Topic: Accounting (common words/expressions) - vocabulary matching 1

VOCABULARY REVIEW: Accounting

Need to review common terms used in accounting? We've got you covered!

Assets
Assets are things a company owns that have value and can help the business earn money in the future. Assets can be physical, like buildings and machines, or non-physical, like patents or trademarks. Assets are recorded on the balance sheet.
Example: A delivery company owns trucks, computers, and cash in the bank. All of these items are assets because they help the company operate and generate income.

Liabilities
Liabilities are amounts of money a business owes to other people or organizations. These can be short-term debts, such as unpaid bills, or long-term debts, such as loans. Liabilities show future payment obligations.
Example: If a company borrows money from a bank to buy equipment, the loan is a liability because the company must repay it over time.

Equity
Equity represents the owners' share of the business after all liabilities are subtracted from assets. It shows how much of the company truly belongs to the owners. Equity can increase through profits or owner investments.
Example: If a business has total assets of $500,000 and liabilities of $300,000, the equity is $200,000.

Revenue
Revenue is the income a company earns from its normal business activities, such as selling goods or providing services. Revenue is recorded when it is earned, not necessarily when cash is received.
Example: A consulting firm completes a project for a client and sends an invoice for $10,000. The company records this amount as revenue, even if the client has not paid yet.

Expenses
Expenses are the costs a business incurs in order to earn revenue. These include wages, rent, utilities, and supplies. Expenses reduce the company's profit.
Example: A restaurant pays monthly rent, employee salaries, and electricity bills. These payments are expenses because they are necessary to operate the business.

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