FABM 1 chapter 2
account receivable
A claim against the customer created by selling merchandise or services on credit.
Balance Sheet
A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or a year.
Income Statement
A summary of the revenue and expenses for a specific period of time, such as a month or a year. (Based on matching concept)
business transaction
An economic event or condition that directly changes an entity's financial condition or directly affects its results of operations.
revenue
An increase in owner's equity resulting from the operation of a business (can be fees earned, sales, rent, and interest)
Accounting Equation
Assets = Liabilities + Owner's Equity
Financial Statements
Financial reports that summarize the financial condition and operations of a business
prepaid expenses
Items such as supplies that will be used in the business in the future.
net loss
The amount by which expenses exceed revenues.
Net Income
The amount by which revenues exceed expenses.
Expenses
The cost of assets consumed or services used in the process of generating revenues.
account payable
The liability created by a purchase on account.
Liabilities
The rights of creditors are the debts of the business
Owner's Equity
The rights of owners
Statement of owner's equity
reports the changes in the owner's equity for a period of time
Assets
resources owned by a business
cash flows from operating activities
section reports a summary of cash receipts and cash payments from operations
cash flows from investing activities
section reports the cash transactions for the acquisition and sale of relatively permanent assets.
cash flows from financing activities
section reports the cash transactions related to cash investments by the owner, borrowings, and withdrawals by the owner
Statement of Cash Flows
summary of the cash receipts and cash payments for a specific period of time