Vocab Flashcards
A snapshot of a company’s assets, liabilities and equity at a specific point in time
Balance Sheet
Shows revenues, expenses, and profits over a specific period
Income Statement
Tracks how a company generates and uses cash
Cash Flow Statement
Records revenues and expenses when incurred, not when cash exchanges
Accrual Principle
Expenses are matched with related revenues in the same accounting period
Matching Principle
Using the same accounting methods across accounting periods
Consistency Principle
What a business owns or uses
Assets
Debts owed by a business
Liabilities
Expected to be converted to cash within the trading cycle
Current Assets
Expected to be settled within 12 months
Current Liabilities
Money owed to the business
Accounts Receivable
Money the business owes to others
Accounts Payable
Sales minus cost of sales
Gross Profit
Total profit after all expenses are paid
Net Income
Official inspection of an organization’s accounts
Audit
Gradual reduction in an asset’s value
Depreciation
A business’s ability to access cash
Liquidity
A account that carries its balance over from one accounting period to the next
Permanent Account
Basic Purpose of Accounting
To communicate financial information
Accounting Equation
Assets=Liabilities+Owner’s Equity
Cash from regular business operations
Operating Activities
Cash from buying and selling long-term assets
Investing Activities
Cash from borrowing money or issuing stock
Financing Activites
Revenue is not yet earned so it increases liability
Unearned Revenue
