Vocab
This fundamental equation states that Assets must always equal the sum of Liabilities and Equity.
What is the Accounting Equation?
This is the standard Internal Revenue Service (IRS) form that individual taxpayers use to file their annual income tax returns.
What is the 1040?
A document instructing a bank to transfer funds from a depositor's account to a recipient.
A Check
When a company uses this type of card, the transaction results in an immediate deduction from the entity's cash or bank asset account.
What is a Debit Card?
A secure, interest-bearing deposit account held at a bank or credit union.
Savings Account
Often called the "Statement of Financial Position," this report provides a snapshot of a company’s financial health at a specific point in time.
What is a Balance Sheet?
These are specific expenses, like student loan interest or IRA contributions, that are subtracted from your total income to arrive at your Adjusted Gross Income (AGI).
What are Adjustments to Income?
A foundational financial statement providing a "snapshot" of a company’s financial position at a specific point in time.
Purchases made with this card type are recorded as a "Current Liability" on the balance sheet, representing an obligation to pay the card issuer at a later date.
What is a Credit Card?
A bank deposit account designed for daily money management, offering high liquidity for frequent transactions like purchases, withdrawals, and bill payments.
Checking Account
This non-cash expense represents the systematic allocation of the cost of a tangible asset over its useful life.
What is Depreciation?
Unlike a deduction, which lowers your taxable income, this accounting treat is subtracted directly from the total tax you owe, making it much more valuable.
What is a Tax Credit?
A small, bound booklet of pre-printed, sequential checks issued by a bank to a checking account holder to pay individuals or businesses.
Check Book
This term describes the 21-to-25-day window where a business can leverage "the float" on a credit card without incurring interest—a benefit not available with immediate-draw debit cards.
What is the Grace Period?
A safe, low-risk savings account offered by banks or credit unions that pays a fixed interest rate on a lump sum of money for a set period, known as a term.
Certificate of Deposit
This specific account represents money owed to a business by its customers for goods or services delivered but not yet paid for.
What is Accounts Receivable?
For employees, this is the amount an employer takes out of each paycheck to cover federal and state income taxes, documented on a W-2 at year-end.
What is Withholding?
A financial report that details the cash inflows and outflows of a business during a specific accounting period, categorized by operating, investing, and financing activities.
Cash Flow Statement
To maintain tight internal controls, many firms use this type of "Intermediate" or "Suspense" account to record card swipes throughout the month before they are formally matched and settled against the month-end statement.
What is a Clearing Account?
A specialized financial account (checking, savings, or credit) held at a bank or financial institution designed for business rather than personal use.
Business Account
This core accounting principle dictates that expenses must be recorded in the same period as the revenues they helped generate, regardless of when cash changes hands.
What is the Matching Principle?
This is the term for a tax system where the tax rate increases as the taxable amount increases, meaning those with higher incomes pay a higher percentage.
What is a Progressive Tax?
A company's total Assets equal the sum of its Liabilities and Shareholder’s Equity
Accounting Equation
This specific accounting challenge occurs with credit cards because the "Transaction Date" (when the expense is incurred) often differs from the "Settlement Date" (when cash actually leaves the bank), requiring careful attention during this month-end process.
What is Bank Reconciliation?
A taxable investment account used to buy and sell securities like stocks, bonds, mutual funds, and ETFs.
Brokerage Account