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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
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