Chapter 2: Tracking sales and assets

sales transaction

generate revenue for a business by selling goods ans services

inventory

raw materials a business uses in production or finished goods ready to sell

depreciation

spreading out the cost of an item over the expected life of the item

current asset

include cash and items that will be converted into cash quickly within a year

accounts receivable

the amount of money that clients owe to a business

prepaid expenses

payments made in advance

fixed assets

assets that a business acquires for productive use in its operations and are not intended for sale

lease

agreement to pay rent for a specific period of time for the right to use an asset.

operating lease

There is no intention for ownership of the asset to transfer hands at the end of the lease.

capital lease

The business intends to take ownership of the asset from the lessor to the lessee at the end of the lease. 

invoice

is an itemized bill of goods sold or services provided.

promissory note

a legal document that shows a promise to repay a specific amount of money by a certain date

calculating interest formula

principla x interest rate x time

what is the collection process