Chapter 14 Vocab - BCOR 199

accounting

the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions

accounting cycle

a six-step procedure that results in the preparation and analysis of the major financial statements

accounts payable

current liabilities involving money owed to others for merchandise or services purchased on credit but not yet paid for

annual report

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

assets

economic resources (things of value) owned by a firm

auditing

the job of reviewing and evaluating information used to prepare a company's financial statement

balance sheet

financial statement that reports a firm's financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owner's equity

bonds payable

long-term liabilities that represent money lent to the firm that must be paid back

bookkeeping

the recording of business transactions

cash flow

the difference between cash coming in and cash going out of a business

certified public accountant (CPA)

an accountant who passes a series of examination established by the American Institute of Certified Public Accountants (AICPA)

cost of goods sold

(or costs of goods manufactured) a measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale

current assets

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

depreciation

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

double-entry bookkeeping

the practice of writing every business transaction in two places

financial accounting

accounting information and analyses prepared for people outside the organization

financial statement

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

fixed assets

assets that are relatively permanent, such as land, buildings, and equipment

fundamental accounting equation

assets = liabilities + owner's equity; this is the basis for the balance sheet

government and nonprofit accounting

accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget

gross profit

(or gross margin) how much a firm earned by buying (or making) and selling merchandise

income statement

the financial statement that shows a firm's profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm, expenses, and the resulting net income or net loss

independent audit

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

intangible assets

long-term assets (ex. patents, trademarks, copyright) that have no real physical form but do have value

journal

the record book or computer program where accounting data is first entered

ledger

a specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place

liabilities

what the business owes to others (debt)

liquidity

the ease with which an asset can be converted to cash

managerial accounting

accounting used to provide information and analyses to managers withing the organization to assist them in decision making

net income/loss

revenue left over after all costs and expenses, including taxes, are paid

notes payable

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

operating expenses

costs involved in operating a business, such as rent, utilities, and salaries

owner's equity

the amount of the business that belongs to the owners minus any liabilities owed by the business

private accountant

an accountant who works for a single firm, government agency, or nonprofit organization

public accountant

an accountant who provides accounting services to individuals or businesses on a fee basis

retained earnings

the accumulated earnings from a firm's profitable operations that are reinvested in the business and not paid out to stockholders in dividends

statement of cash flows

financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing

tax accountant

an accountant trained in tax law and responsible for preparing tax returns or developing tax strategies

trial balance

a summary of all the financial data in the account ledgers that ensures the figures are correct and balanced