Accounting Terminology

Question 1

Often called the language of business and is used to measure, record, report, and interpret the financial assets of the business

Answer 1

Accounting

Question 2

Accounting = liabilities+owner’s equity. Accounting is based on the __ of this equation

Answer 2

Accounting equation

Logic

Question 3

Money that you owe to regular business creditors

Answer 3

Accounts payable

Question 4

Money that is owed to you from other customers

Answer 4

Accounts receivable

Question 5

Things which accumulate either as assets or equities. In ____ accounting net profit is measured by the difference between revenues and expenses, not increases or decreases in cash.

Answer 5

Accrual

Accrual

Question 6

Process of gradually paying off a liability over a period of time

Answer 6

Amortization

Question 7

In accounting, something of value in monetary terms.

Answer 7

Assets

Question 8

Shows the assets, liabilities, owner’s equity at a given moment in time. The fundamental accounting equation of assets = liability+ owner’s equity must always balance

Answer 8

Balance sheet

Question 9

____ is the same as expenditures

Answer 9

Capitalization

Question 10

Money in the till or the bank

Answer 10

Cash

Question 11

Source and application of funds. The actual movement of cash within a business: cash inflow - cash outflow

Answer 11

Cash flow

Question 12

aka cost of production

Answer 12

Cost of goods sold

Question 13

Inventory at the beginning of the accounting period, plus new inventory purchases, plus labor and other associated production costs, minus inventory at the end of the accounting period

Answer 13

Cost of goods sold

Question 14

Cash or other assets that can be converted into cash within one year

Answer 14

Current assets

Question 15

Money you owe that will be ordinarily paid within one year

Answer 15

Current liabilities

Question 16

Reduction in the useful value of fixed assets due to wear and tear, passage of time, and obsolescence

Answer 16

Depreciation

Question 17

Profit made this year but not yet distributed

Answer 17

Earnings year-to-date

Question 18

There are basically 2 kinds of equities (claims against assets): claims of lenders or creditors which are liabilities, or claims or rights that owner has to the assets called owner’s ____

Answer 18

Equities

Question 19

Costs of doing business other than those related to production. ___ result in a decrease in owner’s equity.

Answer 19

Expenses

Question 20

Costs that increase fixed assets and will not be consumed within one year

Answer 20

Expenditures

Question 21

First in, first out. A method of accounting for inventory.

Answer 21

FIFO

Question 22

Property, plant, and equipment. Things not normally intended for sale, which are used over and over again

Answer 22

Fixed assets

Question 23

Operating expenses that tend to remain constant regardless of variations in the volume of sales; for example, real estate taxes, property insurance, and depreciation on buildings.

Answer 23

Fixed costs

Question 24

Summaries the revenues and expenses of a company over a period of time, and reflects the difference between the 2 as a profit or a loss (also called the ____ ____).

Answer 24

Income statement

P and L statement

Question 25

Patients, good will, logo, trademark, franchises

Answer 25

Intangible asset

Question 26

A rental contract

Answer 26

Lease

Question 27

Debts and accounts that are payable

Answer 27

Liabilities

Question 28

Last in, first out. Method of accounting for inventory.

Answer 28

LIFO

Question 29

Ease with which assets can be converted into cash

Answer 29

Liquidity

Question 30

Money owed that will not be repaid during that year, for example, a mortgage.

Answer 30

Long-term liabilities

Question 31

If you are buying on credit it is an account payable if you sell on credit it is an account receivable.

Answer 31

On account

Question 32

Your own money that was used to start the company.

Answer 32

Original investment

Question 33

This is the part of the assets that the owner has claims to after all the liabilities are paid

Answer 33

Owner’s equity

Question 34

Payments made in advance for which the company has not yet received the benefits

Answer 34

Prepaid expenses

Question 35

The bottom line. What is leftover after paying all expenses including taxes

Answer 35

Profit

Question 36

Sales minus cost of goods sold

Answer 36

Gross profit

Question 37

Gross profit minus expenses

Answer 37

Net profit

Question 38

Net profit is aka

Answer 38

Net income

Question 39

A method of allocating the estimated net cost of a fixed asset in equal amounts over a set period of time

Answer 39

Straight line depreciation

Question 40

Money owed to the government for taxes

Answer 40

Tax liabilities

Question 41

Expenses which are directly related to the volume of sales, for example, manufacturing labor, raw materials, and sales costs

Answer 41

Variable costs