Financial Terms Flashcards

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Asset

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A tangible or intangible resource that has economic value, owned by a person or organization.

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Balance Sheet

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A financial statement that marks a company's financial situation at a moment in time, showing all assets, liabilities, and owners’ equity.

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Creditor

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The person or organization to whom a debt or obligation is owed.

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Liability

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A debt or obligation owed to any other person or organization.

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Net Worth

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The difference between an individual's assets and liabilities.

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Owners’ Equity

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The owner’s rights to the assets of the business after all liabilities have been paid.

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The Accounting Equation

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The equation showing the relationship between assets, liabilities, and owner’s equity of a company, shown as: \(Assets = Liabilities + Owners’ Equity\).

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Account

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A record in the accounting system that tracks the increases, decreases, and current balance of a specific asset, liability, equity, revenue, or expense.

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Capital Account

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An account used to record the owner’s equity in a business.

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Purchase On Account

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A promise to pay for goods or services provided by an individual or organization at a later date.