FABM Lesson 1 Intro

Accounting

A systematic recording of financial transactions.

Bookkeeper

Handles basic accounting functions of a business.

Financial Statements

Reports that provide the information captured by the accounting system.

Financial Accounting

The preparation of general-purpose financial statements.

Cost Accounting

A report on the total cost of materials and labor used in the production.

Tax Accounting

Accounting based on laws enacted through a highly political legislative process.

Business

Individuals or groups’ organized efforts and activities to produce and sell goods and services to profit; a repetitive exchange of transactions.

IFRS (International Financial Reporting Standards)

An integrated set of activities and assets that is capable of being conducted to provide goods or services to customers, generating investment income like dividends or interest.

Inputs (Element of Business)

Economic resources (e.g., raw materials, human resources, capital, technology, information).

Process (Element of Business)

The system, standards, protocol, and processes applied to transform inputs (e.g., employees' work, activities, management activities, operations methods).

Outputs (Element of Business)

The results of inputs and process (e.g., products and services, financial results, human results, information).

Financing

A transaction group where a business receives cash and other assets from investors/owners or creditors and gives returns.

Investing

A transaction group involving acquiring and maintaining long-term assets for business use or putting money in other businesses.

Personnel

A transaction group concerning employees and other human resources rendering services to the company and receiving payment for compensation.

Purchasing

A transaction group involving the acquisition of materials from a supplier needed for own use, to sell, or to produce goods.

Conversion

A transaction group involving transforming raw materials into finished goods through the application of labor and other expenditures.

Revenue

A transaction group involving delivering goods and rendering services to customers in exchange for cash or a promise of payment.

Transaction

Exchanges of money, goods, services, and other things of value as agreed between two or more parties for consideration.

Consideration

Something that is agreed to be received in return to what is given in a transaction.

Counterparty

The other party involved in a business transaction; the process of giving and receiving.

Transaction Cycle - Beginning

The step involving agreeing to the terms and conditions of the transaction.

Transaction Cycle - Performance/Delivery

The step concerning the exchange of benefits and transfer of consideration from one party to another.

Transaction Cycle - Ending

The termination of the agreement between the parties.

Management

The organization and coordination of the activities of a business to achieve defined objectives; stewardship.

Stewardship

The ability to take good care of the resources and things of value that are entrusted to the manager.

Liquidity (Financial Objective)

The ability to meet short-term obligations; managed by ensuring current assets exceed current liabilities.

Profitability (Financial Objective)

The excess of income generated over the cost of running the business (income less expenses).

Solvency (Financial Objective)

The strength of the business that possesses stability to address threats or to grow long-term; the aim to flourish and have enough to pay long-term obligations.

Competitiveness (Financial Objective)

The present and potential attractiveness of the business as an investment option versus alternatives.