Business Management and Accounting Principles

Flashcards covering key vocabulary and definitions from business management and accounting principles.

Financing

The provision of capital means necessary for a company's acquisition of inputs, sourced either internally (equity from shareholders) or externally (debts from banks, bondholders).

Purchasing (Acquisition of Inputs)

The process by which a company acquires resources, which can be either fixed assets (used for multiple business cycles) or current costs (used for one business cycle).

Processing (Transformation)

The process that converts inputs into finished goods or services (outputs).

Selling

The activity that generates sales revenues, representing positive economic flows, which, if higher than costs, allow the business to continue operating.

External Transactions

Business activities that involve interactions with third parties, such as suppliers, customers, or lenders.

Internal Transactions

Business activities that occur within the company itself, not involving external parties.

Economic Equilibrium (Profit)

A state in which a business generates profit, where revenues exceed costs to an extent that equity is fairly remunerated (REVENUES – COSTS > Ke * E).

Economic Equilibrium (Non-Profit)

A state in which a non-profit company covers its costs (REVENUES – COSTS = 0).

Financial Statements

Informative and reporting documents about the results of an administrative period, used to evaluate managers and inform stakeholders.

Private Function (Financial Statements)

Use of financial statements by company owners to evaluate the work of managers.

Public Function (Financial Statements)

Use of financial statements by stakeholders to gain insights into the company.

Resources

Represent where the capital of a company is employed; also known as Assets.

Sources

Represent where the capital of a company comes from; also known as Liabilities and Equity.

Trial Balance

A table with two columns (Resources and Sources) that represents different profiles of the same object (capital).

Debit

Accounting code that represents an increase in resources or a decrease in sources.

Credit

Accounting code that represents a decrease in resources or an increase in sources.

Risk Capital

Equity or shareholders’ capital; it has no obligation to be repaid and is internal.

Debt Capital

Financial debts or debts to banks; it has an obligation to be repaid and is external.

Fixed Assets

Assets that can be used for many business cycles.

Current Costs

Costs that can only be used for one business cycle.

Accruals Principle

The concept that separates the trial balance into the balance sheet and income statement.

Assets

Resources with future benefits.

Costs

Resources without future benefits.

Liabilities

Sources with future obligations.

Revenues

Sources without future obligations.

Balance Sheet

The upper part of separated trial balance, representing the capital with which the company presents itself in the future.

Income Statement

The lower part of the separated trial balance, including resources and sources that have contributed to the economic wealth of the company.

Depreciation

The predictable, ordinary decrease in the residual useful life of fixed assets, happening from year to year.

Impairment

The unpredictable, non-ordinary decrease in the residual useful life of fixed assets.

Pre-Paid Costs

Current costs that still have to be used and have future benefits, transferred to the assets side of the balance sheet.

Unearned Revenues

Payments received for services or goods that have not yet been provided or delivered.

Contribution in Kind

Allocation in equity – shareholders’ capital or equity – shareholders' premium reserve, with an increase in fixed assets.

Issue Premium

When the issuing price of a bond is higher than its nominal value.

Issue Discount

When the issuing price of a bond is lower than its nominal value.

Advances to Suppliers

Cost paid in advance for goods to be received, recorded either in fixed assets or prepaid costs.

Advances from Customers

Cost paid in advance from customers for goods to be delivered, representing liabilities.

Operating Lease

The lessor rents the asset to the lessee and provides a number of services; the benefits and the risks remain with the lessor.

Financial Leasing

The lessee assumes all the risks and benefits of ownership, despite not being the formal owner.

Zeroing of the Income Statement

Process happens at the time of transition from one financial year to the next.

Carry-Over of the Balance Sheet

Process happens at the time of transition from one financial year to the next.