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Finance
| Term | Definition |
|---|---|
| Business Accounting | Involves recording business transactions, analyzing business records and reports, and producing reliable information |
| six branches of accounting | financial accounting, costs accounting, managerial accounting, tax accounting, auditing, accounting systems |
| business transaction | the exchange of merchandise, property, or services for cash or a promise to pay |
| auditors | A person authorized to review and verify the accuracy of financial records an ensure that companies comply with tax laws |
| asset | sum total of any company |
| liability | claim on those assets by creditors |
| equity | leftover, claim on those assets by owners |
| double-entry accounting | bookkeeping process in which every business transaction affects two or more bookkeeping accounts |
| marketable securities | (asset) shares of other companies |
| prepaid insurance | (asset) you pay it beforehand- goes down with the year |
| organization costs | (asset) expenses related to structuring the company |
| security deposit | (asset) |
| sales tax payable | (liability) money you pay after sales |
| accrued payroll | (liability) money owed for employees, who already worked |
| accrued payroll taxes | (liability) |
| advance deposit | (liability) a customer already gave money-you owe them service |
| notes payable | (liability) money you owe to a third party |
| mortgage payable | (liability) loan to a bank |
| common stock issued | (equity) the total number of shares a company sold |
| additional paid-in capital | (equity) the value investors pay for the stock |
| retained earnings | (equity) all the profit you made from start until now |
| salaries and wages | (expense) payroll |
| four basic financial statements | statement of income, statement of retained earnings, the balance sheet, statement of cash flows |
| annual financial statement | it's issued at the end of a company's business year, also called fiscal year (calendar year, or 12 months) |
| quarter financial statement | called interim financial statement |
| revenue-expenses=profit | when revenues increase, profit increases which have an increasing effect on Owner's equity when Expenses increase, profit decreases which have a decreasing effect on Owner's equity |
| statement of income | shows revenue an expenses and provides information about the results of operations for a stated period of time |
| income= | total revenue-total expenses |
| operating expenses | it's a section of the income statement lists expenses that are most directly influence by operating policy and management |
| employee benefits | includes the cost of free employee meals, social security and medicare taxes |
| kitchen fuel | includes the cost of fuel used for cooking |
| order of an income statement | revenue-- total sales cost of sales--total cost of sales gross profit (revenue-cost of sales) operating expenses (advertising, china, employee benefits, laundry...) income before fixed charges fixed charges income before income taxes--income taxes |
| depriciation | is a method that is associated with tangible long-lived assets |
| depreciation of fixed asset | depreciation of fixed assets is a systematic allocation of the cost of a longterm tangible asset over its useful life |
| cost of sales accounts | the coast of ingredients that are used to produce food and beverage items |
| perpetual inventory system | constantly keeps track of food and beverage items between delivery, storage and production areas |
| revenue-expenses=profit | when revenues increase, profit increases which have an increasing effect on Owner's equity when Expenses increase, profit decreases which have a decreasing effect on Owner's equity |
| statement of income | shows revenue an expenses and provides information about the results of operations for a stated period of time |
| income= | total revenue-total expenses |
| operating expenses | it's a section of the income statement lists expenses that are most directly influence by operating policy and management |
| employee benefits | includes the cost of free employee meals, social security and medicare taxes |
| order of an income statement | revenue-- total sales cost of sales--total cost of sales gross profit (revenue-cost of sales) operating expenses (advertising, china, employee benefits, laundry...) income before fixed charges fixed charges income before income taxes--income taxes |
| allowance for doubtful accounts | contra-asset account, reduces related asset |
| periodic inventory system | we do not keep track of the cost sales or the value of the inventions during the month, it’ only recorded periodically |
| current assets | assets that are expected to be converted into cash, used up within one year (cash, short-term investments, accounts receivable, inventories) |
| non-current assets | assets with useful life more than one year (investments, property, equipment) |
| current liabilities | these are expected to be settled within one year (f.e accounts payable, sales tax payable) |
| long term liabilities | long-term obligations that are not done within the next year |
| liquidity | ability to meet short term obligations |
| solvency | ability to meet long term obligations |
| Allowance of Doubtful Accounts | represents an estimate of potential receivables that may become uncollectible (money that the company might not get although its supposed to) contra account |
| Notes Receivable | promising note: promise to pay a definite sum of money at some future date |
| Prepaid expenses | usually receiving expenditures, that will affect more than one accounting period |
| Retained earnings | is an account that represents the lifetime earnings of the corporation not distributed to shareholders in the form of dividends |
| Dividends | they are payment a company makes to its shareholders as a way to share profits, it’s a return on investment for owning the company’s stock |
| Donated capital | corporations receiving gifts from states, cities (such as land)--» donated capital equity account increases |
| Paid-In Capita | represents the money that shareholders have invested in the corporation in exchange of stock (equity) |
| common stock | this represents the par value of the shares issued by the corporation |
| additional paid-In capital | this is the amount investors pay above the par value of the stock (f.e share has a par value of 1 Eur but it’s sold for 10 Eur, 9 Eur goes into Additional Paid-In Capital) |
| Accrued Expenses | represents unrecorded expenses that at the end of an accounting period have been incurred but not yet paid |
| Advance deposit | guest payments to the business for goods and services that have not yet been provided |
| Income Taxes Payable | federal government, most states impose taxes on taxable income of corporation |
| dividends payed | what they already payed |
| dividends payable | what you still have to pay |
| cost principle | assets should be recorded as their original cost not as their current market value |
| business entity | each business is a business entity that maintains its own set of account, and these accounts are separate from the financial interests of the owners |
| continuity of the business unit | it’s assumed that the business will continue indefinitely, liquidation is not a prospect |
| Unit of Measurement | it’s assumed to represent a stable unit of value so that transactions from past periods and current periods can be included on the same statement |
| Full Disclosure | must provide information on all the facts pertinent of the interpretation of the financial statement |
| Marching Principle | refers to relating expenses to revenues |
| steps of the accounting cycle | 1 business transactions, 2 analyst and journalist transactions, 3 post transactions to general ledger, 4 prepare trial balance, 5 prepare and journalize adjustments, 6 post the adjustments to the general ledger, 7 prepare an adjusted trial balance, |
| steps of accounting cycle part 2 | 8 prepare the financial statements, 9 closing entries, 10 post-closing trial balance |
| account balance | the difference between the total debits and total credits (can be debit balance or credit balance) |
| asset increase | debit |
| asset decrease | credit |
| contra-asset increase | credit |
| contra-asset decrease | debit |
| liability/ equity increase | credit |
| liability/ equity decrease | debit |
| revenue increase | credit |
| revenue decrease | debit |
| expense increase | debit |
| expense decrease | credit |
| Accounting Adjustments | some assets consumed are not recorded as expenses--» most be called adjustments/ adjusting entries |
| financial ratios | expressions of logical relationships between certain items |
| horizontal analysis | consists of calculating the dollar change and the relative change for two accounting periods |
| vertical analysis | consists of reducing the balance sheets and income statements to percentages |
| trend analysis | useful in analyzing financial information over several accounting periods, generally years |
Created by:
Vvéda
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