Financial Accounting - Chapter 1

Flashcards for key vocabulary and concepts from Chapter 1 of Financial Accounting lecture notes.

Business Acumen

The body of knowledge that employees need to develop to differentiate their company and provide better value to customers.

SDG's

The Sustainable Development Goals are 17 integrated goals adopted by the United Nations in 2015.

Economy

A system that enables resources to be moved to satisfy individual material desires.

Market

A channel that enables transactions between buyers and sellers.

Business

An organisation that uses resources to produce goods or services, usually with the intention of generation a surplus (profit) from this activity.

Risk

The probability that an action will produce an unpleasant outcome that is not in line with expectations.

Demand

The willingness of consumers to purchase a product or service at different prices.

Supply

The total amount of a product or service that producers are willing to provide at various prices.

Land

Includes minerals resources and water.

Labour

Defined as the services of individuals that are needed to produce the required output or deliver services.

Capital

Refers to the property, machinery and equipment needed to produce goods and services.

Enterprise

Refers to the energy of people who use the above resources to satisfy the needs and wants of society.

Opportunity cost

Referring potential benefit lost by making one choice over another.

GDP

Gross Domestic Product which is often the method used to measure the economic health of a country/region.

Financial Capital

Funding available for productions of goods or provision of services

Manufactured Capital

physical objects that are used in a business’s operations

Intellectual Capital

Knowledge based intangible assets

Human Capital

People’s competencies, capabilities and experience

Social and relationship Capital

Business’s relationship with various stakeholders

Natural Capital

Environmental resources used in the business’s operations

Accounting

A system that communicates the financial effects of all decisions made by a business.

Retail

Involves the buying and selling of goods such as clothes, produce, furniture, cars etc.

Manufacturing

Involve the activities of converting raw material (natural resources) into goods, such as producing glass from sand.

Extractive

Activities that extract natural resources from the earth, such as mining (oil, carbon, gold)

Services

Activities that deliver services ranging from professional advice, installation, maintenance, catering etc.

Annual Turnover

The total income a business makes over one financial period from primary business activities.

Sole proprietor

Business owned and operated by one person, with no legal distinction between the owner and business e.g. photographer

Partnership

Business owned by two or more persons who share management duties and profits as agreed upon e.g. audit firm, lawyer firms

Private company

Business privately owned by individuals or a small group of shareholders through ownership of shares in that business. These shares are not publicly traded e.g. Fair Cape, Montague Dried Fruits

Public company

Business whose shares are freely traded on the stock market and shares can belong to several different individuals and businesses who are completely unrelated e.g. Shoprite, Capitec

Marketing

Responsible for letting customers know about the business’s goods and services and how those goods and services will meet the needs/wants of customers.

Operations

Responsible for creating the finished goods or services.

Business Activities

Activities necessary for getting products or services to the customer.

Business process

A set of steps to achieve a business objective.

Business Model

A business’s plan for making a profit.

Integrated thinking

A basis for making decisions that take all relevant information into account.

Inputs

Resources used in business activities

Outputs

Products or services produced by the business, any by-products (items produced at the same time as the primary product or service) and waste.

Outcome

The result of an action or process.

Transactions

Events which will have a financial effect. Examples include: Buying goods from suppliers, Paying employees, Selling goods or services to customers,, Paying rates, water and electricity, Paying the telephone and internet account.