会计概念英文名词解释

Session 1 Definitions and Elements of Financial Statements

You will need to learn these underlined terms for the midterm!

I.Income statement–“video” of revenues, expenses, gains, losses over a period

of time

a.B asic definitions:

Revenue–increase in equity (and associated increase in assets and/or

decrease in liabilities) earned from the sale of goods or provision of services

to customers; it is measured on a gross basis as the amount of assets to be

received.

Expense– decrease in equity (and associated decrease in assets and/or

increase in liabilities) created by sale of goods, rendering of services or

passage of time; it is measured on a gross basis as the amount of assets

consumed.

[

Gain – increase in equity resulting from selling assets or recognizing the

increase in value of assets (or decrease in value of liabilities); it is measured

on a net basis as the positive difference between current value and amount

recorded on the balance sheet.

Loss – decrease in equity resulting from selling assets or decrease in value

of assets (or increase in value of liabilities); it is measured on a net basis as

the negative difference between current value and amount recorded on

the balance sheet.

Accounting period - the time period between consecutive balance sheets

for which a firm prepares an income statement and statement of cash

flows ., an annual report has a 12-month accounting period and a quarterly

statement has a 3-month accounting period).

b.Elements:

Sales - revenue from selling goods or providing services to customers,

which is reported as the top line on the income statement.

Cost of Goods Sold or Cost of Sales labor, material, and overhead costs

directly related to providing goods or services.

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Gross Profit is the difference between Sales Revenue and Cost of Goods

Sold, which represents the profit that is available to cover all of the other

expenses on the income statement.

Operating Expenses are expenses related to the ordinary operating

activities of the firm of providing goods or services to customers or gains

and losses related to operating assets like PPE.

Operating Profit or Income equals gross profit minus operating expenses.

Other Nonoperating Revenue and Expense are items related to FINANCING

activities ., interest expense) and INVESTING activities ., interest income

and gains and losses on investments).

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Income Before Tax equals operating profit minus other income and

expense.

Tax expense equals a GAAP based measure of the government charges on

income.

Net Income equals income before tax minus tax expense.

c.I ncome statement accounts are called TEMPORARY ACCOUNTS because

amounts accumulate for a defined period of time and are then zeroed out

when the balance is transferred to retained earnings. Annual income

statement amounts represent the total revenues or expenses for a 12

month period called the fiscal year.

II.Balance sheet–“snapshot”of assets, liabilities, stockholders’ equity at a point in time

a.B asic Definitions

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Operating cycle - average time it takes to go from cash to goods and

services sold to customers and then back to cash collected from customers.

b.Elements:

Asset: resource the firm controls because of a past transaction or event

that provides expected future benefits.

Current asset: asset a firm expects to convert to cash, sell, or

consume within the longer of one year or an operating cycle.

Noncurrent asset: asset not classified as current.

Liability: creditor’s claims or obligation that represents a probable future

economic sacrifice of assets or services based on a past transaction or

event.