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