Basic Accounting - Chart of Accounts and Financial Statements

These vocabulary flashcards cover the foundational concepts of Basic Accounting, including types of accounts (Assets, Liabilities, Equity, Revenue, Expenses) and the primary financial statements.

Chart of accounts (COA)

An index of all the financial accounts in the general ledger of a company that provides a digestible breakdown of all financial transactions during a specific accounting period.

Assets

Properties owned and controlled by the entity as a result of past events from which economic benefits are expected to flow, which can be converted into cash and have monetary value.

Liabilities

Existing obligations of the entity arising from past events, the settlement of which is expected to result in an out-flow of resources; these include debts like accounts payable, taxes, or loans.

Owner’s Equity

The proportion of the total value of a company's assets that can be claimed by its owners or shareholders, calculated as total assets minus liabilities.

Revenue

Money produced by carrying out normal business operations, calculated by multiplying the average sales price by the number of items sold.

Expenses

The costs of operations that a company incurs to generate revenue, such as office rent, utilities, and office supplies.

Current Assets

Short-term assets that a company expects to use up, convert into cash, or sell within $1\text{ fiscal year}$ or operating cycle.

Cash

Money on hand, or in banks, and other items considered as a medium of exchange in business transactions, including Cash on Hand, Cash on Bank, and Petty Cash Fund.

Accounts Receivable

Amounts due from customers arising from credit sales or credit services that have been received but not yet paid for.

Notes Receivable

An asset account tied to an underlying promissory note which details the payment terms in writing between a payee and the maker.

Promissory Note

A written promise by one party to make a payment of money at a date in the future.

Inventories

Assets held for resale, including items, goods, merchandise, and materials held to earn a profit in the market.

Unused Supplies

Items purchased by an enterprise, such as office or laboratory supplies, which are unused as of the reporting date.

Prepaid Expenses

Expenses paid in advance, such as Prepaid Rent or Prepaid Insurance, which are assets at the time of payment and become expenses over time.

Accrued Income

Revenue earned but not yet collected, recorded on the books in accordance with the accrual accounting method.

Short Term Investments

Investments intended to be sold immediately, including instruments that will mature or be liquidated within $1\text{ year}$.

Noncurrent Assets

A company's long-term investments not easily converted to cash or not expected to become cash within an accounting year.

Property, Plant and Equipment

Long-lived physical or tangible assets, such as Land, Buildings, and Machinery, acquired for use in operations typically lasting more than $1\text{ year}$.

Intangible Assets

Identifiable non-monetary assets without physical substance, such as computer software, licenses, trademarks, patents, and copyrights.

Accumulated Depreciation

The total amount an asset has been depreciated up until a single point, where periodic depreciation expense is added to the beginning balance.

Current Liabilities

Debts a company must pay within a normal operating cycle, usually less than $12\text{ months}$.

Accounts Payable

Amounts due or payable to creditors for money borrowed or merchandise and other assets bought on credit.

Unearned Income

Cash collected in advance for services to be performed or goods to be delivered in the future.

Notes Payable

A promissory note issued by the business to its creditors for borrowed money or assets purchased on credit.

Accrued Expenses

Expenses that are incurred but not yet paid, such as salaries payable and taxes payable.

Noncurrent Liabilities

Debts a business owes that are not due to be paid for at least $12\text{ months}$, also called long-term liabilities.

Loans Payable

An account payable secured by the entity’s real estate property, representing the amount to be paid plus interest.

Mortgage Payable

The liability of a property owner to pay a loan secured by property; portions payable beyond $12\text{ months}$ are long-term liabilities.

Owner’s Capital

The value of cash and other assets invested in the business by the owner, increased by profits and decreased by losses.

Owner’s Drawings

When an owner of a sole proprietorship, partnership, or LLC takes money from the business for personal use instead of a traditional salary.

Sales or Service Income

Revenues or gross income specifically from the sale of a company’s products and services.

Cost of Sales or Services

The direct cost associated with the products sold or for the services rendered by the entity.

Utilities Expense

Costs including telephone, water, internet, and electricity usage.

Depreciation Expense

The portion of the cost of building and equipment allocated to a single accounting period.

Financial Statements

Written records that convey the business activities and financial performance of a company, often audited for accuracy and tax purposes.

Statement of Financial Position (Balance Sheet)

A fundamental document summarizing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Statement of Income

A statement showing revenues, expenses, and profitability over a period of time, also called a profit-and-loss (P&L) statement.

Statement in Changes in Equity

A financial statement measuring the changes in owners’ equity throughout a specific accounting period, also referred to as a statement of retained earnings.

Statement of Cash Flow

A financial statement providing aggregate data regarding all cash inflows received from ongoing operations and external investment sources.