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Accounting equation	Assets = Liabilities + Owner's equity		tp-accounting-terms
Asset	A resource owned that has future value		tp-accounting-terms
Liability	An obligation owed to others		tp-accounting-terms
Equity	Owners' claim on the assets after liabilities		tp-accounting-terms
Revenue	Income earned from selling goods or services		tp-accounting-terms
Expense	Cost of operating a business		tp-accounting-terms
Net income	Revenues minus expenses		tp-accounting-terms
Net loss	Expenses exceed revenues		tp-accounting-terms
Double-entry bookkeeping	Every transaction affects at least two accounts with equal debits and credits		tp-accounting-terms
Debit	An entry on the left side of an account		tp-accounting-terms
Credit	An entry on the right side of an account		tp-accounting-terms
Normal balance of assets	Debit		tp-accounting-terms
Normal balance of liabilities	Credit		tp-accounting-terms
Normal balance of revenue	Credit		tp-accounting-terms
Normal balance of expenses	Debit		tp-accounting-terms
Journal	Chronological record of transactions		tp-accounting-terms
General ledger	The collection of all accounts		tp-accounting-terms
Chart of accounts	List of all accounts a business uses		tp-accounting-terms
Trial balance	List of account balances proving debits equal credits		tp-accounting-terms
T-account	A simple diagram of an account with debit and credit sides		tp-accounting-terms
Adjusting entry	Update made at period end to match revenues and expenses to the right period		tp-accounting-terms
Closing entries	Zero out temporary accounts at the end of the period		tp-accounting-terms
Accrual accounting	Records revenue when earned and expenses when incurred		tp-accounting-terms
Cash basis accounting	Records transactions only when cash changes hands		tp-accounting-terms
Matching principle	Expenses are matched with the revenues they helped earn		tp-accounting-terms
Revenue recognition principle	Record revenue when it is earned		tp-accounting-terms
Going concern	Assumption that the business will continue operating		tp-accounting-terms
GAAP	Generally Accepted Accounting Principles in the US		tp-accounting-terms
IFRS	International Financial Reporting Standards		tp-accounting-terms
Conservatism principle	Choose the option that is less likely to overstate assets and income		tp-accounting-terms
Materiality	Only significant information needs separate disclosure		tp-accounting-terms
Balance sheet	Shows assets, liabilities and equity at one date		tp-accounting-terms
Income statement	Shows revenues and expenses over a period		tp-accounting-terms
Statement of cash flows	Shows cash in and out from operating, investing and financing		tp-accounting-terms
Statement of retained earnings	Shows changes in retained earnings over a period		tp-accounting-terms
Retained earnings	Profits kept in the business rather than paid out		tp-accounting-terms
Current assets	Assets expected to be turned into cash within a year		tp-accounting-terms
Current liabilities	Obligations due within a year		tp-accounting-terms
Long-term assets	Assets held for more than a year		tp-accounting-terms
Accounts receivable	Money customers owe the business		tp-accounting-terms
Accounts payable	Money the business owes suppliers		tp-accounting-terms
Notes payable	Written promises to pay		tp-accounting-terms
Prepaid expense	An expense paid in advance, recorded as an asset until used		tp-accounting-terms
Unearned revenue	Cash received before service is provided; a liability		tp-accounting-terms
Accrued expense	An expense incurred but not yet paid		tp-accounting-terms
Inventory	Goods held for sale		tp-accounting-terms
FIFO	First-in, first-out cost flow method for inventory		tp-accounting-terms
LIFO	Last-in, first-out cost flow method for inventory		tp-accounting-terms
Weighted average	Inventory costing using the average cost of goods		tp-accounting-terms
Cost of goods sold	Direct cost of the products sold		tp-accounting-terms
Gross profit	Sales minus cost of goods sold		tp-accounting-terms
Operating income	Gross profit minus operating expenses		tp-accounting-terms
Depreciation	Spreading the cost of a long-term asset over its useful life		tp-accounting-terms
Straight-line depreciation	Equal depreciation each year		tp-accounting-terms
Accumulated depreciation	Total depreciation recorded to date on an asset		tp-accounting-terms
Book value	Asset cost minus accumulated depreciation		tp-accounting-terms
Salvage value	Estimated value of an asset at the end of its life		tp-accounting-terms
Amortization	Spreading the cost of an intangible asset over time		tp-accounting-terms
Goodwill	Value of a business beyond its identifiable net assets		tp-accounting-terms
Allowance for doubtful accounts	Estimate of receivables that will not be collected		tp-accounting-terms
Bad debt expense	Cost of uncollectible receivables		tp-accounting-terms
Common stock	Basic ownership shares of a corporation		tp-accounting-terms
Treasury stock	Shares a company has bought back		tp-accounting-terms
Paid-in capital	Amounts investors paid for stock		tp-accounting-terms
Current ratio	Current assets divided by current liabilities		tp-accounting-terms
Quick ratio	Liquid assets divided by current liabilities		tp-accounting-terms
Debt-to-equity ratio	Total liabilities divided by equity		tp-accounting-terms
Gross margin ratio	Gross profit divided by sales		tp-accounting-terms
Return on assets	Net income divided by average total assets		tp-accounting-terms
Return on equity	Net income divided by average equity		tp-accounting-terms
Inventory turnover	Cost of goods sold divided by average inventory		tp-accounting-terms
Working capital	Current assets minus current liabilities		tp-accounting-terms
Liquidity	Ability to meet short-term obligations		tp-accounting-terms
Solvency	Ability to meet long-term obligations		tp-accounting-terms
Bank reconciliation	Matching the cash records to the bank statement		tp-accounting-terms
Petty cash	A small fund for minor expenses		tp-accounting-terms
Internal controls	Procedures that protect assets and ensure accurate records		tp-accounting-terms
Audit	Independent examination of financial statements		tp-accounting-terms
CPA	Certified public accountant		tp-accounting-terms
Managerial accounting	Reporting for internal decisions		tp-accounting-terms
Financial accounting	Reporting to outside users		tp-accounting-terms
Cost accounting	Measuring the cost of making products		tp-accounting-terms
Budget variance	Difference between budgeted and actual amounts		tp-accounting-terms
Contribution margin	Sales minus variable costs		tp-accounting-terms
Break-even in units	Fixed costs divided by contribution margin per unit		tp-accounting-terms
Opportunity cost	Value of the next best alternative given up		tp-accounting-terms
Sunk cost	A past cost that cannot be recovered		tp-accounting-terms
Payroll	Employee compensation records and payments		tp-accounting-terms
Gross pay	Pay before deductions		tp-accounting-terms
Net pay	Pay after deductions		tp-accounting-terms
Fiscal year	A 12-month accounting period		tp-accounting-terms
Subsidiary ledger	Detailed records supporting a control account		tp-accounting-terms
Source document	Evidence of a transaction, such as a receipt		tp-accounting-terms
Invoice	A bill for goods or services		tp-accounting-terms
Purchase order	A buyer's request to a seller to supply goods		tp-accounting-terms