Chapter 1 Flashcards
e-commerce
A method of conducting business where companies and consumers buy and sell goods and services over the internet
Service business
A business that performs services or activities that benefit individuals or business customers
Merchandising business
A business that purchases goods (sometimes referred to as merchandise or products) for resale to its customers
Manufacturing business
A business that makes its products and then sells these products to its customers
Capital
Funds a business used to operate or expand its operations
Entrepreneur
Individual who is willing to risk the uncertainty of starting a business in exchange for the reward of earning a profit (and the personal reward of seeing the business succeed)
Solvent
When a business is capable of paying off its debts
Sole proprietorship, or sole trader
Business owned by one individual who is the sole investor of capital into the business
Unlimited liability
Indefinite or unlimited personal liability for the debts incurred by the business. For a sole proprietorship, this means that the owners personal assets may be at risk if things go wrong in the business
Limited life
A business that will cease when the business is sold or when a specific project is completed is said to have a limited life. For example, a sole proprietorship has a limited life because it ceases to exsist if the business is sold
Partnership
Business owned by two or more individuals who each invest capital, time and/or talent into the business and share in its profits and losses
Partnership agreement
Contract signed by partners of a partnership before the business begins operations
Joint ownership
The idea that all partners jointly own all assets owned by a partnership
Agent
A person who has the authority to act for another person
Equity
Claims by creditors and owners against the assets of a business
Company/corporation
A business entity that has been incorporated and registered by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001
Shareholders
Individuals who own shares (stock) in a company
Accounting system
Process used to identify, measure, record and retain information about a business’ activities so that the business can prepare its financial statements
Planning
Management activity that establishes a business’ goals and the means of achieving these goals
Operating
Management activity that enables a business to conduct its business according to its plan
Evaluating
Management activity that measures a business’ actual operations and progress against standards or benchmarks
Internal users
Managers within a business who use information about the business for decision making
Budgeting
Process of quantifying managers’ plans and showing the impact of these plans on a business’ operating activities
Cost analysis, or cost accounting
Process of determining and evaluating the costs of specific products or activities of a business
Management accounting
Identification, measurement, recording, accumulation and communication of economic information about a business for internal users in management decision making
Financial accounting
Identification, measurement, recording, accumulation and communication of economic information about a business for external users to use in their various decisions
External users
Individuals outside of a business who use the business’ information for decision making
Generally accepted accounting principles (GAAP)
Currently accepted principles, procedures and practices that are used for financial accounting in many countries of the world, including Australia
Profit
Difference between the total revenues of a business and the total costs (expenses) of the business during a specific time period
Solvency
Business’ long term ability to pay its debts as they come due
Financial statements
Accounting reports used to summarise and communicate financial information about a business
Income statement
Accounting report that summarises the results of a business’ operating activities for a specific time period
Net income
Excess of a business’ revenues over it expenses from providing goods or services to its customers during a specific time period
Net loss
Excess of a business’ expenses over its revenues from providing goods or services to its customers during a specific time period
Statement of changes in owners equity
A summary of the changes in the shareholders equity in a company that have occurred during a specific period of time
Annual report
Document that includes a business’ income statement, balance sheet and cash flow statement, along with other related financial accounting information
Sustainability
The recognition of intergenerational and intergenerational equity, where the meeting of the needs and wants of a person or group now should not compromise the ability of a future person or group to meet their needs and wants
