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Accounting Terms
Foundations of Business Ch. 15 Vocabulary
| Term | Definition |
|---|---|
| accounting | the process of systematically collecting, analyzing, and reporting financial information |
| accounting equation | the basis for the accounting process: assets = liabilities + owners’ equity |
| annual report | a report distributed to stockholders and other interested parties that describes a firm’s operating activities and its financial condition |
| assets | the resources that a business owns |
| balance sheet (or statement of financial position) | a summary of the dollar amounts of a firm’s assets, liabilities, and owners’ equity accounts at the end of a specific accounting period |
| cost of goods sold | the dollar amount equal to beginning inventory plus net purchases less ending inventory |
| current assets | assets that can be converted quickly into cash or that will be used in one year or less |
| current liabilities | debts that will be repaid in one year or less |
| depreciation | the process of apportioning the cost of a fixed asset over the period during which it will be used |
| earnings per share | a financial ratio calculated by dividing net income after taxes by the number of shares of common stock outstanding |
| fixed assets | assets that will be held or used for a period longer than one year |
| gross profit | a firm’s net sales less the cost of goods sold |
| income statement | a summary of a firm’s revenues and expenses during a specified accounting period |
| intangible assets | assets that do not exist physically but that have a value based on the rights or privileges they confer on a firm |
| long-term liabilities | debts that need not be repaid for at least one year |
| net income | occurs when revenues exceed expenses |
| liabilities | a firm’s debts and obligations |
| net loss | occurs when expenses exceed revenues |
| net sales | the actual dollar amounts received by a firm for the goods and services it has sold after adjustment for returns, allowances, and discounts |
| operating expenses | all business costs other than the cost of goods sold |
| owners’ equity | the difference between a firm’s assets and its liabilities |
| retained earnings | the portion of a business’s profits not distributed to stockholders |
Created by:
BreAnna Hegeman
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