Unit 6: Vocabulary

Please study the 14 vocabulary terms below. Then press the Mark Complete button to continue.
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accounting equation
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the foundation of double entry accounting which shows that all assets are either financed by borrowing money or paying with the money of the company's shareholders
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The accounting equation was the first thing I learned on the bookkeeping course I went on.
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capital
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the total financial value of all assets, less any liabilities
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After three years trading the capital of the company had increased to $100m.
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contingent liabilities
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a potential obligation that may be incurred depending on the outcome of a future event
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The management accountant estimated a contingent liability of $45,000 on the purchase of the new property.
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current assets
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all assets that are expected to be converted into cash within one year of normal business activity
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Of course you cannot depreciate current assets as they won't be in the company a year from now.
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draws
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the withdrawal of business cash or other assets by the owner for the personal use of the owner
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The accounting team tried to explain that the owner shouldn't make so many draws from the company as it was leading to huge losses.
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goodwill
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the favour or advantage that a business has acquired especially through its brands and its good reputation
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The company had assets of $62 million excluding goodwill.
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income statement
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the financial statement which measures a company's financial performance over a specific accounting period
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After studying the income statement it was clear that the company was in financial trouble.
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incur
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come into or acquire (some consequence, usually undesirable)
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The company has incurred taxes of $27,000 this quarter.
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intangible asset
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an asset which is not physical in nature, such as branding or a patent
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The valuation team had trouble valuing the intangible assets of the firm.
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intellectual property
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creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce
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Lawyers and accountants in Hollywood have to be experienced in intellectual property law.
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quantify
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determine or express the quantity of
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When entering a new market, you should be able to quantify the potential sales and the risk attached to them.
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shareholder equity
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a firm's total assets minus its total liabilities
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The board of management was delighted with the 15% rise in shareholder equity on the past year.
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sole proprietorship
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a type of business entity that is owned and run by one individual
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Many people choose to form a sole proprietorship as it is the simplest form of business entity.
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terminology
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a specific vocabulary of technical terms, used in a particular field
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There is some very complicated terminology in accounting so you should make sure you have a good dictionary.
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