Budgeting & Accounting

Accounting

The system of recording, summarizing, and analyzing business and financial transactions.

Financial Records

Documents that report the financial activities and position of a business.

Budgeting

The process of creating a plan to spend money, detailing expected income and expenses.

GAAP

Generally Accepted Accounting Principles - a framework of accounting standards and procedures.

Assets

Items of value owned by a business, such as cash, property, and equipment.

Liabilities

Obligations or debts that a business owes to creditors.

Owner’s Equity

The residual interest in the assets of a business after deducting liabilities.

Net Worth

The difference between total assets and total liabilities, also known as owner's equity.

Accounts Receivable

Monies owed to a business by its customers for goods or services provided.

Accounts Payable

Monies a business owes to its creditors for goods or services received.

Cash-Basis Accounting

An accounting method that records revenue and expenses when cash is received or paid.

Accrual-Basis Accounting

An accounting method that records revenue and expenses when they occur, regardless of cash transactions.

Financial Statement

Documents that summarize the financial performance and position of a business.

Income Statement

A financial statement showing the revenue and expenses over a period, leading to net profit or loss.

Balance Sheet

A snapshot of a company's financial position at a specific point in time, detailing assets, liabilities, and owner's equity.

Cash Flow Statement

A financial statement that shows the flow of cash in and out of a business.

Budget Variance

The difference between the budgeted amount of income and expense and the actual amounts.

Fixed Expenses

Expenses that do not change with the level of sales or production, such as rent and salaries.

Variable Expenses

Expenses that vary directly with the level of sales or production, such as materials and freight costs.

Double-Entry Accounting

An accounting system that records each transaction in at least two accounts, maintaining the accounting equation.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets.

Profit Margin Ratio

A ratio that shows what percentage of revenue has turned into profit; calculated as net income divided by net sales.

SMART Goals

Specific, Measurable, Achievable, Relevant, and Time-bound goals that guide planning.

Start-Up Budget

An estimate of the funds required to launch a new business, detailing initial costs.

Sales Forecast Budget

A prediction of future sales revenue based on historical data and market analysis.

Operating Budget

A detailed projection of revenue and expenses for a specific period.

Cash Budget

A detailed plan that estimates cash inflows and outflows over a specific period.

Ethical Accounting

Practices that ensure the accuracy, honesty, and fairness of financial reporting.

Auditing

An internal control measure evaluating a business's financial records for accuracy and compliance.

Financial Management Processes

Methods used by a business to ensure financial resources are allocated effectively.

Inventory

The goods and materials that a business holds for the purpose of resale.

Documentation

Records and receipts that support financial transactions and accounting entries.

Pro Forma Financial Statements

Projected financial statements used for forecasting future financial performance.

Tax Compliance

Adherence to tax regulations and laws regarding reporting and payment of taxes.

Employee Payroll

The process of compensating employees, including the establishment of earnings and deductions.

Bank Reconciliation

The process of comparing a company’s financial records to bank statements to ensure accuracy.

Financial Ratios

Quantitative relationships between different financial statement items.

Capital Budgeting

The process of planning and managing a company's long-term investments.

Financial Planning

The process of estimating the capital required and determining its competition.

Cost Control

The practice of managing and regulating expenses to maintain a budget.