ACC1050 Terms/Concepts

Vocab for chapters 1-3

Asset

Resources owned by a business that provide future benefit

Stakeholder

Any individual or group that has an interest in or is affected by a business's operations and decisions. Ex. employees, customers, suppliers, and investors

Creditor

An individual or institution that lends money or extends credit to a business or individual, expecting repayment with interest

Dividend

A payment made by a corporation to its shareholders, typically as a distribution of profits

Receivable

An amount owed to a business by its customers for goods or services delivered but not yet paid for

Property, plant, and equipment

Tangible assets used in the production of goods and services and expected to have a useful life of more than one accounting period

Net income/net loss

The total earnings of a business after all expenses, taxes, and costs have been subtracted from total revenue. A net loss occurs when expenses exceed revenues

Management discussion and analysis

A section of a company's annual report where management provides an overview of the previous year's operations and discusses factors that affected the company's financial performance

Corporation

A legally recognized entity that operates separately and distinctly from its owners

Financing activity

Transactions between a company and its owners or creditors that fund business operations

Income statement

A core financial document that summarizes a business's revenues, expenses, gains, and losses over a specific accounting period. It shows the operational efficiency and ultimately reveals the bottom line: whether the company made a net profit or a net loss

Statement of cash flows

A primary financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. It measures a company's financial health by tracking how well it generates cash to pay debt obligations and fund operating expenses

Liability

A legal or financial responsibility that a person or organization owes to another party. It is an obligation that requires a future payout of money, goods, or services

Owner/stockholder

An individual or entity that holds at least one share of a corporation’s capital stock. Because they hold equity, they are partial owners of the company and are entitled to specific rights, profits, and responsibilities

Revenue

The total amount of money a business earns from the sale of its goods or services before any expenses are deducted

Cash

The most highly liquid current asset a business owns. It represents immediately available money that can be spent, saved, or used to pay off debts without restriction

Payable

Refers to a sum of money that is owed, capable of being paid, or legally due to an individual or entity. It signifies an existing obligation to make a payment, either immediately or on a specified future date

Inventory

The collection of raw materials, work-in-progress items, and finished goods a business holds to produce or sell to customers. It is classified as a current asset

Retained earnings

The cumulative net profits a company keeps and reinvests in its business rather than distributing to shareholders as dividends

Notes to financial statements

Supplementary, required disclosures that provide detailed explanations, assumptions, and context for the figures presented in a company’s main financial reports

Partnership

A voluntary business arrangement where two or more parties (individuals, businesses, or organizations) agree to cooperate to advance their mutual interests. They pool their resources, expertise, and capital to operate a for-profit business, sharing the resulting profits and losses

Investing activity

The purchase or sale of long-term assets, such as property, equipment, or other financial investments, that are not part of a company's normal daily operations

Statement of retained earnings

A financial document that outlines changes in a company's accumulated profits over a specific accounting period, revealing exactly how much net income is reinvested into the business versus paid out to shareholders as dividends

Accounting equation

The fundamental formula in accounting that represents the relationship between a company's assets, liabilities, and equity. Assets = Liabilities + Equity

Stockholders’ equity

Represents the residual value of a company's assets remaining after all its liabilities have been paid. It reflects the net worth belonging to the owners and is a core indicator of a company's financial health

Common stock

A type of equity security that represents fractional ownership in a corporation

Expense

The cost of operations that a business incurs to generate revenue, or the money a consumer spends on everyday living and goods

Cash flow

The continuous movement of money in and out of a business, project, or personal account. It measures your liquidity, indicating whether you have enough actual cash on hand to pay bills, cover expenses, and fund new opportunities

Investment

The allocation of money, time, or resources with the expectation of generating an income, profit, or other future value

Cost of goods sold

The direct cost of producing or purchasing the products a business sells. It is subtracted from revenue to determine your gross profit

Auditor

A qualified professional or firm authorized to review, verify, and examine an organization's financial records, internal controls, or regulatory compliance to ensure they are accurate and adhere to established laws or standards

Sole proprietor

An individual who owns and runs an unincorporated business by themselves

Operating activity

The core, day-to-day business functions that generate revenue and expenses

Annual report

A comprehensive document that outlines a company's operations and financial health over the preceding fiscal year

Balance sheet

A core financial statement that provides a snapshot of a company's financial position at a specific point in time. It summarizes what the business owns (assets), what it owes (liabilities), and the owners' or shareholders' stake in the company (equity)

Accounting

The process of recording, summarizing, analyzing, and reporting financial transactions

Current asset

Cash and other resources that are expected to convert to cash or to be used up within one year or the operating cycle, whichever is longer

Property, plant, equipment

Fixed assets; buildings, factories, equipment, etc

Contra asset

A general ledger account with a credit balance that offsets a paired asset account. It reduces the reported value of an asset to its net book value while preserving the original historical cost on the balance sheet

Accounts payable

Current liability that shows the amount a company owes for items or services purchased on credit and for which there was not a promissory note

Unearned revenue

Liability representing amounts received in advance of providing goods or services

Current liability

Debts or obligations that are expected to be paid within one year or within the operating cycle, whichever is longer

Depreciation

an accounting method used to spread the upfront cost of a tangible asset over its expected useful life. It accounts for how items—such as vehicles, machinery, or buildings—lose value over time due to wear, tear, and obsolescence

Intangible assets

An asset you cannot touch, e.g., copyright, patents, trademarks, etc

Inventory

The cost of a merchandiser’s products waiting to be sold or a manufacturer’s raw materials, work-in-process, and finished goods

Notes payable

Amount of principal due on a formal written promise to pay due beyond the current year

Long-term investments

Financial assets you intend to hold for five years or more. Their primary goal is to maximize wealth through compound growth and price appreciation, allowing your portfolio to weather market volatility

Accumulated depreciation

Contra asset account that accumulates the depreciation expense charged since the asset was acquired

Accounts receivable

Current asset resulting from selling goods or services on credit (on account); a promise from customers to pay later

Prepaid expenses

Future expenses that have been paid in advance (costs that have been paid but have not yet been used up; e.g., rent, supplies, insurance

Bonds payable

Amount due to bondholders at the maturity date of the bonds