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Business Unit 5
Business Essentials
| Term | Definition |
|---|---|
| Financial Reporting | The tabulation and formulation of all the financial statements which make up the company’s annual reports and accounts. |
| Financial Accounting | The accounting discipline focused on drawing up the required and useful financial statements via the recording, measurement and interpretation of financial information resulting from transactions which occur in the course of business activity. |
| Managerial Accounting | Also known as Cost Accounting, it is the internal use of accounting statements by managers in planning and directing the organization’s activities. |
| Compliance | The adherence to outside regulatory requirements, industry standards, and marketplace reporting norms, and also the adherence to internal policies. |
| Securities and Exchange Commission (SEC) | independent federal government regulatory agency-protecting investors, maintaining fair security markets, capital formation. It ensures transparency of reporting from companies to shareholders and investors establishing expectations for professionals |
| Annual Report | Summary of a firm’s financial information, products, and growth plans. |
| 10K (or Form 10-K) | The official form in which a company’s annual report is submitted to the SEC. |
| Financial Statement | A document (usually a spreadsheet) which sums up the company’s financial activities in a standardized layout which is easy to recognize and interpret across industries, nations, currencies, and sizes of business. |
| Consolidated Financial Statement | Financial statements which reflect the status of a parent (holding) company and all of its subsidiaries. |
| P&L (Profit and Loss Statement) | Also known as an Income Statement. Shows all of the revenues, costs and expenses during an accounting period, and is a true statement of company profitability. |
| Balance Sheet | Shows what a business is worth at a particular point in time. It shows assets, liability, and equity. |
| Statement of Cash Flows | Shows the total and movement of cash during the accounting period. It really answers the question of whether a company is making enough money to sustain its operations, provide surplus capital to grow, pay any debts, and distribute dividends. |
| Fiscal Year (FY) | A one-year period that companies and governments use for financial reporting and budgeting. |
| Per Share Data (P/S) | Data used by investors to compare the performance of one company with another on an equal basis. |
| Revenue | The total amount of money received from the sale of goods or services, as well as from related business activity. |
| Expense | The costs incurred in the day to day operation of a business |
| Profit | The difference between what it costs to make and sell a product and what a customer pays for it. |
| Loss | The condition or result when expenses exceed revenues in normal business operations. |
| Inventory | Finished goods ready for sale, goods in the process of being made and finished, and also raw materials used in the production of goods. |
| SKU | Stock Keeping Unit. |
| UPC | Universal Product Code. |
| RFID | Radio Frequency Identification. |
| Purchasing | The buying of all the materials needed by the organization, or the name of the function or department which completes that activity. Also called procurement. |
| Asset | A firm’s economic resources or items of value that it owns, such as cash, inventory, land, equipment, buildings and other tangible and intangible things. |
| Fixed Asset | Assets that are longer term in nature and a minimum life expectancy that exceeds one year but that is usually considered three or more years. |
| Current Asset | Cash, or a highly liquid asset that is likely to be turned into cash in the next 12 months. |
| Liability | Debts that a business owes to others. |
| Equity | Also called “owner’s equity.” It is equal to assets minus liabilities and reflects historical values. |
| The Accounting Equation | A mathematical calculation and a core principle of financial accounting. The equation states: Assets = Liabilities + Owner’s Equity |
| Liquidity | Whether a company has more money coming in than going out. |
| Ratio Analysis | Calculations that measure an organization’s financial health. |
| Accounting Cycle | A standardized process (workflow) to make sure that accounting is performed correctly for every business activity. |
| Transaction | Any business activity which generates income or expense. |
| Double Entry Bookkeeping | A system of recording and classifying business transactions that maintains the balance of the accounting equation. |
| Journal and Journal Entry | A journal is a time-ordered list of account transactions. A journal entry is an individual addition to the list. |
| General Ledger | A “book” or digital file with separate sections for each account. |
| Trial Balance | A list of all the company’s accounts prepared at the end of the accounting period. Kind of like a rough draft. |
| Worksheet | A place where changes can be made to facilitate the balancing of accounts. |
| Closing the Books | A standardized period of time which can last a month, a quarter, or a year depending upon the needs of the business and regulatory requirements, and determines the open and close times for the recording transactions. |
| Accounting Period | |
| Certified Public Accountant (CPA) | |
| Certified Management Accountant (CMA) | |
| Financial Audit | |
| Independent Auditor | |
| “The Big Four” | |
| Bookkeeping |
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