Weeks 1-4 Accounting and Management Review

A comprehensive vocabulary set covering accounting definitions, the accounting equation, financial statements, recording processes, and management accounting concepts.

Accounting

The process of recording, classifying, summarizing, and interpreting financial transactions of a business; often called the language of business.

Internal Users

People inside the company who use accounting information, such as Managers, Owners, and Employees.

External Users

People outside the company who use accounting information, including Investors, Banks, Government, and Suppliers.

Assets

Resources owned by a business, such as Cash, Equipment, Land, Building, and Supplies.

Liabilities

Debts or obligations of a business, including Loans Payable, Accounts Payable, and Notes Payable.

Owner's Equity

The owner's claim on the business, calculated using the formula: $Owner's Equity = Assets - Liabilities$.

Revenue

Money earned by the business from operations, such as Service Revenue, Sales Revenue, and Interest Revenue.

Expenses

Costs incurred to operate the business, such as Rent Expense, Salaries Expense, and Utilities Expense.

Current Assets

Assets expected to be used or converted to cash within $1$ year, including Cash, Accounts Receivable, Supplies, and Inventory.

Non-Current Assets

Long-term assets used in operations, such as Land, Building, Equipment, and Vehicles.

Accounts Receivable

Money that customers owe to the business.

Accounts Payable

Money that the business owes to its suppliers.

Withdrawal/Drawing

Money taken out of the business by the owner.

Official Receipt (OR)

A source document that serves as proof that money was received.

Journalizing

The process of recording business transactions in the journal, which is known as the Book of Original Entry.

Posting

The process of transferring journal entries to the ledger accounts.

Ledger

A collection of accounts where journal entries are transferred after journalizing.

Trial Balance

A list of all account balances used to check if Total Debits equal Total Credits.

Transposition Error

An error where digits are reversed, such as recording $₱5,432$ as $₱5,342$.

Income Statement

A financial statement that reports Revenue, Expenses, and Profit (Net Income) for a specific period.

Balance Sheet

A financial statement showing the business's financial position (Assets, Liabilities, and Owner's Equity) on a specific date.

Operating Activities

Cash flows from daily business operations, such as receiving cash from customers or paying salaries.

Investing Activities

Cash flows from buying or selling long-term assets, such as Land or Equipment.

Financing Activities

Cash flows from obtaining or repaying funds, such as Owner's investment or Loans from a bank.

Management Accounting

The branch of accounting that provides financial and non-financial information to managers for planning, controlling, and decision-making.

Direct Materials

Materials directly used in production, such as wood for furniture or flour for bread.

Manufacturing Overhead

Indirect production costs, such as factory electricity, factory rent, and supervisor salaries.

Fixed Costs

Costs that remain the same regardless of production volume, such as Rent and Insurance.

Variable Costs

Costs that change as production changes, such as Raw materials and Packaging.

Budget

A financial plan for future activities that helps control spending and achieve goals.

Contribution Margin

The amount remaining after variable costs are covered, calculated as: $Contribution Margin = Selling Price - Variable Cost$.

Integrity

A core ethical principle in business meaning being honest and truthful.

Objectivity

An ethical principle focused on avoiding bias in professional judgment.

Sum Function

An Excel function used to add numbers, written as: $=SUM(A1:A10)$.

Profit

The result when revenue exceeds costs, calculated as: $Profit = Revenue - Cost$.