Accounting Terms
Assets
Noun. (Accounting.) Resources that are owned by a business and are expected to provide future economic benefits. Equipment, an example of an asset, provides benefits by its use in the manufacture of products to be sold. The normal balance of an asset account is debit. Assets appear on the balance sheet.
Other asset accounts include: Accounts Receivable, Cash, Notes Receivable, Inventories, Supplies, Prepaid Insurance, Investments, Land, Buildings, and Others.
Liabilities
Noun. (Accounting.) The debts and obligations of a business that represent claims of creditors on the assets of that business. Examples of liability accounts include Notes Payable and Accounts Payable. Notes Payable represents loans taken by the business that are due to be paid back on a specific date or later in the future, plus interest. Accounts Payable represents debts incurred when purchasing assets and services on account. Liabilities are reported on the balance sheet.
Stock Holders Equity
Noun phrase. (Accounting.) The net shareholders' claims against the assets of a corporation are comprised of paid-in capital and retained earnings. Paid-in capital represents the shareholders' investment when stock was issued. Retained earnings represents accumulated profits retained (not paid as dividends) from current and previous periods.
Stockholders' equity is reported on the balance sheet in a section by itself, following liabilities.
Revenue
Noun. (Accounting.) Income earned by selling goods and services to customers. Revenue increases stockholders' equity and appears at the beginning of the income statement. Revenue is earned when the product is delivered to the customer or when a service has been performed.
Expense
Noun. (Accounting.) The amount of assets used up or services consumed in the process of producing goods and services to generate revenues. Expenses are costs with no...
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