Introduction to Accounting Language and Balance Sheet Equation

These flashcards review key concepts from the lecture about accounting, focusing on the balance sheet equation and related terminology.

Balance Sheet Equation

Assets equal Liabilities plus Stockholders' Equity at all points in time.

Assets

Resources owned by a company that have economic value.

Liabilities

Obligations or debts that a company owes to outside parties.

Stockholders' Equity

The residual interest in the assets of the entity after deducting liabilities; represents the ownership claims.

Double Entry Bookkeeping

A system of accounting where every transaction affects at least two accounts to keep the balance sheet equation in balance.

Retained Earnings

The portion of net income that is retained in the company rather than paid out as dividends.

Net Income

Revenues minus expenses, representing the profit of the company.

Contributed Capital

The total value of the assets that shareholders have given to the company in exchange for shares.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Market Value

The current worth of a company's equity based on the trading price of its shares.

Economic Impact of Financial Crises

Effects on asset values and equity during downturns, leading to losses without cash flow changes.

Complete Balance Sheet Equation

Assets equal Liabilities plus Contributed Capital plus Retained Earnings plus Revenues minus Expenses minus Dividends.

T Accounts

A visual representation of individual accounts in accounting, used for analyzing transactions.

Financial Statements

Structured reports that provide a summary of a company's financial performance and position.