FABM 12 - Assets, Liabilities, Equity, and Comprehensive Income (Vocabulary)

Vocabulary flashcards covering the key terms from the notes on assets, liabilities, equity, and comprehensive income.

Assets

Resources owned and controlled by the business expected to bring future economic benefits.

Current Assets

Assets that can be realized within one year after the year-end date (e.g., cash and equivalents, accounts receivable, inventories, prepaid expenses).

Non-current Assets

Assets that cannot be realized within one year; long-term investments and resources used over time (e.g., PPE, intangible assets).

Liabilities

Obligations of an entity arising from past transactions/events, where settlement will cause an outflow of resources.

Current Liabilities

Obligations due within one year after the year-end date (e.g., accounts payable, short-term loans, accrued expenses).

Non-current Liabilities

Obligations not due within one year after the year-end date (e.g., bonds payable, long-term loans, pension liabilities).

Owner's Equity

Capital/owner's investment representing the owner's stake in the business; formula: Owner's Equity = Owner's Investment − Owner's Drawings + Net Income (− Net Loss).

Comprehensive Income

Change in equity during a period from transactions and other events, excluding those with owners; includes Profit or Loss and Other Comprehensive Income (OCI).

Profit or Loss

Net result of operations; component of comprehensive income.

Other Comprehensive Income (OCI)

Items of comprehensive income that are not included in net income; part of comprehensive income.

Statement of Comprehensive Income

Reports results of operations for a period; includes revenues, costs/expenses, and net income; also called the Income Statement.

Revenues

Gross inflow of benefits from operating activities (e.g., sales, services, interest, royalties, dividends).

Costs/Expenses

Outflows or depletions of assets that decrease equity; not including owner distributions.

Net Income

Revenues plus Gains minus Expenses plus Losses; formula: Net Income = (Revenues + Gains) − (Expenses + Losses).

Cost of Goods Sold (COGS)

Cost of purchases consumed to produce goods sold; includes raw materials, direct labor, and manufacturing overhead.

Purchases

Number of goods bought during the accounting period for resale or production.

Single-Step Approach

Presentation where all revenues are in one section and all expenses in another; Net Income computed as Revenues + Gains − Expenses − Losses.

Gains

Increases in economic benefits from incidental or peripheral transactions; included with revenues in net income.

PPE (Property, Plant, and Equipment)

Long-term tangible assets used in operations.

Intangible Assets

Non-physical assets with long-term value (e.g., patents, goodwill).