chp 17 Foundations of Business CORRECTED

Accounting

The recording, classifying, summarizing, and interpreting of financial events and transactions affecting an organization.

Accounting system

Methods used to record and summarize accounting data into reports.

Accounting cycle

A series of steps involving the recording, posting, and summarizing of financial transactions.

Journals

Books where bookkeepers first record transactions.

Ledgers

Specialized accounting books that categorize transactions by homogeneous groups (accounts).

Bookkeeping

Part of accounting focused on the systematic recording of data.

Balance sheet

A financial statement reporting the firm's financial position on a specific date.

Income statement

A report detailing revenues, costs, and expenses for a specific period.

Statement of cash flows

A financial statement detailing cash receipts and disbursements related to operations, investments, and financing.

Assets

Economic resources owned by the firm, such as buildings and machinery.

Liabilities

Amounts the firm owes to creditors, bondholders, and others.

Owners' equity

The value of what the firm owns minus its liabilities.

Ratio analysis

A tool providing information about a firm's financial position for comparison.

Liquidity ratios

Ratios measuring a firm's ability to meet short-term obligations.

Leverage ratios

Ratios indicating the level of a firm's debt in relation to its equity.

Profitability ratios

Ratios assessing a firm's ability to generate profit relative to revenue, operating costs, and other expenses.

Activity ratios

Ratios evaluating the efficiency of a firm's use of its assets.

Managerial accounting

Accounting providing information and analyses to assist managers in decision making.

Financial accounting

Accounting providing information and analyses to external users such as creditors and lenders.

Auditor

A professional who reviews and evaluates financial statements for accuracy.

Public accountant

An accountant providing services for a fee to multiple companies.

Private accountant

An accountant who works for a single company.