Accounting Basics
This equation ensures the balance sheet always balances.
What is the accounting equation (Assets = Liabilities + Equity)
This statement shows profitability over a specific time period.
What is the income statement
When you pay your employee's, it's this kind of expense?
These are costs that vary directly with production volume.
What are variable costs
Money a company owes to suppliers.
What are accounts payable
This principle requires revenue to be recognized when earned, not when received.
What is the revenue recognition principle
This section of the balance sheet includes liabilities payable within 12 months.
What are current liabilities
When you buy inventory for your online business but haven't paid yet, it goes here.
What is accounts payable
This is a cost that has already been incurred and cannot be recovered.
What is a sunk cost
An accounting method where revenue and expenses are recorded when incurred, not when cash changes hands.
What is accrual accounting
The process of recording financial transactions chronologically.
What is journalizing
This term describes the net amount of operating, investing, and financing cash flows.
What is net change in cash
McDonald's golden arches are considered this type of intangible asset.
What is a trademark
This type of analysis compares how changes in costs and volume affect operating profit.
What is cost-volume-profit (CVP) analysis
This contra-asset account reduces accounts receivable to reflect uncollectible amounts.
What is allowance for doubtful accounts
This term refers to an entry made to correct an error in the accounts.
What is an adjusting or correcting journal entry
This is the process of eliminating intra-company transactions when preparing consolidated financial statements.
What is intercompany elimination
Buying a laptop for work is considered this type of cost on financial statements.
What is a capital expenditure (CapEx)
This is the allocation of indirect costs to products based on estimated usage of each cost driver.
What is overhead allocation using activity-based costing (ABC)?
This term refers to the estimated useful life of an intangible asset with a definite life.
What is amortization period
These are economic benefits controlled by an entity as a result of past events, expected to generate future benefits.
What are assets (according to the IFRS definition)
Under IFRS, this is the framework that defines the concepts for financial reporting, including recognition and measurement criteria.
What is the Conceptual Framework for Financial Reporting
If you loan your friend $500 for their start-up and expect it back in 6 months, it’s this type of asset.
What is a current asset
This variance measures the difference between actual and standard direct material prices.
What is direct material price variance
This is the process of allocating the cost of a natural resource over its extraction period
What is depletion