Chapter 1 Vocab Flashcards
(24 cards)
Requires an exchange of value between 2+ parties
Business transactions
Owned by only one person
Sole proprietorship
Multiple co-owners
Partnership
An amount associated with a business transaction
Money measure
Management appointed by board of directors
Corporations
Distinct from customers, lenders, and owners
Separate entity
Biggest segment of economy
Corporations
Creditors’ Equities+Owner’s Equities=
Economic resources
Liabilities+Owner’s Equity=
Assets
Accounting Equation
A=L+OE
Examples of assets
Cash Inventories Land Buildings Equipment
Examples of liabilities
Bank loans Salaries Wages owed Taxes Services
Examples of owners equity
Owner’s investments
Withdrawals
When revenues exceed expenses, the difference is called..
Net income
When expenses exceed revenue, the difference is called..
Net loss
Owners have limited liability
Corporations
What is an income statement?
Summary of the revenues earned and expenses spent over an accounting period
What is the purpose of a balance sheet?
To show the financial position of a business on a certain date
Four major financial statements
Income statement
Statement of owners equity
Balance sheet
Statement of cash flows
What is profitability?
The ability to earn enough income to attract and hold investment capital
What is liquidity?
The ability to have enough cash to pay debts when they are do
Operating activities
Buying, producing, and selling goods/services, hiring employees, paying taxes
Investing activities
Spending the company’s capital to help is achieve its goals;
Land
Buildings
Equipment
Financing activities
Obtaining adequate funds to begin/continue operating the business;
Obtaining capital from creditors
Repaying creditors
Paying a return to the owners
