SPEA V246 Terms

Credit

is an entry made on the right side of a T-account or general ledger. It increases liability, equity, or revenue accounts and decreases asset or expense accounts.

Debit

An entry recording a sum owed; it increases expenses or decreases liabilities in accounting.

Accounts Receivable

A current asset on the balance sheet representing money owed to a company by its customers for goods or services provided on credit.

Cash

Money that a business has on hand or in bank accounts, typically used for daily operations and transactions.

Notes Payable

A liability on the balance sheet that represents money borrowed by a business, typically through formal agreements, which must be repaid at a future date.

Retained Earnings

The cumulative amount of net income that a company retains for reinvestment in its business rather than distributing it as dividends to shareholders.

Common Stock

A type of equity security that represents ownership in a corporation, providing shareholders with voting rights and potential dividends.

Accounts Payable

A liability on the balance sheet that represents amounts a company owes to suppliers for goods and services purchased on credit, typically due for payment in a short term.

Accounting

a system of maintaining records of a companys operations and communicating that information to decision makers.

Investor

want to make good decisions related to buying and selling their shares of the company’s stock

Creditors

make decisions related to lending money to the company

Assets

the resources of the company

Liabilities

amounts owed to creditors

The Accounting Equation

assets = liabilities + stockholder’s equity

Corporation

a company that is legally separate from its owners

Sole Proprietorship

A business owned by one person

Partnership

a business owned by two or more persons

Limited Liability

prevents stockholders from being held personally responsible for the financial obligations of the corporations

Income Statement

a financial statement that reports the company’s revenues and expenses over an interval of time