Account Name Financial Statement Category

Cash Balance Sheet Asset

Accounts Receivable Balance Sheet Asset
Patient Service Revenue Income Statement Revenue
Contributed Capital Balance Sheet Equity
Wage Expense Income Statement Expense
Accounts Payable Balance Sheet Liability
Wages Payable Balance Sheet Liability
Office Supply Expense Income Statement Expense
Unearned Revenue Balance Sheet Liability
Sales Revenue Income Statement Revenue
Depreciation Expense Income Statement Expense

StatementSynonymous
of Financial Terms in the World of Accounting
Balance Sheet Position
I call this “lifetime net earnings” Statement of Assets,
or “cumulative total ofLiabilities and Shareholder
net earnings,” Equity
less dividends of cou
Retained Earnings Statement of Retained Earnings) Profit and Loss Statement
Income Statement Statement of Operations (P & L)
Revenue Sales Sales Revenue
Cost of Goods Sold (COGS) Cost of Sales
Gross Profit Gross Margin
Operating Income Income from Operations
Net Income Profit
Net Earnings
Recognize Revenue Record Expense
Record Revenue Earn Revenue
Recognize Expense Incur Expense
Interest Income Interest Revenue
Dividend Income Dividend Revenue
 To Increase To Decrease Normal Balance
Debit Credit Debit
Debit Credit Debit
Credit Debit Credit
Credit Debit Credit
Debit Credit Debit
Credit Debit Credit
Credit Debit Credit
Debit Credit Debit
Credit Debit Credit
Credit Debit Credit
Debit Credit Debit

Accounting
sets,
tal ofLiabilities and Shareholder
net earnings,” Equity
less dividends of course (see the
Statement of Statement of
Revenue and Activities (for a non-

Surplus
I. BALANCE SHEET
Balance Sheet (also called Stmt of Financial Position): is comprised of Assets, Liabilities and Equity; shows financial positi
the organization as of one date, one point in time.

• Assets: economic resources of the entity

• Liabilities: obligations of the entity to individuals/entities external to the organization (e.g., may be money owed –
Accounts Payable or services owed – Unearned or Deferred Revenue)
• Stockholders’ Equity (also known as Owners’ Equity or Shareholders’ Equity): owner claims on assets
II. INCOME STATEMENT
Income Statement (also known as Statement of Operations, Profit and Loss Statement, in nonprofit organizations it is
frequently called Statement of Activities):
• is comprised of a list of revenues and expenses;
• shows performance over a period of time, typically one year or a month
• Performance is measured by netting expenses (resources used) against revenues (delivery of services and goods).

• Revenues (only reported on the income statement): are recorded when goods or services are delivered
Special Note : UNEARNED Revenue or DEFERRED Revenue is NOT revenue. It is a liability representing the doll
amount of services owed to customers and is reported on the balance sheet. Also, Accrued Expenses are liabilities on the
balance sheet, not an expense on the income statement.
• Expenses (only reported on the income statement): arise or are incurred when resources are USED
Special Note : PREPAID EXPENSE (i.e., Prepaid Rent) is NOT an expense. It is an asset showing the amount paid
advance for rent or insurance, for example, and is reported on the balance sheet.
• Net Earnings (also called net income, profit, surplus): revenues less expenses
Net Income is NOT revenue…revenue is at the top of the income statement and reflects the dollar amount of services o
goods delivered to customers in an accounting period without regard to whether cash has been received or not; net incom
revenue – expenses.
• Interest Revenue (interest earned from a savings account, for example) is sometimes called interest income, which is
III. STATEMENT OF RETAINED EARNINGS
The book introduces the statement of retained earnings early on and then transitions to the formal Statement of Stockho
Equity. If you examine the latter, you will see the statement of retained earnings is embedded in the Statement of
Stockholders’ Equity. There is also information showing how contributed capital changed over the accounting period as we
Retained Earnings is cumulative earnings (profits) of the business to date (lifetime earnings) less dividends paid to
shareholders, if applicable. It is NOT cash.

IV. DEPRECIATION
Depreciation Expense: cost allocation mechanism used to spread the purchase price (historical cost) of a long term tangib
asset over multiple income statements to show the partial utilization of the asset employed in generating revenues for that
period of time. Calculated by taking the purchase price and dividing it by the economic (accounting) life of the long term as
This would reflect the annual depreciation expense amount. When depreciation is recorded, depreciation expense on the
income statement increases and Accumulated Depreciation on the balance sheet increases. Accumulated Depreciation is
cumulative amount of depreciation expense recorded to date and is a contra asset account on the balance sheet. As a co
asset, it is deducted in the asset column shown on the balance sheet. Frequently, it is not shown as a separate account o
balance sheet but rather directly deducted from Property, Plant and Equipment (PP&E) and shown as “PPE, net” on the
balance sheet. Depreciation is NOT a cash expense. It will never be a cash outflow of the organization.