The Accounting Equation and Financial Statements

Vocabulary flashcards covering the basic accounting equation, common balance sheet elements, asset and liability categories, and financial terminology from the lecture notes.

Accounting Equation

The fundamental financial relationship defined as $\text{Assets} = \text{Liabilities} + \text{Stockholders' Equity}$.

Assets

Resources of the company representing a present right of an entity to an economic benefit that arose from a past transaction or event.

Liabilities

Creditors' claims to resources representing a present obligation of the company to transfer or otherwise provide economic benefits to others.

Stockholders' Equity

The owners' claims to the company's resources.

Balance Sheet

A financial statement that provides a snapshot at a point in time of a company's assets, liabilities, and equity.

Cash

Funds available to the company.

Accounts Receivable

Amounts customers owe the company.

Inventory

Goods held for sale to customers.

Prepaid Expenses

Future benefits the company has already paid for.

Property, Plant & Equipment

Long-lived resources used in operations.

Intangible Assets

Nonphysical resources that provide future benefits.

Current Assets

Assets expected to be converted into cash or used in operations within the next year (or next operating cycle), listed in order of liquidity.

Noncurrent Assets

Also known as long-term assets, these are assets NOT expected to expire or be converted into cash within one year (or next operating cycle).

Accounts Payable

Amounts owed to suppliers.

Accrued Liabilities

Obligations already incurred but not yet paid.

Deferred Revenue

An obligation to provide goods or services after receiving payment.

Short-Term Borrowings

Debt due in the near term.

Long-Term Debt

Amounts owed beyond the near term.

Current Liabilities

Liabilities due within the next year.

Noncurrent Liabilities

Obligations not due within one year or operating cycle, listed after current liabilities on the balance sheet.

Expanded Accounting Equation

The expanded formula defined as $\text{Assets} = \text{Liabilities} + \text{Contributed Capital} + \text{Retained Earnings}$.