chapter 15

data

numerical or verbal descriptions that usually result from some sort of measurement

information

data presented in a form that is useful for a specific purpose

database

a single collection of data and information stored in one place that can be used by people throughout an organization to make decisions

knowledge management

a firm’s procedures for generating, using, and sharing important data and information

decision-support system

a type of software program that provides relevant data and information to help a firm’s employees make decisions

expert system

a type of computer program that uses artificial intelligence to imitate a human’s ability to think

management information system

a system that provides managers and employees with the information they need to perform their jobs as effectively as possible

data processing

the transformation of data into a form that is useful for a specific purpose

statistic

a measure that summarizes a particular characteristic of an entire group of numbers

accounting

the process of systematically collecting, analyzing, and reporting financial information

audit

an examination of a company’s financial statements and the accounting practices that produced them

generally accepted accounting principles

an accepted set of guidelines and practices for U.S. companies reporting financial information and for the accounting profession

managerial accounting

provides managers and employees with the information needed to make decisions about a firm’s financing, investing, marketing, and operating activities

financial accounting

generates financial statements and reports for interested people outside an organization

certified public accountant

an individual who has met state requirements for accounting education and experience and has passed a rigorous accounting examination

assets

the resources that a business owns

liabilities

a firm’s debts and obligations

owners' equity

the difference between a firm’s assets and its liabilities

accounting equation

the basis for the accounting process: Assets=Liabilities+Owners’⁢equity

double-entry bookkeeping system

a system in which each financial transaction is recorded as two separate accounting entries to maintain the balance shown in the accounting equation

annual report

a report distributed to stockholders and other interested parties that describes the firm’s operating activities and its financial condition

balance sheet

a summary of the dollar amounts of a firm’s assets, liabilities, and owners’ equity accounts at the end of a specific accounting period

statement of financial position

a summary of the dollar amounts of a firm’s assets, liabilities, and owners’ equity accounts at the end of a specific accounting period

liquidity

the ease with which an asset can be converted into cash

current assets

assets that can be converted quickly into cash or that will be used in one year or less

fixed assets

assets that will be held or used for a period longer than one year

depreciation

the process of apportioning the cost of a fixed asset over the period during which it will be used

intangible assets

assets that do not exist physically but that have a value based on the rights or privileges they confer on a firm

current liabilities

debts that will be repaid in one year or less

long-term liabilities

debts that need not be repaid for at least one year

retained earnings

the portion of a business’s profits not distributed to stockholders

income statement

a summary of a firm’s revenues and expenses during a specified accounting period

revenues

the dollar amounts earned by a firm from selling goods, providing services, or performing business activities

gross sales

the total dollar amount of all goods and services sold during the accounting period

net sales

the actual dollar amounts received by a firm for the goods and services it has sold after adjustment for returns, allowances, and discounts

cost of goods sold

the dollar amount equal to beginning inventory plus net purchases less ending inventory

gross profit

a firm’s net sales less the cost of goods sold

operating expenses

all business costs other than the cost of goods sold

net income

occurs when revenues exceed expenses

net loss

occurs when expenses exceed revenues

statement of cash flows

a statement that illustrates how the company’s operating, investing, and financing activities affect cash during an accounting period

financial ratio

a number that shows the relationship between two elements of a firm’s financial statements

net profit margin (or return on sales)

a financial ratio calculated by dividing net income after taxes by net sales

current ratio

a financial ratio computed by dividing current assets by current liabilities

inventory turnover

a financial ratio calculated by dividing the cost of goods sold in one year by the average value of the inventory

balance sheet

a summary of the dollar amounts of a firm’s assets, liabilities, and owners’ equity accounts at the end of a specific accounting period