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Assets
Resources a company owns or controls expected to provide future economic benefits
Liabilities
Obligations the company must settle in the future
Owners’ Equity
The residual interest in assets after deducting liabilities
Accounting Equation
Assets = Liabilities + Owners’ Equity
Current Assets
Assets expected to be used or converted into cash within one year
Long-Term Assets
Assets expected to provide benefits beyond one year
Cash
Most liquid asset
Accounts Receivable
Amounts owed to the company by customers from credit sales
Inventory
Goods held for sale as part of normal business operations
Property
Plant
Intangible Assets
Non-physical assets like patents or trademarks purchased from others
Current Liabilities
Obligations expected to be paid within one year
Accounts Payable
Amounts owed for goods or services received but not yet paid for
Accrued Liabilities
Expenses incurred but not yet paid or recorded
Long-Term Liabilities
Obligations not due within the next year
Notes Payable
Written promises to pay a certain amount in the future
Common Stock
Represents ownership in a corporation and includes voting rights
Preferred Stock
Stock that provides fixed dividends and has priority over common stock in asset claims
Paid-In Capital
Funds raised by issuing stock
Retained Earnings
Cumulative net income not paid out as dividends but reinvested in the business
Treasury Stock
Company’s own stock that it has repurchased
Accumulated Other Comprehensive Income
Items that affect equity but not net income
Recognition
Deciding which items to include in the financial statements
Valuation
Assigning a dollar amount to an asset or liability
Historical Cost
Original cost of an asset
Market Value
Current value of an asset if sold in the open market
Balance Sheet Format
Usually organized by liquidity: current assets
Working Capital
Current assets minus current liabilities
Liquidity
Ease with which an asset can be converted into cash
Comparative Balance Sheet
Presents financial positions for multiple periods side-by-side
Transaction Analysis
Evaluating the effects of business events on the accounting equation