Financial Literacy Vocabulary Guide

Fundamental Financial Terminology

• Asset: An item of value owned.

• Liability: The state of being responsible for something, a debt.

• Equity (Owner’s Equity): The portion of a company’s assets that truly belongs to its owners.

• Revenue: Total income a business generates from its operations.

• Expense: The cost required for something, the money spent on something.

• Profit (Net Income): A financial gain.

• Loss (Net Loss): Failure to gain.

Accounting Books and Entry Systems

• Ledger: A book or other collection of financial accounts of a particular type.

• Journal: Book of original entry.

• Debit: An entry recording an amount owed.

• Credit: An entry recording a sum received.

Financial Statements and Analysis Tools

• Balance Sheet: A financial statement that contains details of a company’s assets or liabilities at a specific point in time.

• Income Statement: A financial report showing a company’s revenues, expenses, gains and losses over a specific period.

• Cash Flow: The total amount of money being transferred into and out of a business, especially as affecting liquidity.

• Trial Balance: A statement of all debits and credits in a double-entry account book with any disagreement indicating an error.