Chapter 1-2 Vocab Flashcards
Account payable turnover
A measure of the speed at which the company pays its obligations to suppliers.
Accounting
The information infrastructure of the firm/economy that permits it to achieve its objectives.
Accounting and information systems function
The function that is responsible for providing useful information to the other functional areas and external parties.
Accounting equation
Assets equal liabilities plus owner’s equity.
Accounts receivable turnover
A measure of the speed at which the company receives cash from its customers.
Accrual basis of accounting
A system in which income is measured as the difference between the sale (revenues) earned and the expenses incurred during the period, regardless of when cash is paid or received.
Appraisal cost
The cost incurred to detect mistakes as early in the process as possible.
Assets
The rights to use resources that have expected future economic benefits.
Balance sheet
The financial statement that designed to show the ending amounts of the company’s assets, liabilities, and owner’s equity.
Balanced scorecard approach
A process for translating a company’s strategy into measurable objectives and plans organized into four perspectives.
Bank reconciliation
A control procedure performed periodically by a company to adjust the recorded cash amounts and to reflect any differences between its cash balance and the cash balance according to the bank.
Bank Statements
Reports sent by banks to the businesses and individuals who have an account at the bank showing all transactions in each cash account for the period.
Business
The exchange of goods or services on an arm’s-length basis that results in mutual benefit for both parties involved.
Business entity concept
The concept that requires an accounting system to reflect only information about economic events that pertain to a particular entity.
Business process
A collection of activities that takes one or more kinds of input and creates an output that has value to the customer.
Cash basis accounting
A system in which income is measured as the difference between the cash received from customers and the cash paid to employees and other suppliers of goods and services.
Corporation
A business entity that is legally separate and distinct from its owners.
Current asset
An asset likely to be used or consumed within one year.
Current liability
A liability likely to be paid or otherwise discharged within one year.
Current ratio
A measure of company liquidity; the relationship between current assets and current liabilities.
Debt-to-equity ratio
A measure of company solvency and its ability to meet its long-term obligations.
Deposits in transit
Bank deposits that the business has recorded in its cash records and sent to the bank or put into the nightly depository, but that the bank has not received and recorded before it sent the bank statements to the business.
Double Taxation
A situation in which the profits earned by the corporation are taxed twice - once at the business level and again at the owner level if the profits are distributed as dividends.
Efficiency strategy
A strategy that focuses primarily on the reduction or containment of costs, improvements in productivity, and penetration of products/services in the market by having the lowest cost.
Expense
An amount incurred from using resources or services in the effort to generate revenue.
External failure cost
A cost incurred to fix mistakes after the mistake become known by the customer.
Finance function
The function that is responsible for managing the financial resources of the business.
Financial Accounting Standards Board (FASB)
The group the SEC holds responsible for determining accounting standards in the United States
Financial statements
Statements prepared to communicate the results of business activities to interested users.
Financing processes/activities
Activities that involve obtaining the cash or other resources as means to pay for investments in long-term assets, to repay money borrowed from creditors, and to provide a return to owners (shareholders).
Flexibility strategy
A strategy in which a company strives to adapt to changing market conditions by developing new products/services, markets, and technologies.
Generally accepted accounting principles (GAAP)
The set of reporting standards applicable to all US companies that issue financial reports for external users.
Going concern concept
The concept that assumes that, absent from any information to the contrary, the business entity will continue into the foreseeable future.
Gross margin ratio
A ratio used to monitor the profitability of the company’s products
