Financial Accounting Concepts & Terminology

These flashcards cover key terms and definitions related to financial accounting concepts, including the accounting equation, users of financial information, and definitions of assets, liabilities, and owners equity.

Accounting

A system of gathering, analyzing, recording, reporting, and interpreting financial information.

Users of Financial Information

Groups that utilize financial data for various purposes, including internal users (owners, managers, employees) and external users (customers, competitors, lenders, government, suppliers, investment analysts).

Assets

Resources controlled by an entity resulting from past events, which are expected to provide future economic benefits.

Liabilities

Present obligations resulting from past events, settlement of which leads to a decrease in economic benefits.

Owners Equity

The interest the owner has in the business, which includes capital contributed and retained earnings.

Current Assets

Items of value with a lifespan of less than a year.

Non-Current Assets

Items of value with a lifespan of longer than a year.

Intangible Assets

Non-physical items, such as goodwill and intellectual property, that help a business generate revenue.

Current Liabilities

Obligations payable within one year.

Non-Current Liabilities

Obligations payable over a period of more than a year.

Accounting Equation

The fundamental equation stating that Assets = Liabilities + Owners Equity.

Net Worth

The value of possessions minus what one owes.

Income

Receipts from the normal operations of the business.

Expenses

Amounts spent in the normal course of business.

Capital

The contribution made by the owner to the business.

Drawings

The amount the owner withdraws from the business for personal use.