Part 1: Terms

Question 1

Assets

Answer 1

Anything the business owns of value or a resource of value that has the potential to be transformed into cash.

Question 2

Liability

Answer 2

What the business owes to others.

Question 3

Equity

Answer 3

Owner’s stake in the business, how much they have invested or withdrawn.

Question 4

Accounts Payable

Answer 4

Money a business owes to others for goods or services.

Question 5

Accounts Receivable

Answer 5

Money that is owed to a business for providing a good or service.

Question 6

Revenue

Answer 6

Income earned through business, gross proceeds or sales.

Question 7

Expenses

Answer 7

The costs of doing business, such as labor costs, costs of goods sold, overhead, etc.

Question 8

Debit

Answer 8

An increase in assets or expenses, or a decrease in liabilities, owner’s equity, or revenue.

Question 9

Credit

Answer 9

A decrease in assets or expenses, or an increase in liabilities, owner’s equity, or revenue.

Question 10

General Ledger

Answer 10

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.

Question 11

Chart of Accounts

Answer 11

Lists all of the accounts and sub-accounts used to categorize transactions.

Question 12

Unadjusted Trial Balance

Answer 12

A form or statement that lists the titles and balances of all ledger accounts at a given date before adjusting entries are made.

Question 13

Adjusting Entries

Answer 13

Creating new entries to record accrual, deferrals, and non-cash adjustments; these are provided to bookkeepers by a CPA or accountant.

Question 14

Adjusted Trial Balance

Answer 14

Listing of the ending balances in all accounts after adjusting entries have been prepared.

Question 15

Vendor

Answer 15

An entity that the business purchases products or services from, sometimes to resell or for company use, also known as a supplier.

Question 16

Double-Entry Accounting

Answer 16

A method of bookkeeping that uses at least 2 entries, a debit and a credit, for every transaction.

Question 17

Deferral

Answer 17

An entry to record a current payment or expense at a later period when the money has actually been earned or incurred.

Question 18

Accrual

Answer 18

An entry to record a future revenue or expense in the current period, even if money hasn’t been paid or received yet.

Question 19

Income Statement

Answer 19

Also called the profit and loss statement, the income statement shows the business’s revenues and expenses during a particular period.

Question 20

Balance Sheet

Answer 20

The balance sheet is a financial statement that reports a business’s assets, liabilities, and equity at a specific point in time.

Question 21

Statement of Cash Flows

Answer 21

Reports the sources and uses of cash by a business.

Question 22

Statement of Equity

Answer 22

Reports the changes in business equity, from the opening balance to the end of the period balance.

Question 23

Operating Expenses

Answer 23

The day-to-day expenses incurred as the business generates revenue directly associated with the core business activities.

Question 24

Operating Profit

Answer 24

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.