Accounting Concepts and Terminology

These flashcards include key accounting terminology and definitions to aid in studying concepts related to financial statements, transactions, and internal controls.

Payables

Liabilities; means something is owed by you.

Receivables

Assets; means something is owed to you.

Assets

Resources owned by a company that have economic value.

Liabilities

Claims against the assets; obligations owed to creditors.

Stockholder Equity

The residual interest in the assets of the entity after deducting liabilities.

Claims Accounting Equation

Assets = Liabilities + Stockholder Equity.

Retained Earnings

Cumulative amount of profits a company has retained, not distributed as dividends.

Deferral

A revenue or expense recognition that is postponed to a future date.

Accrual

Recognition of revenue or expenses when they occur, regardless of cash flow.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period.

Balance Sheet

A financial statement that presents the financial position of a company at a specific point in time.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash.

Fraud Triangle

A model that explains the three key elements that lead to fraud: opportunity, pressure, and rationalization.

Internal Control

Processes put in place by management to ensure the integrity of financial and accounting information.

Gross Margin

The difference between sales and the cost of goods sold.

Net Sales

Total sales revenue minus returns, allowances, and discounts.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold in a company.

Operating Expenses

Expenses incurred in the normal course of business operations.

Prepaid Insurance

Insurance paid in advance and recognized as an asset until it is used.

Unearned Revenue

Liabilities created when a company receives payment for goods or services not yet delivered.

Liquidation

The process of dissolving a company and distributing its assets to claimants.