Business Dynamics Exam 2

accounting

recording, classifying, summarizing and interpreting of financial events and transactions in an organization to provide management and other interested parties the financial information they need to make good decisions about its operation

accounting cycle

1. analyze source documents

2. record transactions in journals

3. transfer (post) journal entries to ledger

4. take a trial balance

5. prepare financial statements

6. analyze financial statements

accounts payable

current liabilities or bills the company owes others for merchandise or services it purchased on credit but has not yet paid for

annual report

yearly statement of the financial condition, progress, and expectations of an organization

assets

economic resources owned by a firm

auditing

reviewing and evaluating the information used to prepare a company’s financial statements

balance sheet

financial statement that reports a firm’s financial condition at a specific time

bonds payable

long term liabilities- money lent to the firm by bondholders that it must pay back

bookkeeping

recording of business transactions

cash flow

difference between cash coming into and cash going out of a business

certified public accountant (CPA)

find careers as private or public accountants are are often sought to fill other financial positions within organizations

cogs

cost of merchandise the firm sells

current assets

items that can or will be converted into cash within one year

depreciation

systematic write-off of the cost of a tangible asset over its estimated useful life

double entry bookkeeping

writing every transaction in two places

financial accounting

generates financial information and analyses for people -outside the organization

financial statement

summary of all the financial transactions that have occurred over a particular period

fundamental accounting equation

A=L+E

government and not-for-profit accounting

supports organizations whose purpose is not generating a profit but serving taxpayers and others according to a duly approved budget

gross profit

net sales- cogs

income statement

shows a firm’s bottom line- profit or loss after costs, expenses and taxes

independent audit

evaluation and unbiased opinion about the accuracy of a company’s financial statements

journal

where the day’s transactions are kept

ledger

transfer (post) information from accounting journals into specific categories so managers can find all the information about a single account in one place

liabilities

what a business owes to others

liquidity

ease to be converted to cash

managerial accounting

provides information and analysis to managers inside the organization - to assist in decison making

net income

revenue left over after paying all costs and expenses

notes payable

can be short or long term liabilities- that a business promises to repay by a certain date

retained earnings

accumulated earnings from the firm’s profitable operations that are reinvested in the business and not paid out to stockholders in distributions of company profits

tax accountant

trial balance