2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses

Vocabulary-style flashcards covering current/noncurrent assets and liabilities, equity, revenues, expenses, and fundamental concepts from the notes.

Current asset

An asset expected to be used or consumed within one year (or the operating cycle), such as accounts receivable or inventory.

Noncurrent asset

An asset expected to be used or consumed over more than one year, such as land, buildings, equipment, or vehicles.

Tangible asset

An asset with physical substance that can be touched.

Intangible asset

An asset lacking physical substance, such as a trademark, with value controlled by the organization.

Trademark

A legally protected symbol or logo that identifies a brand; an intangible asset owned or controlled by the organization.

Accounts receivable

The amount of customer debt on credit sales, a current asset.

Inventory

Goods held for sale or to be converted into sellable products, a current asset.

Notes receivable

Promissory notes representing amounts loaned that will be received in the future with interest; can be current or noncurrent.

Current liability

An obligation expected to be settled within one year (or operating cycle).

Noncurrent liability

An obligation expected to be settled in more than one year.

Accounts payable

Amounts owed for goods or services purchased on credit, a current liability.

Notes payable

Promissory notes representing amounts borrowed that will be paid in the future with interest; can be current or noncurrent.

Land

A noncurrent asset representing real estate owned for business use or investment.

Buildings

A noncurrent asset representing structures owned for business use.

Equipment

A noncurrent asset used in operations; includes machinery and tools.

Vehicles

A noncurrent asset used for business purposes.

Equity

Net worth; the residual interest in the assets after liabilities. Increases with revenues and investments, decreases with expenses and distributions.

Revenue

Inflows from providing goods or services that increase the organization's value.

Expense

Outflows from generating revenue that decrease the organization's value.

Net income

Revenues minus expenses; increases equity.

Net loss

Expenses exceed revenues; decreases equity.

Gains

Increases in equity from peripheral or incidental transactions.

Losses

Decreases in equity from peripheral or incidental transactions.

Investments by owners

Increases equity; capital contributions in sole proprietorships/partners or common stock in corporations.

Distributions to owners

Decreases equity; drawings in sole proprietorships/partnerships or dividends in corporations.

Retained earnings

Accumulated net income not distributed as dividends in a corporation.

Accounting equation

Assets = Liabilities + Owner's Equity, illustrating that every asset is financed by liabilities or owner’s equity.

Owner's equity

The owners’ claim on the assets of the business after liabilities; also called net worth in many contexts.