Financial accounting terms

Balance Sheet

reports the financial position (amounts of assets, liabilities, and stockholder’s equity) of an accounting entity at a point in time

start with cash and continue in the direction of decreasing liquidity (cash most liquid)

income statement

reports the revenues less the expenses during the accounting period

income statement is NOT based on cash flow. We don’t base revenue or expense on cash

Statement of Stockholder’s equity

Reports the changes

earnings, profit, and income

all mean the same thing

credit

either a direction in our record keeping

or a revenue earned with no cash flow

loans and notes

mean the same thing in the notebook they will use notes

liabilities

basic accounting equation

assets (what the company owns/controls) = liabilities + stockholder’s equity (what the company owes)

income statement is composed of

revenues (cash and promises received from delivery of goods and services, sales, fee, interest, and rent rev) and expenses (resources used to earn revenue during the period, ex: cost of good, wages expense, etc)

income statement equation

revenue- expense = net income (or loss if negative)

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