Financial Accounting Vocabulary

Comprehensive set of vocabulary flashcards covering fundamental terms and concepts from the introductory financial accounting lecture.

Cash

Most liquid asset; currency on hand or in bank that can be exchanged for goods or services.

Accounts Receivable

Amounts owed to the company by customers, normally collected within 15–90 days and interest-free.

Supplies

Consumable items used in operations; recorded as an asset until they are used.

Prepaid Rent

Rent paid in advance; initially an asset, later reclassified to Rent Expense through an adjusting entry.

Equipment (Machinery, Buildings)

Long-term tangible assets used in the business and depreciated over time.

Accumulated Depreciation

Contra-asset account that stores the total depreciation taken on a long-term asset.

Accounts Payable

Amounts owed to suppliers; usually due in 15–90 days with no interest.

Notes Payable

Longer-term liability to banks or others that typically bears interest.

Salaries Payable

Short-term liability showing wages owed to employees but not yet paid.

Deferred Revenue

Liability created when cash is received before goods or services are provided (e.g., gift cards).

Utilities Payable

Short-term liability for utility costs incurred but not yet paid.

Common Stock

Equity representing ownership shares that usually carry voting rights.

Retained Earnings

Cumulative net income minus dividends; part of stockholders’ equity.

Dividends

Distributions of earnings to stockholders; contra-equity, temporary account.

Service Revenue

Income earned from providing services.

Sales Revenue

Income earned from selling goods.

Interest Revenue

Income earned from lending funds, such as on notes receivable.

Fees Income

Revenue collected as fees from customers.

Advertising Expense

Cost of advertising incurred in the current accounting cycle.

Salaries Expense

Total payroll cost recognized for the period.

Rent Expense

Rent cost recognized for the period.

Insurance Expense

Insurance cost recognized for the period.

Supplies Expense

Cost of supplies used during the period.

Depreciation Expense

Portion of a long-term asset’s cost allocated to the current period.

Balance Sheet

Statement presenting assets, liabilities, and equity at a specific date; follows Assets = Liabilities + Equity.

Income Statement

Statement reporting revenues, expenses, and resulting net income over a period.

Asset

Resource controlled by a company expected to provide future benefits.

Liability

Present obligation requiring future transfer of assets or services.

Owners’ Equity

Owners’ residual claim on assets after liabilities.

Revenue

Income from selling goods or providing services.

Expense

Cost incurred to earn revenues.

Income Statement Equation

Revenues – Expenses = Net Income.

Statement of Cash Flows

Statement that shows cash receipts and cash payments over a period.

Accounting Cycle

Complete set of procedures for measuring and communicating financial information during a period.

Debit

Left side of an account; increases assets, expenses, dividends and decreases liabilities, equity, revenues.

Credit

Right side of an account; increases liabilities, equity, revenues and decreases assets, expenses, dividends.

Journal

Chronological record of all business transactions.

Journal Entry

Standard format for recording a transaction in the journal using debits and credits.

Accrual-Basis Accounting

Record revenues when earned and expenses when incurred, regardless of cash timing.

Revenue Recognition Principle

Recognize revenue in the period in which goods or services are provided to customers.

Cash-Basis Accounting

Record revenues and expenses only when cash is received or paid.

Prepaid Expenses

Assets created when cash is paid for benefits to be received in future periods.

Accrued Expense

Expense incurred but not yet paid; creates a liability such as Salaries Payable.

Accrued Revenue

Revenue earned but not yet received in cash; creates a receivable.

Contra Account

Account with a balance opposite to its related account, used for offsets (e.g., Accumulated Depreciation).

Depreciation

Allocation of the cost of a long-term asset to expense over its useful life.

Deferred Revenues

Cash received in advance; recognized as revenue in a later period when goods/services are provided.

Adjusted Trial Balance

List of all accounts and balances after posting adjusting entries.

Classified Balance Sheet

Balance sheet that separates assets and liabilities into current and long-term categories.

Permanent Accounts

Balance-sheet accounts whose balances carry forward to the next period.

Temporary Accounts

Revenue, expense, and dividend accounts closed at period-end.

Closing Entries

Journal entries that transfer balances of temporary accounts to Retained Earnings.

Post-Closing Trial Balance

List of all accounts and balances after closing entries to verify debits equal credits.

Financial Statement Process Loop

Sequence: adjusted trial balance → income statement → statement of stockholders’ equity → balance sheet.