Accounting: Ch. 1-3 Vocabulary

Expense

• the cost of goods or services used to operate a business

• a type of revenue generated from sales

• a financial obligation to pay for future services

• the total income earned by a business

Realization of Revenue

• Revenue is recorded at the time goods or services are sold

• Revenue is recognized when cash is received

• Revenue is recorded at the end of the accounting period

• Revenue is recognized when expenses are incurred

Proving Cash

• determining that the amount of cash agrees with the accounting records

• calculating the total cash inflow for the month

• estimating future cash needs based on past performance

• reconciling bank statements with cash balances

Service Business

What is a service business?

• A business that sells products directly to consumers

• A business that performs an activity for a fee

• A business that manufactures goods

• A business that provides financial services

Journalizing

• recording transactions in a journal

• analyzing financial statements

• preparing tax returns

• auditing company accounts

Business Plan

• a formal written document that describes the nature of a business and how it will operate

• a casual overview of a business's goals

• a brief summary of a company's financial status

• a list of products and services offered by a business

Entry

• A summary of financial statements

• Information for each transaction recorded in a journal

• A list of all accounts in a ledger

• A report of financial performance over a period

Accounts Receivable

• amounts to be received in the future due to the sale of goods or services

• amounts paid for goods or services received

• amounts owed to suppliers for goods or services

• amounts that have been written off as uncollectible

Accounting System

• a planned process designed to compile financial data and summarize the results in accounting records and reports

• a method for tracking employee performance and productivity

• a system for managing inventory and supply chain logistics

• a framework for developing marketing strategies and campaigns

Equities

• the financial rights to the assets of a business

• a type of debt instrument

• a form of insurance policy

• a method of tax evasion