Key Financial Terms and Concepts in Accounting

Accounts Payable

Liabilities that a company owes to suppliers for goods and services received but not yet paid for.

Accounts Receivable

Assets representing money owed to a company by its customers for goods or services delivered.

Accumulated Depreciation (Building)

The total amount of depreciation expense that has been allocated to a building since it was acquired.

Advertising Expense

The costs incurred by a business to promote its products or services.

Bonds Payable

Long-term liabilities representing money borrowed by a company that must be repaid at a future date.

Buildings

Physical structures owned by a company that are used for operations or investment purposes.

Cash

Money

Common Stock

Equity securities representing ownership in a corporation, giving shareholders voting rights and dividends.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life.

Dividends

Payments made by a corporation to its shareholders, usually in the form of cash or additional shares.

Gain on Sale of PPE

The profit realized when property, plant, and equipment is sold for more than its book value.

Income Tax Expense

The amount of tax a company is obligated to pay based on its taxable income.

Liability

A financial obligation or debt that a company owes to outside parties.

Asset

Resources owned by a company that have economic value and can provide future benefits.

Contra-Asset

An asset account that is offset by another account, reducing the total value of assets.

Expense

Costs incurred by a business in the process of earning revenue.

Stock

Shares representing ownership in a company.

Interest Expense

The cost incurred by a company for borrowed funds.

Interest Revenue

Income earned from interest on loans or investments.

Inventory

Goods and materials that a business holds for the purpose of resale.

Loss on Sale of PPE

The loss incurred when property, plant, and equipment is sold for less than its book value.

Notes Payable (due in 6 months)

Short-term liabilities that represent amounts owed by a company that are due within six months.

Notes Payable (due in 2 years)

Long-term liabilities that represent amounts owed by a company that are due in two years.

Patents

Exclusive rights granted for an invention, intangible asset

Prepaid Insurance

Insurance premiums that have been paid in advance and are recorded as an asset.

Retained Earnings, Jan 1

The accumulated net income that has been retained in the company rather than distributed as dividends as of January 1.

Salaries Expense

The total amount of salaries paid to employees during a specific period.

Sales

Revenue generated from selling goods or services.

Supplies

Consumable items used in the operation of a business.

Unearned Revenue

Payments received by a company for goods or services that have not yet been delivered or performed.

Retained Earnings

The portion of net income that is retained in the company rather than distributed to shareholders as dividends.