The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset
An accounting system that doesn't record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There's no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren't possible.
Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term "accrual" refers to any individual entry recording revenue or expense in the absence of a cash transaction
A financial statement that lists the assets, liabilities and equity of a company at a specific point in time and is used to calculate the net worth of a business. A basic tenet of double-entry book-keeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance. Subtracting liabilities from assets shows the net worth of the business A basic tenet of double-entry bookkeeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance.
A legal state of insolvency. A company deemed to be in this condition may choose protection under the law to allow a chance to reorganize (Chapter 11) or liquidate in an orderly fashion (Chapter 7).
A financial document generated monthly and/or annually that reports the earnings of a company by stating all relevant revenues (or gross income) and expenses in order to calculate net income. Also referred to as a profit and loss statement.
Last In, First Out (LIFO)
An accounting method for inventory and cost of sales in which the last items produced or purchased are assumed to be sold first; allows business owner to value inventory at the less expensive cost of the older inventory; typically used during times of high inflation