

When a business pays for a service upfront, in cash, but does not receive the entire service right away.

Question 5

Define “Differed Revenue”.

Answer 5

A liability on a company’s balance sheet that represents a prepayment by its customers for goods and services that have yet to be delivered.

Question 6

Define “Inventory Purchases”.

Answer 6

These result when we pay for supplies upfront in cash, but we do not deliver finished products right away, as we need time to turn supplies into finished products.