GAAP

A set of rules folloed by accountants in preparing companie’s financial statements.

While the rule of GAAP vary between countries, all national systems aim to produce statements that are comprehensive and consistent.

Income is money earned by a company through sales or other activities.

Accountants always distinguish between gross income or revenue, and net income or profit.

Labor costs, rent, raw materials, and interest on loans are all common company expenses.

An expence account is a record of expenses paid for by employees for company business.

These expenses will then be reimbursed, or paid back, by the company at the end of the month.

Cash flow is any movement of money into or out of a company’s accounts.

It is different from income because some activities, like receiving loans from a bank, will create positive cash flow without increasing a company’s profits.

A cash flow statement shows flows of funds in and out of the company.

Income earned by a company from normal business transactions, such as the sale of its products.

Costs associated with transactions, such as the payment of salaries and the purchase of raw materials.

Income recieved by a company that is not earned from its productive activities.

Includes interest earned on a company’s bank accounts, or money from selling of an investment or property.

Expenses not realated to the costs of a company’s productive activities.

These include interest paid on the company’s bonds, bank loads and other debts.