Part 1: Terms Flashcards
Assets
Anything the business owns of value or a resource of value that has the potential to be transformed into cash.
Liability
What the business owes to others.
Equity
Owner’s stake in the business, how much they have invested or withdrawn.
Accounts Payable
Money a business owes to others for goods or services.
Accounts Receivable
Money that is owed to a business for providing a good or service.
Revenue
Income earned through business, gross proceeds or sales.
Expenses
The costs of doing business, such as labor costs, costs of goods sold, overhead, etc.
Debit
An increase in assets or expenses, or a decrease in liabilities, owner’s equity, or revenue.
Credit
A decrease in assets or expenses, or an increase in liabilities, owner’s equity, or revenue.
General Ledger
Provides a record of each financial transaction that takes place during the life of an operating business and contains all accounts needed to prepare financial statements.
Chart of Accounts
Lists all of the accounts and sub-accounts used to categorize transactions.
Unadjusted Trial Balance
A form or statement that lists the titles and balances of all ledger accounts at a given date before adjusting entries are made.
Adjusting Entries
Creating new entries to record accrual, deferrals, and non-cash adjustments; these are provided to bookkeepers by a CPA or accountant.
Adjusted Trial Balance
Listing of the ending balances in all accounts after adjusting entries have been prepared.
Vendor
An entity that the business purchases products or services from, sometimes to resell or for company use, also known as a supplier.
Double-Entry Accounting
A method of bookkeeping that uses at least 2 entries, a debit and a credit, for every transaction.
Deferral
An entry to record a current payment or expense at a later period when the money has actually been earned or incurred.
Accrual
An entry to record a future revenue or expense in the current period, even if money hasn’t been paid or received yet.
Income Statement
Also called the profit and loss statement, the income statement shows the business’s revenues and expenses during a particular period.
Balance Sheet
The balance sheet is a financial statement that reports a business’s assets, liabilities, and equity at a specific point in time.
Statement of Cash Flows
Reports the sources and uses of cash by a business.
Statement of Equity
Reports the changes in business equity, from the opening balance to the end of the period balance.
Operating Expenses
The day-to-day expenses incurred as the business generates revenue directly associated with the core business activities.
Operating Profit
The profitability of a business’s core operations before interest, taxes, and non-operating expenses are deducted, calculated by subtracting the total operating expenses from the gross profit.
