Accounting Exam 1 Prep

Income Statement

A financial statement that summarizes the total revenues and expenses of an organization, and the resulting profit or loss over a specific accounting period, also known as the profit & loss statement.

Cash Flow Statement

A financial statement that summarizes and organizes the inflows and outflows of cash for an organization over a specific accounting period, also known as a statement of cash flows.

Account Classification

A category of related accounts organized primarily into assets, expenses, liabilities, equity, or revenue (income) classifications. 

Balance Sheet

A financial statement that marks a company's financial situation at a moment in time, showing all assets, liabilities and owners’ equity. 

Financial Statement

A summary-level report used to convey the financial position and performance of an organization within a specific time period.

Accounts Receivable

The current balance of all money owed to a company for goods and/or services it sold to its customers, but that haven’t yet been paid for by its customers.

Expense

A cost incurred to provide products and services to customers and operate a business.

Invoice

A time-stamped document outlining the goods or services sold, total amount owed, and the terms/methods of payment.

Net Income

The profit that remains after all expenses have been subtracted from revenue during a certain time period, often referred to as the “bottom line” or “net profit”.

Revenue

The money generated from all sales of goods and services over a certain time period; it is calculated by multiplying the average sales price by the number of units sold.

Sale on Account

An agreement to provide a good or service in exchange for payment at a later date.

Account

A record in the accounting system that tracks the increases, decreases, and current balance of a specific asset, liability, equity, revenue, or expense.

Account Balance

The net or cumulative difference of all increases and decreases of an account, e.g. the current balance.

Account Title

The name given to an account.

Capital Account

An account used to record the owner’s equity in a business.

Purchase On Account

A promise to pay for goods or services provided by an individual or organization at a later date.

Sole Proprietorship

A business owned by one person, and the owner has unlimited liability, meaning the owner can lose more than they invested in the business.

Transaction

An exchange of value that can be measured and that affects the accounting equation.