Introduction to Accounting and Finance – Vocabulary Review

These vocabulary flashcards cover the fundamental terms, principles and structures discussed in the lecture notes on accounting and finance. Review them to reinforce definitions and prepare for exams.

Accounting

The process of recording, classifying, and summarising financial data so stakeholders can make informed decisions.

Finance

The creation, management and systematic use of money and investments within an organisation.

Bookkeeping

The act of recording financial transactions and data for a business.

Analysing (Accounting)

Interpreting recorded financial data to guide business decision-making.

Stakeholder

Any person or entity that owns shares or assets in a business and is affected by its performance.

Manager / Employee

Individuals hired by a business to perform work in exchange for financial benefits.

Government (as stakeholder)

Regulatory body that monitors the economy and enforces business laws and taxation.

Supplier

A business that provides raw materials or resources to other businesses or consumers.

Customer / Consumer

A person who purchases goods or services from a business.

Community (Market)

A collective group of consumers who buy a certain product or service.

Competitor

Another business that offers similar goods or services and seeks the same customers.

Manufacturing Organisation

A business that extracts or refines raw materials into goods for sale.

Industrial Manufacturer

Produces resources to sell to wholesalers or other businesses.

Consumer Manufacturer

Produces finished goods to sell directly to end-users (e.g., handmade jewellery).

Wholesaler

The ‘middle-man’ that buys large quantities from manufacturers and sells to retailers, not to consumers.

Retail Organisation

Buys finished goods from wholesalers and sells them to consumers; requires a retail permit for tax purposes.

Service Organisation

Provides intangible benefits (services) to consumers for a fee (e.g., law firm, medical clinic).

Sole Trader

A business owned and operated by one person who bears full liability and receives all profits.

Partnership

A business owned by 2–20 partners who share profits, workload and unlimited liability.

Proprietary Company (Private)

A separate legal entity with 1–50 non-employee shareholders whose liability is limited to their share value.

Public Company

A company with no upper shareholder limit; ownership is spread via shares traded publicly.

Unlimited Liability

Legal situation where owners are personally responsible for all business debts (sole trader, partnership).

Separate Legal Entity

A business structure where the company is legally distinct from its owners (companies).

Continuity of Existence

The business’s ability to continue despite changes in ownership or death of shareholders.

Separation of Power

Distribution of decision authority among owners, partners, or elected directors of a company.

Goods and Services Tax (GST)

A 10 % tax on sales revenue payable quarterly by businesses earning >$75k (or >$150k for non-profits).

GST Credits

Amounts a business can claim back for GST paid on purchases.

GST Payable

GST collected from customers that must be remitted to the government.

Registered (Trade) Name

The consumer-facing name of a business; registration costs $99 (1 yr) or $199 (3 yrs).

Legal Name

The name used in contracts and legal matters; for non-entities it is the owner’s own name.

Asset

A past-transaction controlled resource expected to produce future economic benefits (e.g., cash, land).

Liability

A present obligation requiring future economic sacrifices (e.g., loans, accounts payable).

Income

Increases in economic benefits through asset increases or liability decreases; always raises equity.

Expense

Decreases in future economic benefits through asset reductions or liability increases; lowers equity.

Equity

Residual interest in assets after deducting liabilities; formula: Equity = Assets − Liabilities.

Accounts Receivable

Money owed to the business by customers for prior sales on credit.

Accounts Payable

Money the business owes to suppliers for goods or services received.

Accrued Expenses

Costs that build up because they have been incurred but not yet paid (e.g., wages, utilities).

Bank Overdraft

A negative bank balance caused by withdrawing more funds than are available.

Going Concern Principle

Assumption that a business will continue operating indefinitely unless evidence suggests otherwise.

Historical Cost (Purchase Price)

Valuing assets at their original purchase price in accounting records.

Fair Market Value

Valuing assets at the price a willing buyer would pay a willing seller under normal conditions.

Liquidation Value

Estimated selling price of assets when a business is forced to sell quickly to repay debts.

Liquidation

Process of winding up a business, selling assets and paying debts when it can no longer operate.

Bankruptcy

Legal status when debts exceed asset proceeds; owner cannot start a business for 7 years.

Financial Year (Australia)

The 12-month period from 1 July to 30 June used for accounting and tax reporting.

Accounting Period

A subdivision of the financial year (monthly, quarterly) for which financial statements are prepared.

Accounting Entity Assumption

Principle that the business’s financial records are separate from the owner’s personal records.

Inventory

Goods held for resale; considered outdated and devalued after the end of the financial year.

Prepaid Rent / Insurance

Expenses paid in advance that provide future economic benefit, recorded as assets until used.

Sales / Service Revenue

Income earned from selling goods or performing services.

Fees Earned

Revenue generated from providing professional or specialised services.