| Term | Definition |
|---|
| Cash Basis | Simplest method, records a Sale when payment is received from customers & records an expense when paid. |
| Accrural Basis | Records Sales when they are made and records expenses when they are incurred. |
| Completed Contract | Records revenue as a project progresses and records a corresponding amount of expenses. |
| Assets | (1) A company's possessions, including tangible or intangible items, (2) Current assets are possessions easily converted into cash, (3) Fixed assets are permanent possessions not meant to be converted into cash, (4) Other assets are possessions that are not current assets or fixed assets. |
| Balance Sheet | Compares the possessions of a company and the debts its owes on a specific day (Net Worth) |
| Break-Even Point | The minimum amount of sales necessary for the company's survival. |
| Cash | Money that you actually have on-hand NOT on paper. Actual cash that has been received (not credit). |
| Cash Flow Projection | (Cash Forecast) predicts how much actual cash you'll have at any given time in the future. |
| Cash Flow Statement | A way to avoid cash flow crisis, put it all down on paper. Includes anticipated cash sales. |
| Contribution Margin | Gross profit divided by sales margin. |
| Depreciation | An expense that records a portion of the cost of a fixed asset in each accounting period. |
| Fixed Expenses | Expenses that do not fluctuate with the company's sales volume. |
| Gross Margin | (Gross Profit) The difference between sales and the cost of good sold. |
| Income Statement vs Cash Flow Statement | Shows Sales as they are generated, shows depreciation, interest on loan listed, has beginning and ending inventory for costs of goods sold, proprietor's salary not shown as an expense. |
| Cash Flow Statement vs. Income Statement | Shows Sales as 'cash-in" only when money is received, depreciation shown as expense (must be added back in), interest & principal are included, inventory purchases recorded as bills paid, proprietor's salary shown as money withdrawn. |
| Liabilities | Debts that a company owes. |
| Current Liabilities | Debts that must be paid within 12 months. Includes accounts payable, accrued expenses, notes, notes payable, and current portion of long-term debt. |
| Long-Term Liabilities | Debts that are due more than 12 months from the date of the balance sheet. |
| Net Worth --How is it different from Retained Earnings or Owner's Equity? | The difference between your assets and liabilities. All three terms refer to the same thing! |
| Opening Day Balance Sheet | Corresponds with the start-up costs of the business. |
| Overhead Expenses | All expense for business except for direct labor and direct material costs. |
| P+L (Profit and Loss) Statement | A list of all your income & expenses for a given period, usually a month or a year. |
| Sales | On an income statement can be listed as Sales, Income, or Revenue. Is revenue a company has generated during a specific period of time. |
| Start-Up Costs | All items (things) needed on the first day of business. |
| T+M (Time and Materials) | A way of billing, charging for time spent on the job and price of materials (marked up) in order to complete the job. |
| The Rule of 3's. | If your bank balance is off by a number thats divisible by 3, you've probably made a transposition error. |
| Variable Costs | Costs that vary for the business every month and change. Never the same. |
Combine with other sets
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