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• Current assets


  All assets which are expected to be realized within the ordinary course of business, or a span of twelve months, whichever is longer
• Cash


  The most basic and familiar of all the assets. Includes money in the form of bills, coins, bank deposits, and checks
• Cash equivalents


  Short-term investments which are considered subject to negligible changes in fair value, and are maturing within three months from the date of their purchase
• Accounts receivable


  Oral promises to the entity to receive cash at a later date, usually arising from the normal course of business
• Allowance for doubtful accounts

  Contra-asset account that estimates how much of the current receivables are uncollectible
• Short-term investments


  The company's investments in low risk, highly liquid assets such as bonds and stocks, which are expected to be liquidated in less than a year
• Notes receivable


  Formal written promises to the entity to receive cash at a later date, with longer maturity dates than accounts receivable
• Inventories


  Finished goods, raw materials, work-in-process items, and supplies
• Prepayments


  Amounts paid in advance for goods or services anticipated to be received by the entity in the future
• Noncurrent assets


  All other assets which are not current
• Investments


  The company's investments which it does not expect to realize within one year, including real estate, long-term notes, government treasury bills, and funds set aside for long-term purposes
• Fixed assets


  Tangible, longest-serving assets a company can have, such as land, buildings, machinery, and equipment
• Intangible assets


  Assets that lack physical substance but are realizable over long periods of time, such as patents, copyrights, and goodwill
• Other assets


  All remaining items which do not fall into any of the other asset accounts
• Current liabilities


  Liabilities which are expected to be settled or paid out by the entity within twelve months
• Accounts payable


  The entity's oral promises to pay cash at a later date, usually arising from the normal course of business
• Notes payable


  The entity's written promises to pay a sum certain in a future determinable time
• Accrued liabilities


  All other accounts which the company should pay, arising from the normal course of business
• Current portion of long-term debts

  Long-term debts payable within the coming year
• Other payables


  Payables due from the entity outside the normal course of its business, such as dividends payable and interest payable
• Noncurrent liabilities


  Liabilities which the entity expects to settle after more than a year, or have the legal or contractual capacity to defer payment accordingly
• Bonds payable


  A form of long-term debt, often in huge sums, contained in an agreement called as the bond indenture
• Equity


  The residual interest of the owners in the assets of the business after considering all liabilities
• Bonds


  Debt instruments that pay a fixed interest rate, which may differ from prevailing market interest rates, causing their fair values to change from time to time. They are usually issued by the government, banks, and huge corporations seeking huge financing sources.
• Term bonds


  Bonds which have principal that mature in a single date
• Serial bonds


  Bonds that mature in multiple dates
• Equity


  The residual interest of the owners in the assets of the business after considering all liabilities. It is equal to total assets minus total liabilities.
• Illustrating the concept of equity

  1. Sole proprietor starts a business by obtaining a loan from a bank and investing own money

  2. Business has two owners: the creditor bank and the sole proprietor

  3. Sole proprietor has to deduct the loan from the total assets to determine how much of the business they own
• Owner's equity / Stockholders' equity

  In sole proprietorships and partnerships, it is called owner's capital. In corporations, it is called shareholders' equity or stockholders' equity.
• Common stock


  A security which represents ownership in a corporation. Common stockholders have the right to vote in stockholders' meetings, receive dividends, and have pre-emptive rights.
• Par value


  The legal nominal value assigned to common stock, which it is illegal to be issued for less than.
• Preferred stock


  A security which represents ownership in a corporation. Preferred stockholders have preference as to corporate dividends and/or liquidation over common stockholders.
• Additional paid-in capital


  The excess over par-value contributed by the company's shareholders in a stock issue. It can be from the issuance of common shares or preferred shares.
• Retained earnings


  The accumulated net income from operations over several periods. It is a measure of how much the company earned since day one of its operations.
• Revenues


  The amounts received by a business earned as a result of selling something or rendering a service. It is the increases in equity as a result of day-to-day operations.
• Types of revenues


  • Operating revenue (e.g. sales, service revenue)
  • Non-operating revenue (e.g. interest revenue, rent revenue)
• Gains


  Increases in equity as a result of non-recurring activities or the increase in value of investments.
• Capital contributions


  Increases in equity as a result of transactions with owners, in the form of cash and non-cash assets.
• Expenses


  The amounts consumed by the business to operate, the result of attempting to generate revenues.
• Losses


  Decreases in equity as a result of non-recurring activities or decreases in value of assets.