Accounting Vocab

Stakeholder

a person or entity that has an interest in the economic performance and well-being of a business

Financial Accounting

• provides information to external stakeholders

• must follow GAAP

Managerial Accounting

provides information to internal stakeholders

GAAP

generally accepted accounting principles

Asset

resources acquired by a business and used to make money

Liability

obligation a business has to it’s creditors (debt owed)

Dividends

• distributions of earnings

• not to be confused with expenses

Revenue

economic benefit a company derives from providing goods and services to its customers

Expenses

economic sacrifices a business incurs in the process of generating revenue

Net Income

• the excess of revenues over expenses in a specific time period

• also known as profits

Retained Earnings

the earnings for future operating needs, such as an emergency fund

Accounting Events

economic occurrences that change a company’s assets, liabilities, or stockholders’ equity

Double-entry Bookkeeping

all transactions recorded affect the accounting equation in at least two places

Common Stock

amount of cash received from investors

Income Statement

revenues and expenses resulting in net profit or loss

Statement of Changes

reports on the effect of transactions on equity

Balance Sheet

assets, liabilities, and equity ending balances

Stockholder’s Equity

owner’s investment in the business

Financing Activities

any cash transaction between the company and its creditors or owners

Investing Activities

any cash transaction involving the sale/purchase of long-term assets

Operating Activities

activities that affect cash and are related to day-to-day company operations

Accrual Accounting

the exchange of cash can occur before or after a transaction is recorded that may affect revenues and expenses

Deferral Accounting

recognizes revenue after transaction is recorded

Cash Basis Accounting

the exchange of cash occurs at the same time as the revenue or expense is recorded