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Accounting

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the recording, measurement, and interpretation of financial information

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Certified Public Accountant

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an individual who has been certified by the state in which he or she practices to provide accounting services ranging from the preparation of financial records and the filing of tax returns to complex audits of corporate financial records.

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Private accountants

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employed by large corporations, govt agencies, and other organizations to prepare and analyze their financial statements

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Certified Management Accountants

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private accountants who, after rigorous examination, are certified by the national association of accountants and who have some managerial responsibility.

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Managerial accounting

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the internal use of accounting statements by managers in planning and directing the organizations activities

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Cash flow

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the movement of money through an organization over a daily, weekly, monthly, or yearly basis

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budget

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an internal financial plan that forecasts expenses and income over a set period of time

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annual report

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summary of a firms financial information, products, and growth plans for wonders and potential investors

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assets

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a firms economic resources, or items of value that it owns, such as cash, inventory, land, equipment, buildings, and other tangible and intangible things

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Liabilities

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debts the firm owes to others

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Owners equity

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assets minus liabilities and reflects historical values

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accounting equation

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assets=liabilities+owners equity

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double entry bookkeeping

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a system of recording and classifying business transactions in separate accounts in order to maintain the balance of the accounting equation

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accounting cycle

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the four step procedure of an accounting system: examining source documents, recording transactions in an accounting journal, posting recorded transactions, and preparing financial statements

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journal

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time ordered list of account transactions

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ledger

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a book or computer file with separate sections for each account

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income statement

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a financial report that shows an organizations profitability over a period of time - month, quarter, or year

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revenue

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the total amount of money received from the sale of goods or services as well as from related business activities

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cost of goods sold

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the amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies (COGS=beginning inventory+interim purchases-ending inventory)

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gross income (or profit)

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revenues-COGS

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expenses

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are the costs incurred in day to day operations of an organization

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depreciation

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the process of spreading the costs of long lived assets such as buildings and equipment over the total number of accounting periods in which they are expected to be used

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net income

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the total profit (or loss) after all expenses, including taxes, have been deducted from revenue; also called net earnings

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balance sheet

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a snapshot of an organizations financial position at a given moment

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current assets

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assets that are used or concerted into cash within the course of a calendar year

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accounts receivable

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money owed a company by its clients or customers who have promised to pay fro the products at a later date

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current liabilities

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a firms financial obligations to short-term creditors, which must be repaid within one year

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accounts payable

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the amount a company owes to suppliers for goods and services purchased with credit

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accrued expenses

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an account representing all unpaid financial obligations incurred by the organization

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statement of cash flows

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explains how the companies cash changed from the beginning of the accounting period to the end

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ratio analysis

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calculations that measure an organizations financial health

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profitability ratios

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measure how much operating income or net income an organization is able to generate relative to its assets, owners equity, and sales

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profit margin

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computed by dividing net income by sales, shows the overall percentage profits earned by the company

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return on assets

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net income divided by assets shows how much income the firm produces for every dollar invested in assets

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return on equity

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aka ROI, calculated by dividing net income by wonders equity who's how much income is generated by each $1 the owners have invested in the firm

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asset utilization ratios

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measure how well a firm uses its assets to generate each $1 of sales

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receivables turnover

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sales divided by accounts receivable, indicates how many times a firm collects its accounts receivable in one year

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inventory turnover

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sales divided by total inventory, indicates how many times a firm sells and replaces its inventory of the course of a year

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total asset turnover

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sales divided by total assets, measures how well an organization uses all of its assets in creating sales

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liquidity ratios

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ratios that measure the speed with which a company can turn its assets int cash to meet short term debt

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current ratio

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current assets divided by current liabilities

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quick ratio (acid test)

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a stringent measure of liquidity that eliminates inventory

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debt utilization ratios

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ratios that measure how much debt an organization is using relative to other sources of capital, such as owners equity

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debt to total assets ratio

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indicates how much of the firm is financed by debt and how much by owners equity

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times interest earned ratio

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operating income divided by interest expense

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per share data

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data used by investors to compare the performance of one company with another on an equal, per share basis

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earnings per share

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net income or profit divided by the number of stock shares outstanding

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dividends per share

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the actual cash received for each share owned

Genbus 101 Ch. 14 – Flashcards

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