accounting

asset

anything of value that is owned

• e.g. a vehicle

having the potential to produce economic benefits at the end of a reporting period

• expected to be sold, used up, turned into cash for 12 months

liability

owe another person / business money

• present obligation that must be met

• e.g. loans

owner’s equity

residual interest in the assets of the entity after the liabilities are deducted

• what business owns after all debts are paid

accounts receivable

money owed by customers for purchase made on credit

inventory

goods available for sale and raw materials used to produce goods available for sale

bank overdraft

line of credit that covers transactions if bank account balance drops below 0

accounts payable

when a business purchases goods on credit which needs to be paid back in a short period of time

equation

assets = liabilities + OE

balance sheet

accounting report that details a business’ financial position at a particular point in time by reporting its assets, liabilities, owner’s equity

cash receipts

amount of cash business has received from other businesses + sources of the cash

cash payments

amount of cash business has paid to other businesses during a period + uses of the cash

bank balance

level of cash at a particular point in time

asset

source document

evidence that a transaction occurred

• e.g. receipt, bank statement, cheque butt