Vocab

Question 1

A snapshot of a company’s assets, liabilities and equity at a specific point in time

Answer 1

Balance Sheet

Question 2

Shows revenues, expenses, and profits over a specific period

Answer 2

Income Statement

Question 3

Tracks how a company generates and uses cash

Answer 3

Cash Flow Statement

Question 4

Records revenues and expenses when incurred, not when cash exchanges

Answer 4

Accrual Principle

Question 5

Expenses are matched with related revenues in the same accounting period

Answer 5

Matching Principle

Question 6

Using the same accounting methods across accounting periods

Answer 6

Consistency Principle

Question 7

What a business owns or uses

Answer 7

Assets

Question 8

Debts owed by a business

Answer 8

Liabilities

Question 9

Expected to be converted to cash within the trading cycle

Answer 9

Current Assets

Question 10

Expected to be settled within 12 months

Answer 10

Current Liabilities

Question 11

Money owed to the business

Answer 11

Accounts Receivable

Question 12

Money the business owes to others

Answer 12

Accounts Payable

Question 13

Sales minus cost of sales

Answer 13

Gross Profit

Question 14

Total profit after all expenses are paid

Answer 14

Net Income

Question 15

Official inspection of an organization’s accounts

Answer 15

Audit

Question 16

Gradual reduction in an asset’s value

Answer 16

Depreciation

Question 17

A business’s ability to access cash

Answer 17

Liquidity

Question 18

A account that carries its balance over from one accounting period to the next

Answer 18

Permanent Account

Question 19

Basic Purpose of Accounting

Answer 19

To communicate financial information

Question 20

Accounting Equation

Answer 20

Assets=Liabilities+Owner’s Equity

Question 21

Cash from regular business operations

Answer 21

Operating Activities

Question 22

Cash from buying and selling long-term assets

Answer 22

Investing Activities

Question 23

Cash from borrowing money or issuing stock

Answer 23

Financing Activites

Question 24

Revenue is not yet earned so it increases liability

Answer 24

Unearned Revenue

Question 25

Statement of Cash Flows Sections

Answer 25

Operating, investing, and financing activities

Question 26

To adjust for net income

Answer 26

Statement of retained earnings

Question 27

Order of preparing financial statements

Answer 27

Income statement, statement of retained earnings, balance sheet

Question 28

Verify that total debts equal total credits

Answer 28

Trial Balance

Question 29

Asset that is expected to be held or used for more than a year

Answer 29

Non-Current Asset

Question 30

Summarizes the results of transactions

Answer 30

General Ledger

Question 31

Unlimited Liability

Answer 31

Sole Proprietorship

Question 32

Offsets the balance of a related asset account

Answer 32

Contra Asset Account

Question 33

Portion of net income that is not distributed to share holders

Answer 33

Retained Earnings