CALINGO, FAITH NICOLETTE M.

BACNTHI

Define the following terms:

1. Statement of Profit and Loss- a statement that contains the revenue, costs, and
expenses that occur on a quarterly or yearly basis. In addition, it is commonly known
as an income statement. It contains necessary information about the company’s
ability to generate income by cost reduction and increasing revenue. Moreover, it
contains both the income and expenses. P&L can be used to track the company’s
financial status to determine how much is gained and lost by the company.
2. Statement of Financial Position- often referred to as a balance sheet. It can be used
to analyze the finances by comparing the debt to equity or the assets and liabilities
owned by the company. When a company uses a double-entry accounting system,
the statement of financial position is frequently provided since it allows for
continuous adjustment to an asset, liability, and equity accounts. Furthermore, the
basic format shows that assets= liabilities+ equity.
3. Statement of Cash Flow- is one of the three important financial statements that
show how much money was made and spent over a period of time. For instance,
monthly, quarterly, or yearly basis. By demonstrating how the money went in and out
of the business, the statement of cash flows serves as a link between the income
statement and the balance sheet. The three parts of the cash flow statement
include the operating, financial, and investing activities.
4. Statement of Changes in Equity-The comparison of a company's opening and closing
equity balances during a current period is referred to as the Statement of Changes
in Equity. The primary aim of the Statement of Changes in Equity is to provide
information about all changes in the equity account over the course of an
accounting period that is not otherwise available in the financial statements. As a
result, it assists shareholders and investors in making more educated investment
decisions. It also assists analysts and other financial statement readers to
understand what variables contributed to the change in equity capital.
5. Disclosure and notes- Accounting disclosure notes are provided in the financial
statements' footnotes. These comments provide additional information about an
entity's finances that is not included in the financial statements.
6. Assets (General)- Anything of worth or a resource of value that may be converted
into cash is referred to as an asset. Assets are owned by individuals, businesses,
and governments. An asset may create money for a corporation, or it may benefit
the firm in some way by holding or using the asset. A home, automobile, investments,
artwork, or household goods are examples of personal assets. A piece of machinery,
a financial instrument, or a patent, for example, can often provide cash flows in the
future.
7. Current Assets-A company's cash and other assets that are expected to be
converted to cash within one year of the date appearing in the balance sheet's
heading are considered current assets. On a company's balance sheet, current
assets are typically listed first and sorted in order of liquidity. For instance,
inventory, supplies, and account receivables.
8. Non-current Assets- Non-current assets are assets with benefits that will be
realized over a longer period of time and are difficult to convert into cash. Property,
plant, and equipment, intellectual property, intangible assets, and other long-term
assets are all assets that are represented on the balance sheet at acquisition cost.
Three parts of Non-assets include Tangible (physical form), intangible (lacks physical
form), and natural resources (comes from earth).
9. Liabilities-Liabilities reduce the value and equity of your organization. However, if
your liabilities exceed your assets, it means that your company is financially
 suffering and may end up filing for bankruptcy. For instance, bank and mortgage
debt, money owed to a supplier.
10. Current Liabilities- A current liability is a debt that must be paid within a year.
Current liabilities are a group of liabilities that must be regularly monitored since a
corporation must have sufficient liquidity to pay them off when they are due. A
current responsibility is one that must be paid within the operational cycle's
duration. Current liabilities can also be satisfied by substituting other liabilities, such
as short-term debt, for them. For example, payrolls.
11. Non-current Liabilities-Liabilities that are due in a year or longer are referred to as
non-current obligations (long-term liabilities). Non-current liabilities, often called
long-term liabilities, are debts or commitments that are due in more than a year.
Long-term liabilities are a crucial component of a company's long-term financing
strategy. Long-term debt is taken on by companies to get immediate capital to fund
the purchase of capital assets or to invest in new capital projects. For example,
mortgage payables and capital leases.
12. Equity-"Net worth" is a term that is frequently used. The value of a company that can
be attributed to its owners is called equity. The difference between the company's
assets and liabilities is used to calculate the book value of equity.
13. Retained Earnings- Retained earnings are the accumulated portion of a company's
profits that aren't released as dividends to shareholders and are instead set aside
for reinvestment. These funds are often allocated for working capital and fixed
asset purchases (capital expenditures) or for debt repayment.
14. Shareholder’s Capital- is the amount of money invested in a business by its
shareholders. Although share capital is a large line item, it is occasionally split down
by companies into the various types of equity they issue. There are two types of
stock: ordinary stock and preferred stock, both of which are reported at par value
or face value. It's worth noting that some states permit the issuance of common
shares with no par value.
15. Revenue- The value of all goods and services sold by a corporation in a certain
period is referred to as revenue. Revenue also known as “Sales or Income”, is the
first line of a firm's income statement. Profit or Net Income is calculated by
subtracting expenses from a company's revenue.
16. Cost of Goods sold-The entire cost of all costs needed to manufacture a product or
service that has been sold is known as the cost of goods sold. These expenses are
divided into three categories: direct labor, materials, and overhead. The labor,
payroll taxes, and other costs of items sold in a service business are considered the
cost of goods sold.
17. Direct expenses-A direct expense is one that changes in direct proportion to the
volume of a cost object. Any item for which you are assessing expenses, including
items, product lines, services, sales areas, workers, and consumers, is referred to be
a cost object. For instance, transportation costs and labor fees.
18. Operating expenses are linked with the upkeep and administration of a business on
a daily basis. Staff salary and office supplies are examples of operating expenses
incurred by a firm in order to keep it running. Cost of goods sold (materials, direct
labor, manufacturing overhead) and capital expenditures are not included in
operating expenses (larger expenses such as buildings or machines).
19. Accounting cycle- Accepting, documenting, sorting, and crediting payments made
and received within a business over a specific accounting period is known as the
accounting cycle. After all of the business of which accounts have been balanced,
the accounting period is closed out, and new ones are created for the next
accounting period.
20. Manual Journal- The manual journal is a book in which an entity first notes all daily
financial activities. Because all transactions are recorded in this book before
migrating to other books, it is also known as a book of original entries. Other non-
financial transactions that occur in the firm are also recorded in this book.
Depreciation, adjustments and an accrual were all part of that non-financial
transaction.
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