Financial Accounting Chapters 1-5 Definitions Only
Accrual Basis of Accounting
Accounting procedures whereby sales revenue is recorded when earned and realized and expenses are recorded in the period in which they help to generate the sales revenue.
Adjusting entries
Made at the end of an accounting period under accrual accounting to ensure the proper matching of expenses incurred with revenues earned for the period.
Assets
Economic resources of a business that can be expressed in money terms.
Dividends
Distributions of assets (usually cash) or stock from a corporation to its stockholders
Liabilities
Obligations/debts that a business must pay in money or services at some time in the future as a consequence of past transactions or events.
Define:
Excess of business’s sales revenues over expenses
Net Assets
Difference between a business’s assets & liabilities
Retained Earnings
Earnings of a corporation that have been retained in the corporation (have not been paid out as a dividend) for future corporate use.
Stockholder’s Equity
Residual interest in the assets of a business after all liabilities have been paid off
Expenses
Decreases in stockholders’ equity incurred by a firm during the process of generating its sales revenues .
Common Stock
Basic ownership class of capital stock, carrying the right to vote, share in earnings, participate in future share issues, and share in any liquidation proceeds after all more senior claims have been settled.
Sales revenue
Increases in stockholders’ equity that result when a firm provides goods or services to its customers
Balance Sheet
Financial statement showing a business’s A’s, L’s,& S.E as of a specific date
General Ledger
Grouping of all of a business’s accounts used to prepare basic financial statements
General Journal
Diary of a business’s accounting transactions
Income Statement
Financial statement reporting a business’s sales revenue & expenses for given period of time.
Prepaid Expense
Expense paid in advance but which has not yet been incurred.
Unearned Revenue
Payment received before good is sold or service is provided
Accrued Expense
Expense incurred but not yet paid.
Accrued Revenue
Revenue earned but not yet billed or received.
Inventory
goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.
Equipment
Asset used for operating functions of a company.