CBP Business Finance and Accounting Flashcards

Which financial statement shows a company's revenues and expenses over a specific period?

Answer: Income Statement

The income statement (profit and loss statement) summarizes revenues and expenses over a reporting period to show net profit or loss.

What does the term 'accounts payable' refer to in business accounting?

Answer: Money the company owes to suppliers or vendors

Accounts payable represents short-term liabilities — amounts a company owes to its suppliers and vendors for goods or services received.

What is the formula for calculating gross profit?

Answer: Revenue minus cost of goods sold

Gross profit equals revenue minus the cost of goods sold (COGS), showing profitability before operating expenses are deducted.

Which ratio measures a company's ability to pay short-term obligations using its most liquid assets?

Answer: Quick ratio

The quick ratio (acid-test ratio) measures short-term liquidity by comparing cash, marketable securities, and receivables to current liabilities, excluding inventory.

What is 'depreciation' in the context of business accounting?

Answer: The allocation of an asset's cost over its useful life

Depreciation systematically allocates the cost of a tangible asset over its useful life, reducing taxable income and reflecting the asset's decreasing value.

A company has total assets of $500,000 and total liabilities of $200,000. What is the owner's equity?

Answer: $300,000

Owner's equity equals total assets minus total liabilities; $500,000 - $200,000 = $300,000, per the fundamental accounting equation.