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| financial reports | summarize the results of financial transactions affecting a business and report its current financial position |
| accounting period | a block of time covered by an accounting report |
| accounting cycle | steps that help a business keep its accounting records in an orderly manner |
| owner's equity | an owner's claim to the assets of a business |
| accounting equation | assets = liabilities + owner's equity |
| account | shows the balance for a specific item |
| accounts receivable | the total amount of money owed to the business |
| accounts payable | the total amount of money the business owes |
| double-entry accounting | a system of recordkeeping in which each business transaction affects at least 2 accounts |
| T accounts | show the dollar increase/decrease in an account that is caused by a transaction |
| debit | deduction from account (shown on left side of T account) |
| credit | addition to an account (shown on right side of T account) |
| journal | a record of all of the transactions of a business |
| general ledger | a book or set of electronic files that contains the accounts used for a business |
| posting | when you transfer amounts from the general journal to individual accounts in a general ledger |
| trial balance | a list of all the account names for a business and their current balances |
| journalizing | process of recording business transactions in a journal |
| financial statements | reports that summarize the changes that result from your business transactions during an accounting period |
| merchandising business | a business that buys goods, marks them up, and sells them to customers |
| income statement | a report of the net income or net loss for an accounting period |
| cost of merchandise sold | the amount of money the business paid for the goods that it sold to customers |
| gross profit on sales | the profit made from selling merchandise before operating expenses are deducted |
| net income | the amount of revenue that remains after expenses for the accounting period are subtracted from the gross profit on sales |
| balance sheet | a report of the balances of all asset, liability, and owner's equity accounts at the end of an accounting period |
| statement of cash flows | a document that reports how much cash your business took in and where the cash went. |
| cash inflows | cash that enters a business |
| cash outflows | cash that exits a business |
