Statement of Financial Position and Changes in Owner's Equity Vocabulary

Vocabulary flashcards covering the concepts, accounts, classifications, and financial statement formats from the lecture on Statement of Financial Position and Changes in Owner's Equity.

Statement of Financial Position

Also known as the balance sheet, a financial statement that shows the financial condition of a company as of a given time and represents the accounting equation Assets = Liabilities + Owner's Equity.

Current Assets

Assets classified according to liquidity that are expected to be realized, sold, or consumed within the normal operating cycle or twelve months, held primarily for trading, or exist as unrestricted cash or cash equivalents.

Cash

Includes coins, currencies, checks, bank deposits, and other cash items readily available for use in the operations of the business.

Cash Equivalents

Short-term investments that are readily convertible to known amounts of cash and subject to insignificant risks of changes in value (PAS 7 par. 6).

Marketable Securities

Also known as Investment in Trading Securities, these are stocks and bonds purchased by an enterprise to be held for a short duration, usually when excess cash is available.

Accounts Receivable

The amount collectible from customers to whom goods have been sold or services have been rendered on account or credit.

Notes Receivable

A promissory note issued by clients or customers as evidence of their obligation to pay for services or goods received.

Accrued Income

Income that has already been earned during the accounting period but has not yet been received.

Merchandise Inventory

Unsold goods remaining at the end of the accounting period, applicable to merchandising and manufacturing businesses.

Prepaid Expenses

Expenses paid in advance, including supplies bought for business use or services and benefits to be received in the future.

Allowance for Doubtful Accounts

A contra-asset account deducted from accounts receivable to determine net realizable value, representing estimated losses due to uncollectible accounts.

Accumulated Depreciation

A contra-asset account representing the expired cost of property, plant, and equipment as a result of usage and passage of time, deducted to get book value.

Non-Current Assets

Long-term assets with a service potential for more than one year that are not expected to be converted to cash, consumed, or used up within one year.

Property, Plant and Equipment

Tangible assets held by an enterprise for use in the production or supply of goods or services, or for administrative purposes, expected to be used for more than one period (IAS 16).

Intangible Assets

Identifiable nonmonetary assets without physical substance held for use in production, supply of goods or services, rental, or administrative purposes (IAS 38).

Current Liabilities

Obligations expected to be settled in the entity's normal operating cycle, held primarily for trading, or due to be settled within twelve months after the reporting period.

Loans Payable

A liability to pay a bank or financing institution arising from funds borrowed, classified as current if payable within twelve months or shorter.

Unearned Revenues

Obligations of a business arising from advance payments received before goods or services are provided to customers.

Accrued Liabilities

Amounts owed to others for expenses already incurred but not yet paid, such as salaries payable, utilities payable, taxes payable, and interest payable.

Mortgage Payable

A long-term debt of the business backed by security or collateral in the form of real property.

Bonds Payable

A certificate of indebtedness under the seal of a corporation, specifying terms of repayment and the rate of interest charged.

Statement of Changes in Owner's Equity

A financial statement showing changes in capital resulting from additional investments or withdrawals by the owner, plus or minus net income or net loss.

Income Summary

A temporary account used at the end of the accounting period to close income and expense accounts before transferring the net balance to capital.

Retained Earnings

The accumulated earnings of a corporation to which net income or loss is closed and from which cash dividends are declared.

Cash Dividends

Payments made by a corporation to its shareholders taken from retained earnings as a distribution of profits.

Account Form

A format of the statement of financial position following the accounting equation, with assets on the left column and liabilities and owner's equity on the right column.

Report Form

A format of the statement of financial position displaying assets, followed by liabilities and owner's equity, in a single straight column.