Vocab unit 3 - small business start up

Accounting

A system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization

Financial accounting

The branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders

Managerial accounting

The branch of accounting that provides reports and analysis to managers to help them make informed business decisions

Generally accepted accounting principles (GAAP)

A set of accounting standards that is used in the preparation of financial statements

Balance sheet

A financial statement that reports assets, liabilities, and owners equity

Accounting equation

Assets = Liabilities + Owners equity

Assets

Money and other valuables belonging to an individual or business

Liabilities

Money or debts owed to others

Owners equity

The claims of firms owners have against their companies assets

Income statement

The financial statement that reports the revenues, expenses, and net income

Revenue

increases in a firms assets that result from the sale of goods, providing of services, or other activities to earn income

Expenses

Resources that are used up as a result of business operations

Net income

The difference between the revenue affirm earns and the expense it incurs

Statement of cash flows

The financial statement that identifies affirm sources and uses of cash

Horizontal analysis

Analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends

Budgeting

Planning through which managers decide how to allocate available money to best accomplish company goals

Operating budget

Budgets that communicate in organizations sales and production goals, and the resources needed to achieve these goals

Financial budget

Budgets that focus on the firms financial goals and identify the resources needed to achieve these goals

Master budget

A presentation that represents the firms overall plan of action for a specified time period

Cost

The value of what is given in exchange for something

Out-of-pocket cost (also called explicit cost)

A cost that involves the payment of money or other resources

Implicit cost

A non-monetary opportunity cost

Fixed costs

Cost that do not vary with production or sales level

Variable costs

Cost that vary directly with the level of production

Direct cost

Cars that are incurred directly as the result of some specific cost object

Indirect cost

Cost that are a result of affirms general operations, and are not directly tied to any specific cost object

Financial capital

The funds of firm uses to acquire its assets and finance its operations

Finance

The area of business that deals with finding the best sources and uses of financial capital