Vocab Wk1

Question 1

Accounting

Answer 1

Process of organizing, analyzing, and communicating financial information that is used for decision-making.

Question 2

Creditor

Answer 2

Business that grants extended but short-term payment terms to other businesses.

Question 3

Financial Accounting

Answer 3

Measures the financial performance of an organization using standard conventions to prepare financial reports.

Question 4

For-profit business

Answer 4

Has the primary purpose of earning a profit by selling goods and services.

Question 5

Generally accepted accounting principles (GAAP)

Answer 5

Common set of rules, standards, and procedures that publicly traded companies must follow when composing their financial statements.

Question 6

Lender

Answer 6

Bank or other institution that has the primary purpose of lending money.

Question 7

Managerial Accounting

Answer 7

Process that allows decision makers to set and evaluate business goals by determining what information they need to make a particular decision and how to analyze and communicate this information.

Question 8

Manufacturing Business

Answer 8

For-profit business that is designed to make a specific product or products

Question 9

Privately held company

Answer 9

Company whose stock is available only to employees or selected individuals or groups.

Question 10

Publicly Traded Company

Answer 10

Company whose stock is traded (bought and sold) on an organized stock exchange.

Question 11

Retail Business

Answer 11

For-profit business that purchases products (called inventory) and resells the products without altering them.

Question 12

Service Business

Answer 12

Business that does not sell tangible products to customers but rather sells intangible benefits (services) to customers; it can be either a for-profit or a not-for-profit organization

Question 13

Stakeholder

Answer 13

Someone affected by decisions made by a company. This may include an investor, creditor, employee, manager, regulator, customer, supplier, and layperson.

Question 14

Stockholder

Answer 14

Owner of stock or shares in a business.

Question 15

Transaction

Answer 15

Business activity or event that has an effect on financial information presented on financial statements.

Question 16

Accounting Equation

Answer 16

Assets = liabilities + owner’s equity.

Question 17

Accounts Payable

Answer 17

Value of goods or services purchased that will be paid for at a later date.

Question 18

Accounts Receivable

Answer 18

Outstanding customer debt on a credit sale, typically receivable within a short time period.

Question 19

Accrual Basis Accounting

Answer 19

Accounting system in which revenue is recorded or recognized when earned yet not necessarily received, and in which expenses are recorded when legally incurred and not necessarily when paid.

Question 20

Asset

Answer 20

Tangible or intangible resource owned or controlled by a company, individual, or other entity with the intent that it will provide economic value.

Question 21

Balance Sheet

Answer 21

Financial statement that lists what the organization owns (assets), owes (liabilities), and is worth (equity) on a specific date.

Question 22

Cash Basis Accounting

Answer 22

Method of accounting in which transactions are not recorded in the financial statements until there is an exchange of cash.

Question 23

Common Stock

Answer 23

Corporation’s primary class of stock issued, with each share representing a partial claim to ownership or a share of the company’s business.

Question 24

Corporation

Answer 24

Legal business structure involving one or more individuals (owners) who are legally distinct (separate) from the business.

Question 25

Current Asset

Answer 25

Asset that will be used or consumed in one year or less.

Question 26

Current Liability

Answer 26

Debt or obligation due within one year or, in rare cases, a company’s standard operating cycle, whichever is greater.

Question 27

Distribution to Owner

Answer 27

Periodic reward distributed to owner of cash or other assets.

Question 28

Dividend

Answer 28

Portion of the net worth (equity) that is returned to owners of a corporation as a reward for their investment.

Question 29

Elements of the financial statements

Answer 29

Categories or groupings used to record transactions and prepare financial statements.

Question 30

Equity

Answer 30

Residual interest in the assets of an entity that remains after deducting its liabilities.

Question 31

Expense

Answer 31

Cost associated with providing goods or services.

Question 32

Income Statement

Answer 32

Financial statement that measures the organization’s financial performance for a given period of time.

Question 33

Initial public offering (IPO)

Answer 33

When a company issues shares of its stock to the public for the first time.

Question 34

Intangible Asset

Answer 34

Asset with financial value but no physical presence. Examples include copyrights, patents, goodwill, and trademarks.

Question 35

Inventory

Answer 35

Value of products to be sold or items to be converted into sellable products.

Question 36

Investment by Owner

Answer 36

Exchange of cash or other assets in exchange for an ownership interest in the organization.

Question 37

Liability

Answer 37

Probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

Question 38

Long-term Asset

Answer 38

Asset used ongoing in the normal course of business for more than one year that is not intended to be resold.

Question 39

Long-term Liability

Answer 39

Debt settled outside one year or one operating cycle, whichever is longer.

Question 40

Net Income

Answer 40

When revenues and gains are greater than expenses and losses.

Question 41

Net Loss

Answer 41

When expenses and losses are greater than revenues and gains.

Question 42

Noncurrent Asset

Answer 42

Asset that will be used or consumed over more than one year.

Question 43

Noncurrent Liability

Answer 43

Liability that is expected to be settled in more than one year.

Question 44

Notes Payable

Answer 44

Value of amounts borrowed that will be paid in the future with interest.

Question 45

Notes Receivable

Answer 45

Value of amounts loaned that will be received in the future with interest.

Question 46

Partnership

Answer 46

Legal business structure consisting of an association of two or more people who contribute money, property, or services to operate as co-owners of a business.

Question 47

Retained Earnings

Answer 47

Cumulative, undistributed net income or net loss for the business since its inception.

Question 48

Revenue

Answer 48

Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.

Question 49

Short-term Asset

Answer 49

Asset typically used up, sold, or converted to cash in one year or less.

Question 50

Sole Proprietorship

Answer 50

Legal business structure consisting of a single individual.

Question 51

Statement of Cash Flows

Answer 51

Financial statement listing the cash inflows and cash outflows for the business for a period of time.

Question 52

Statement of Owner's Equity

Answer 52

Financial statement showing how the equity of the organization changed for a period of time.

Question 53

Tangible Asset

Answer 53

Asset that has physical substance.