Accounting the Monopoly Way
Vocabulary
1. assets: Everything a business OWNS – cash, inventory
2. liabilities: Everything a business OWES – payroll, taxes
3. accounts receivable: money that comes into the business
4. accounts payable: money that must be paid out of the business, like bills
5. total equity: equal to the sum of all assets minus the sum of all liabilities
assets – liabilities = total equity
Total equity is the bottom line – how much are you worth??
6. balance sheets: Balance sheets give us the total equity, what we are worth,
on a weekly basis. It gives us a bottom line: How much money have we made
each week? Balance sheets use the equation:
(asset A + asset B + asset C…) – (liability A + liability B + liability C…) = total equity
7. depreciation: this happens when you buy something new, and the longer
you own it and use it, the less it is worth. For example: the depreciation of a
used car.
8. profit and loss statement: this statement summarizes the results of your company’s
operations for the month. It tells you whether you made or lost money that month.
9. statement of cash flows: this statement deals with cash only, and shows us
where the cash is coming from and where it goes.
10. leasing: a long term legal obligation to “borrow” capital, like a building or
equipment needed in the operation of a business. Lease payments are spread over a
longer period of time than loan payments would be if you were buying instead of
leasing.
11. personal check: a check written and signed by the individual offering it. They
make it out to you or your business.
12. two-party check: a check that is issued by one person, the maker, to a second person
who endorses it so that it may be cashed by a third person. This check is susceptible
to fraud because the maker can stop payment at the bank.
13. stop payment: when the maker of a check calls the bank and orders them not to
honor the check , but to cancel it. Usually when stop payment is ordered on checks,
the bank charges a fee of $20.00 - $30.00 to the maker of the check.
14. payroll check: a check issued to an employee for wages or salary earned.
15. counter check: issued by banks to be used by depositors when they are withdrawing
funds from their accounts. Counter checks do not have the name nor the account
number of the depositor pre-printed. The person who is using the counter check fills
that part in. Sometimes a store has its own counter checks for the convenience of its
customers.
16. Insufficient funds (ISF): a check returned to you from the bank marked ISF is a
check that did not clear the second time you deposited it. If the check is returned to
you the second time by the bank, it is the retailer’s collection problem and not the
bank’s.
17. no account: Usually you’ve lost when the bank returns a check marked “no
account.” Such a check is evidence of a swindle or a fraud unless there has been an
extraordinary error.
18. closed account: A check marked “closed account” is a warning of extreme
carelessness or fraud. The bank may have closed the account because of too many
overdrafts. An individual may have opened a new account by removing funds from
an old one, and forgotten they had issued a check that is still outstanding against the
old account.
19. Overdraft: an overdraft occurs when the check writer writes a check for more
money than they have in their account. The check “bounces” and is returned to the
retailer whose job it is now to become bill collector and get the money back from the
check writer.