Asset Things of value owned by the business. Examples include cash, machines, and buildings. To their owners, assets possess service potential or utility that can be measured and expressed in money terms.

Balance sheet Financial statement that lists a company’s assets, liabilities, and stockholders’ equity (including dollar amounts) as of a specific moment in time. Also called a statement of financial position.

Business entity concept (or accounting entity concept) The separate existence of the business organization.

Corporation Business incorporated under the laws of one of the states and owned by a few stockholders or by thousands of stockholders.

Entity A business unit that is deemed to have an existence separate and apart from its owners, creditors, employees, customers, other interested parties, and other businesses, and for which accounting records are maintained.

Going-concern (continuity) concept The assumption by the accountant that unless strong evidence exists to the contrary, a business entity will continue operations into the indefinite future.

Income statement Financial statement that shows the revenues and expenses and reports the profitability of a business organization for a stated period of time. Sometimes called an earnings statement.

Manufacturing companies Companies that buy materials, convert them into products, and then sell the products to other companies or to final customers.

Merchandising companies Companies that purchase goods ready for sale and sell them to customers.

Money measurement concept Recording and reporting economic activity in a common monetary unit of measure such as the dollar.

Partnership An unincorporated business owned by two or more persons associated as partners.

Periodicity (time periods) concept An assumption that an entity’s life can be meaningfully subdivided into time periods (such as months or years) for purposes of reporting its economic activities.

Profitability Ability to generate income. The income statement reflects a company’s profitability.

Service companies Companies (such as accounting firms, law firms, or dry cleaning establishments) that perform services for a fee.

Sole proprietorship An unincorporated business owned by an individual and often managed by that individual.

Stockholders or shareholders Owners of a corporation; they buy shares of stock, which are units of ownership, in the corporation.