Accounting Terms Flashcards
(15 cards)
Money owed by a business to its creditors for goods and services purchased on credit.
Accounts payable
Money owed to a business by its customers for goods and services delivered but not yet paid for.
Accounts receivable
is the income a business earns from providing services to customers.
Service revenue
method that records revenues and expenses when they are incurred, regardless of cash transactions. This approach reflects the true financial position of a business more accurately than cash basis accounting.
Accrual basis accounting
Any resource owned by a business that is expected to provide future economic benefits, such as cash, inventory, and property.
Assets
financial statement that summarizes a company’s assets, liabilities, and shareholders’ equity at a specific point in time, providing insights into its financial stability.
Balance sheet
Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.
Capital expenditure
The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.
Depreciation
The value of an owner’s interest in a company after deducting liabilities from assets. It represents the ownership stake in the business.
Equity
The difference between sales revenue and the cost of goods sold (COGS), before deducting operating expenses
Gross profit
A company’s legal debts or obligations that arise during business operations, including loans and accounts payable.
Liability
The actual profit after all expenses, taxes, and costs have been deducted from total revenue. It is often referred to as the bottom line.
Net profit
A report that lists the balances of all general ledger accounts to ensure that total debits equal total credits, serving as a check on the accuracy of bookkeeping.
Trial balance
The total income generated from sales of goods or services before any expenses are deducted. It is often used interchangeably with sales or turnover.
Revenue
