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BE 4.01

Role of finance and nature of accounting

TermDefinition
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 firm by its customers.
Acquisition of funds Finance activity involving making decisions about financing.
Administration of assets Finance activity involving making decisions about a firm's investments.
Asset(s) Anything of value that a business or individual owns.
Capital budgeting A process in which firm's 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 share holders.
Capital structure A firm's mix of financing, usually some combination of debt and equity.
Cash conversion cycle Ratio that refers to the number of days between a 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 a new business opportunities.
Working capital management Management of a firm's 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 The process of keeping financial records.
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.
Assets Anything of value that a business owns.
Balance sheet A financial statement that captures the financial condition of the business at that particular moment.
Bookkeeping The steps of the accounting cycle that involves recording each business transaction; the process of analyzing 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 type of accounting that involves preparing and reporting financial data to external users who are not 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 has made or has lost; also called the profit-and-loss statement.
Investors Those who invest their funds in a business, may be owners or stockholders.
Journal A specialized book or computer program in which a business's transactions 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 financial decisions and plans affecting the business.
Net worth The total value of the business.
Owner's equity The amount an owner has invested in the business plus or minus profits and losses.
Transaction A business activity such as a sale, a purchase, or a 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: angelo.g828
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