Basics of Financial Accounting Terms

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What is financial accounting?

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Financial accounting is the process of recording, summarizing, and reporting financial transactions of a business.

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What are the key financial statements?

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The key financial statements are the balance sheet, income statement, and cash flow statement.

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What is a balance sheet?

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A balance sheet is a financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

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What is an income statement?

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An income statement is a financial statement that shows a company's revenues and expenses over a specific period, resulting in net profit or loss.

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What is a cash flow statement?

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A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows and outflows a company receives.

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What are assets?

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Assets are resources owned by a company that have economic value.

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What are liabilities?

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Liabilities are obligations that a company owes to outside parties.

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What is equity?

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Equity represents the ownership interest in a company, calculated as assets minus liabilities.

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What is double-entry accounting?

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Double-entry accounting is an accounting method that requires every financial transaction to be recorded in at least two accounts.

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What is a journal in accounting?

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A journal is a detailed account that records all the financial transactions of a business, in chronological order.