Flashcards › Test Prep & College › Accounting

Accounting Terms and Equations

Core accounting vocabulary, statements and formulas.

95 cardsCollege, Adult#accounting#business#finance

0 of 95 known
95 cards
  • Accounting equationTerm
    Assets = Liabilities + Owner's equity
  • AssetTerm
    A resource owned that has future value
  • LiabilityTerm
    An obligation owed to others
  • EquityTerm
    Owners' claim on the assets after liabilities
  • RevenueTerm
    Income earned from selling goods or services
  • ExpenseTerm
    Cost of operating a business
  • Net incomeTerm
    Revenues minus expenses
  • Net lossTerm
    Expenses exceed revenues
  • Double-entry bookkeepingTerm
    Every transaction affects at least two accounts with equal debits and credits
  • DebitTerm
    An entry on the left side of an account
  • CreditTerm
    An entry on the right side of an account
  • Normal balance of assetsTerm
    Debit
  • Normal balance of liabilitiesTerm
    Credit
  • Normal balance of revenueTerm
    Credit
  • Normal balance of expensesTerm
    Debit
  • JournalTerm
    Chronological record of transactions
  • General ledgerTerm
    The collection of all accounts
  • Chart of accountsTerm
    List of all accounts a business uses
  • Trial balanceTerm
    List of account balances proving debits equal credits
  • T-accountTerm
    A simple diagram of an account with debit and credit sides
  • Adjusting entryTerm
    Update made at period end to match revenues and expenses to the right period
  • Closing entriesTerm
    Zero out temporary accounts at the end of the period
  • Accrual accountingTerm
    Records revenue when earned and expenses when incurred
  • Cash basis accountingTerm
    Records transactions only when cash changes hands
  • Matching principleTerm
    Expenses are matched with the revenues they helped earn
  • Revenue recognition principleTerm
    Record revenue when it is earned
  • Going concernTerm
    Assumption that the business will continue operating
  • GAAPTerm
    Generally Accepted Accounting Principles in the US
  • IFRSTerm
    International Financial Reporting Standards
  • Conservatism principleTerm
    Choose the option that is less likely to overstate assets and income
  • MaterialityTerm
    Only significant information needs separate disclosure
  • Balance sheetTerm
    Shows assets, liabilities and equity at one date
  • Income statementTerm
    Shows revenues and expenses over a period
  • Statement of cash flowsTerm
    Shows cash in and out from operating, investing and financing
  • Statement of retained earningsTerm
    Shows changes in retained earnings over a period
  • Retained earningsTerm
    Profits kept in the business rather than paid out
  • Current assetsTerm
    Assets expected to be turned into cash within a year
  • Current liabilitiesTerm
    Obligations due within a year
  • Long-term assetsTerm
    Assets held for more than a year
  • Accounts receivableTerm
    Money customers owe the business
  • Accounts payableTerm
    Money the business owes suppliers
  • Notes payableTerm
    Written promises to pay
  • Prepaid expenseTerm
    An expense paid in advance, recorded as an asset until used
  • Unearned revenueTerm
    Cash received before service is provided; a liability
  • Accrued expenseTerm
    An expense incurred but not yet paid
  • InventoryTerm
    Goods held for sale
  • FIFOTerm
    First-in, first-out cost flow method for inventory
  • LIFOTerm
    Last-in, first-out cost flow method for inventory
  • Weighted averageTerm
    Inventory costing using the average cost of goods
  • Cost of goods soldTerm
    Direct cost of the products sold
  • Gross profitTerm
    Sales minus cost of goods sold
  • Operating incomeTerm
    Gross profit minus operating expenses
  • DepreciationTerm
    Spreading the cost of a long-term asset over its useful life
  • Straight-line depreciationTerm
    Equal depreciation each year
  • Accumulated depreciationTerm
    Total depreciation recorded to date on an asset
  • Book valueTerm
    Asset cost minus accumulated depreciation
  • Salvage valueTerm
    Estimated value of an asset at the end of its life
  • AmortizationTerm
    Spreading the cost of an intangible asset over time
  • GoodwillTerm
    Value of a business beyond its identifiable net assets
  • Allowance for doubtful accountsTerm
    Estimate of receivables that will not be collected
  • Bad debt expenseTerm
    Cost of uncollectible receivables
  • Common stockTerm
    Basic ownership shares of a corporation
  • Treasury stockTerm
    Shares a company has bought back
  • Paid-in capitalTerm
    Amounts investors paid for stock
  • Current ratioTerm
    Current assets divided by current liabilities
  • Quick ratioTerm
    Liquid assets divided by current liabilities
  • Debt-to-equity ratioTerm
    Total liabilities divided by equity
  • Gross margin ratioTerm
    Gross profit divided by sales
  • Return on assetsTerm
    Net income divided by average total assets
  • Return on equityTerm
    Net income divided by average equity
  • Inventory turnoverTerm
    Cost of goods sold divided by average inventory
  • Working capitalTerm
    Current assets minus current liabilities
  • LiquidityTerm
    Ability to meet short-term obligations
  • SolvencyTerm
    Ability to meet long-term obligations
  • Bank reconciliationTerm
    Matching the cash records to the bank statement
  • Petty cashTerm
    A small fund for minor expenses
  • Internal controlsTerm
    Procedures that protect assets and ensure accurate records
  • AuditTerm
    Independent examination of financial statements
  • CPATerm
    Certified public accountant
  • Managerial accountingTerm
    Reporting for internal decisions
  • Financial accountingTerm
    Reporting to outside users
  • Cost accountingTerm
    Measuring the cost of making products
  • Budget varianceTerm
    Difference between budgeted and actual amounts
  • Contribution marginTerm
    Sales minus variable costs
  • Break-even in unitsTerm
    Fixed costs divided by contribution margin per unit
  • Opportunity costTerm
    Value of the next best alternative given up
  • Sunk costTerm
    A past cost that cannot be recovered
  • PayrollTerm
    Employee compensation records and payments
  • Gross payTerm
    Pay before deductions
  • Net payTerm
    Pay after deductions
  • Fiscal yearTerm
    A 12-month accounting period
  • Subsidiary ledgerTerm
    Detailed records supporting a control account
  • Source documentTerm
    Evidence of a transaction, such as a receipt
  • InvoiceTerm
    A bill for goods or services
  • Purchase orderTerm
    A buyer's request to a seller to supply goods

Download this deck

Want paper cards? Paste the plain-text download into the flashcard maker.