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Accounting
Recording, classifying, summarizing and interpreting of financial events and transactions in an organization to provide interested parties needed financial information TERM 2
Managerial Accounting
DEFINITION 2 Provides information and analysis to managers inside the organization to assist them in decision making .Involved with: Costs of production Costs of marketing Preparation and control of budgets Minimizing tax liabilities TERM 3
Financial Accounting
DEFINITION 3 Financial information and analyses are generated for people primarily outside the organization- outside users are interested in these questions: Is the organization profitable? Is it able to pay its bills? How much debt does it owe? TERM 4
Annual Report
DEFINITION 4 A yearly statement of the financial condition, progress, and expectations of the firm TERM 5
Private Accountants
DEFINITION 5 Work in a single firm, government agency, or nonprofit organization
Public Accountants
Provide accounting services to individuals or businesses TERM 7
Certified Public Accountants (CPAs)
DEFINITION 7 Accountants who have passed a series of examinations established by the American Institute of Certified Public Accountants (AICPA) and met a states requirements for education and experience TERM 8
Auditing
DEFINITION 8 Reviewing and evaluating the information used to prepare a companys financial statements TERM 9
Independent Audit
DEFINITION 9 An evaluation and unbiased opinion about the accuracy of a companys financial statements TERM 10
Certified Internal Auditors (CIAs)
DEFINITION 10 Accountants who have a bachelors degree and two years of experience in internal auditing and pass an exam administered by the Institute of Internal Auditors
Ledger
A specialized accounting book or program where all information is in one place TERM 17
Trial Balance
DEFINITION 17 A summary of all the information in the account ledgers TERM 18
Financial Statement
DEFINITION 18 A summary of all the financial transactions that have occurred over a particular period. Key financial statements of business are:Balance sheet,Income statement,Statement of cash flows TERM 19
Fundamental Accounting Equation
DEFINITION 19 The basis for the balance sheet The equation must always be balanced and includes the formula: Assets = Liabilities + Owners Equity TERM 20
Assets
DEFINITION 20 Economic resources owned by a firm. Items can be tangible or intangible
Liquidity
Ease with which assets can be converted into cash TERM 22
Current Assets
DEFINITION 22 Items that can or will be converted to cash within one year TERM 23
Fixed Assets
DEFINITION 23 Long-term assets that are relatively permanent such as land, buildings, or equipment TERM 24
Intangible Assets
DEFINITION 24 Long-term assets that have no physical form but do have value such as patents, trademarks, and goodwill TERM 25
Liabilities
DEFINITION 25 What the business owes to others - its debts
The INCOME STATEMENT
The formula for the income statement: Revenue Minus Cost of Goods Sold Equals Gross Profit Minus Operating Expenses Equals Net Income before Taxes Minus Taxes Equals Net Income or Net Loss TERM 32
Revenues
DEFINITION 32 the monetary value a firm received for goods sold, services rendered or other payments TERM 33
Cost of Goods Sold (or
Manufactured)
DEFINITION 33 Measures the cost of merchandise the firms sells or the cost of raw materials and supplies it used in producing items for resale TERM 34
Gross Profit
DEFINITION 34 How much a firm earned by buying (or making) and selling merchandise TERM 35
Operating Expenses
DEFINITION 35 Expenses a firm incurs in selling goods and services such as rent, salaries and supplies
Depreciation
The systematic write-off of the cost of a tangible asset over its estimated useful life TERM 37
Statement of Cash
Flows
DEFINITION 37 Reports cash receipts and cash disbursements related to the three major activities of a firm: 1.Operations 2.Investments3.Financing TERM 38
Ratio Analysis
DEFINITION 38 The assessment of a firms financial condition using calculations and financial ratios developed from the firms financial statements Key ratios include: Liquidity ratios Leverage ratios Performance ratios Activity ratios TERM 39
Liquidity ratios
DEFINITION 39 measure a firms ability to turn assets into cash to pay its short-term debts Two key ratios are: Current ratio Acid-test ratio (quick ratio) This information is found on the firms balance sheet TERM 40
Leverage ratios
DEFINITION 40 measure the degree to which a firm relies on borrowed funds in its operations Key ratios include: Debt to Owners Equity Ratio This information is found on the firms balance sheet
