Accounting Unit 6: Vocabulary

To pass this unit, please study the 14 vocabulary words below.
accounting equation
the foundation of double entry accounting which shows that all assets are either financed by borrowing money or paying with the money of the company's shareholders
The accounting equation was the first thing I learnt on the bookkeeping course I went on.
capital
the total financial value of all assets less any liabilities. The net worth of a company
After three years trading the capital of the company had increased to $100m.
contingent liabilities
a potential obligation that may be incurred depending on the outcome of a future event
The management accountant estimated a contingent liability of $45,000 on the purchase of the new property.
current assets
all assets that are expected to be converted into cash within one year of normal business activity
Of course you cannot depreciate current assets as they won't be in the company a year from now.
draws
the withdrawal of business cash or other assets by the owner for the personal use of the owner
The accounting team tried to explain that the owner shouldn't make so many draws from the company as it was leading to huge losses.
goodwill
the favour or advantage that a business has acquired especially through its brands and its good reputation
The company had assets of $62 million excluding goodwill.
income statement
the financial statement which measures a company's financial performance over a specific accounting period
After studying the income statement it was clear that the company was in financial trouble.
incur
come into or acquire (some consequence, usually undesirable)
The company has incurred taxes of $27,000 this quarter.
intangible asset
an asset which is not physical in nature
The valuation team had trouble valuing the intangible assets of the firm.
intellectual property
creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce
Lawyers and accountants in Hollywood have to be experienced in intellectual property law.
quantify
determine or express the quantity of
When entering a new market, you should be able to quantify the potential sales and the risk attached to them.
shareholder equity
a firm's total assets minus its total liabilities
The board of management was delighted with the 15% rise in shareholder equity on the past year.
sole proprietorship
a type of business entity that is owned and run by one individual
Many people choose to form a sole proprietorship as it is the simplest form of business entity.
terminology
The vocabulary of technical terms used in a particular field
There is some very complicated terminology in accounting so you should make sure you have a good dictionary.
Go to Unit Activities