Accounts payable (p. 27)
Amounts a business must pay in the future.
Accounts receivable (p. 33)
Claims for future collection from customers.
Assets (p. 30)
Property owned by a business.
Balance sheet (p. 30)
A formal report of a business’s financial condition on a certain date; reports the assets, liabilities, and owner’s equity of the business.
Break even (p. 37)
A point at which revenue equals expenses.
Business transaction (p. 25)
A financial event that changes the resources of a firm.
Capital (p. 26)
Financial investment in a business; equity.
Equity (p. 26)
An owner’s financial interest in a business.
Expense (p. 33)
An outflow of cash, use of other assets, or incurring of a liability.
Fair market value (p. 39)
The current worth of an asset or the price of the asset would bring if sold on the open market.
Fundamental accounting equation (p. 32)
The relationship between assets and liabilities plus owner’s equity.
Income statement (p. 37)
A formal report of business operations covering a specific period of time; also called a profit and loss statement or a statement of income and expenses.
Liabilities (p. 30)
Debts or obligations of a business.
Net income (p. 37)
The result of an excess of revenue over expenses.
Net loss (p. 37)
The result of an excess of expenses over revenue.
On account (p. 27)
An arrangement to allow payment at a later date; also called a charge-account or open-account credit.
Owner’s equity (p. 30)
The financial interest of the owner of a business; also called proprietorship or net worth.
Revenue (p. 33)
An inflow of money or other assets that results from the sales of goods or services or from the use of money or property; also called income.
Statement of owner’s equity (p. 38)
A formal report of changes that occurred in the owner’s financial interest during a reporting period.
Withdrawals (p. 36)
Funds taken from the business by the owner for personal use.
