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4.01 glossary
role of finance and nature of accounting
| Question | Answer |
|---|---|
| accounting | the process of keeping and interpreting financial records |
| accounts payable | all monies owed by the business to others |
| accounts receivable | all monies owed to a firms by its customers |
| acquisition of funds | finance activity involving making decisions about financing |
| administration of assets | finance activity involving making decisions about a firms investments |
| asset(s) | anything of value that a business or individual owns |
| capital budgeting | a process in which a firms financial managers determine which projects it should invest in |
| capital investment decisions | decisions that determine which projects a business will invest in, how the investment(s) will be financed, and whether to pay dividends to shareholders |
| capital structure | a firms mix of financing usually some combination of debt and equity |
| cash conversion cycle | ratio that refers to the number of days between a company paying for raw materials and receiving cash from selling the products made from those raw materials |
| debt funding | using money that is lent by a bank or other institution to finance a project |
| dividend | a sum of money paid to an investor or stockholder as earnings on an investment |
| equity funding | using money from investors to finance a project in exchange for shares in the company |
| finance | in business, the function that involves all money and money management matters |
| financing | funding a business activity or project through debt, equity, or venture capital |
| return on capital | a measure of how well a business generates cash flow in relation to the capital it has already invested in itself |
| venture capital | invested money used for new business opportunities |
| working capital management | management of a firms current balance of assets and liabilities; involves accounts payable and receivable, inventory, and cash |
| accountant | an individual who has had specialized training in accounting procedures |
| accounting cycle | a process or series of steps that businesses complete to maintain their financial records effectively |
| accounting standards | rules that accountants must follow when preparing financial statements |
| accounting system | the methods and procedures used in consistently handling the business's financial information |
| accrual accounting method | a method of accounting that records transactions at the time they occur even if no money changes hands at the time |
| balance sheet | a financial statement that captures the financial condition of the business at the particular moment |
| bookkeeping | the steps of the accounting cycle that involve recording each business transaction; the process of financial transactions, journalizing transactions, posting to ledgers, and balancing the books |
| cash | currency and coins |
| cash accounting method | An accounting method in which income and expenditures are recorded at the time the money changes hands |
| cash flow statement | a financial summary with estimates as to when, where, and how much money will flow into and out of a business |
| credit | the arrangement by which businesses or individuals can purchase now and pay later |
| expenditures | the monies that a business spends also called expenses |
| expenses | the monies that a business spends also called expenditures |
| financial accounting | a time of accounting that involves preparing and reporting financial data to external users who are directly involved in business operations |
| financial statement | a summary of accounting information |
| income | money received by a business or an individual from outside sources |
| income statement | a financial summary that shows how much money the business made or has lost also called the profit and law statement |
| investors | those who invests your funds in a business maybe owners or stockholders |
| journal | a special book or computer program in which the businesses transaction are recorded in the order in which they occur |
| ledger | the accounting record for a specific department or area of the business |
| liabilities | debts that the business owes |
| managerial accounting | a type of accounting that involves preparing and reporting financial data to internal users usually managers who need financial information to control day to day operations and to make finanacial descions and plans affecting the business |
| networth | the total value of the business |
| owners equity | the amount a owner has invested in the business plus or minus profits and losses |
| transactions | a business activity such as a sale a purchase or return |
| trial balance | the listing of a business 's different accounts and their current balances used to check the accuracy of journal and ledger entries |
Created by:
sasha.h595
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