Basic Accounting Concepts: Liabilities, Equity & Leverage

Vocabulary flashcards summarizing key accounting terms mentioned in the lecture note excerpt.

Liabilities

Debts or obligations a business owes to outside parties, such as loans and payables; example amount in notes: ₱40,000.

Owner's Equity

The residual interest of the owner in the business after liabilities are settled; calculated as Assets minus Liabilities (₱60,000 in the notes).

Assets

Economic resources owned by a business that are expected to provide future benefits; equal to Liabilities plus Owner’s Equity.

Debt-to-Equity Ratio

A leverage metric computed as Total Liabilities ÷ Owner’s Equity; indicates how much debt exists for every peso of equity (0.67 in the notes).

Loans

Borrowed funds that must be repaid with interest; a common component of liabilities on the balance sheet.

Payables

Short-term or long-term amounts owed by a business to creditors or suppliers; part of liabilities.

Over-leveraged

A financial situation where a company has excessive debt relative to equity, increasing financial risk; the example ratio (0.67) indicates the business is not over-leveraged.