Law & Business Flashcards
Account
A separate record of an asset, liability, income, or expense of a business
Accounting
The process for recording, summarizing, and interpreting business financial records
Accounting Method
The method of recording income and expenses for a business, can be either accrual method or cash method
Accounting System
The specific system of record-keeping used to set up the accounting records of a business. See also single-entry accounting or double-entry accounting
Accounts Payable
Money owed by a business to another for goods or services purchased on credit. Money that the business intends to pay to another
Accounts Receivable
Money owed to the business by another for goods or services sold on credit. Money that the business expects to receive
Accrual Method
Accounting method in which all income and expenses are counted when earned or incurred regardless of when the actual cash is received or paid
Accrued Expenses
Expenses that have been incurred but have not yet been paid
Accrued Income
Income that has been earned but has not yet been received
Agent
A person who is authorized to act on behalf of another. A corporation acts only through its agents, whether they are directors, employees or officers
Aging
The method used to determine how long accounts receivable have been owed to a business
Amend
To alter or change
Articles of Incorporation
The charter of the corporation, the public filing with a state that requests that the corporation be allowed to exist. Along with the corporate bylaws, they provide details of the organization and structure of the business. They must be consistent with the laws of the state of incorporation
Assets
Everything a business owns, including amounts of money that are owed to the business
Assumed Name
A name, other than the corporation’s legal name as shown on the Articles of Incorporation, under which a corporation will conduct business. Most states require registration of the fictitious name if a company desires to conduct business under an assumed name. The corporation’s legal name is not an assumed name.
Authorized Stock
The number of shares of stock that a corporation is allowed to issue as stated in the Articles of Incorporation. All authorized shares need not be issued
Balance Sheet
The business financial statement that depict the financial status of the business on a specific date by summarizing the assets and liabilities of the business
Balance Sheet Accounts
Asset and liability accounts used to prepare business balance sheets
Board of Directors
The group with control of the general supervision of the corporation. They are elected by the shareholders and the directors, in turn, appoint the officers of the corporation
Bookkeeping
The actual process of recording the figures in accounting records. Business corporation laws: For each individual state, these provide the legal framework for the operation of corporations. The Articles of Incorporation and the Bylaws of a corporation must adhere to the specifics of state law.
Business Liabilities
Business debts. Also the value of the owner’s equity in his or her business
Bylaws
The internal rules that govern the management of the corporation. They contain the procedures for holding meeting, appointments, elections and other management matters. If these conflict with the Articles of Incorporation, the provision in the Articles will be controlling.
C-corporation
A business entity owned by shareholders that is not an S-corporation. Subject to double taxation, unlike S-corporations
Calendar Year
Year consisting on 12 consecutive months ending on December 31st.
Capital
Initially, the actual money or property that shareholders transfer to the corporation to allow it to operate. Once in operation, capital also consists of accumulated profits. The net worth of the corporation, the owner’s equity in a business, and/or the ownership value of the business
Capital Expense
An expense for the purchase of a fixed asset; an asset with a useful life of over one year. Generally, must be depreciated rather than deducted as a business expense.
Capital Stock
See authorized stock
Capital Surplus
Corporations owner’s equity. See also retained capital.
Cash
All currency, coins, and checks that a business has on hand or in a bank account
Cash Method
Accounting method in which income and expenses are not counted until the actual cash is received or paid.
Cash Out
Cash paid out for business purposes, such as a refund
Certificate of Incorporation
See Articles of Incorporation. Note, however, that some states will issue a Certificate of Incorporation after the filing of the Articles of Incorporation
Chart of Accounts
A listing of the types and numbers of the various accounts that a business uses for its accounting needs
Check Register
A running record of checks written, deposits made, and other transactions for a bank account
Close Corporation
Corporation with less than 50 shareholders that has elected to be treated as a close corporation. Not all states have close corporation statutes.
Closely Held Corporation
Not a specific state-sanctioned type of corporation, but rather a designation of any corporation in which the stock is held by a small group of people or entities and is not publicly traded
Common Stock
The standard stock of a corporation that includes the right to vote the shares and the right to proportionate dividends.
Consent Resolution
Any resolution signed by all of the directors or shareholders of a corporation authorizing an action, without the necessity of a meeting.
Corporate Record Book
Contains all the corporate records (except accounting records)
Corporate Stock Transfer Book
Record of the issuance and transfer of stock certificates
Corporation
A business entity owned by shareholders; can be a C-corporation or an S-corporation
Cost Basis
Total cost to a business of a fixed asset
Cost of Goods Sold
The amount that a business has paid for the inventory that it has sold during a specific period. Calculated by adding beginning inventory and additions to inventory and then deducting the ending inventory value.
Credit
In double-entry accounting, an increase in liability or income accounts or a decrease in or expense accounts
Cumulative Voting
A voting right of shareholders that allows votes for directors to be spread among the various nominees. This right protects the voting strength of the minority shareholders. The amount of votes in cumulative voting is based on the number of shares held times the number if director positions to be voted on. The shareholder can then allocate the total cumulative votes in any manner
Current Assets
Cash and any other assets that can be converted to cash or consumed by the business within one year
Current Debt
Debt that will normally be paid within one year
Current Liabilities
Debts of a business that must be paid within one year
Current Ratio
A method of determining the liquidity of a business. Calculated by dividing current assets by current liabilities
Debit
In double-entry accounting, a decrease in liability or income accounts or an increase in asset or expense accounts
Debt
The amount that a business owes to another. Also known as liability
Debt Ratio
A method of determining the indebtedness of a business. Calculated by dividing total liabilities by total assets
Depreciation
Cost of fixed asset deductible proportionately over time
Dissolution
Methods by which a corporation concludes its business and liquidates. Dissolutions may be involuntary because of bankruptcy or credit problems or voluntary on the initiation of the directors or shareholder of a corporation
Dividend
A distribution of money or property paid by the corporation to a shareholder based on the amount of shares held. A proportionate share of the net profits of a business that the board of directors has determined should be paid out of the corporations net earnings and profits. The board of directors has the authority to declare or withhold dividends based on sound business discretion.
Domestic Corporation
A corporation is a domestic corporation in the state in which it is incorporated
Double-Entry Accounting
An accounting system under which each transaction is recorded twice: as a credit and a debit. A very difficult system of accounting to learn and understand
Equity
Any debt that a business owes. It is owner’s equity if owed to the business owners and liabilities if owed to others.
Expenses
The costs to a business of producing its income. Any money that it has paid or will pay out during a certain period
FEIN
Federal Identification Number, used for tax purposes
FICA
Federal Insurance Contributions Act. Taxes withheld from employees and paid by employers for Social Security and Medicare
Fictitious Name
See assumed name
FIFO
First-in, first-out method of accounting for inventory. The inventory value is based on the cost of the latest items purchased
Financial Statements
Reports that summarize the finances of a business; generally a profit and loss statement and a balance sheet
Fiscal Year
A 12 month accounting period used by a business
Fiscal Year Reporting
For income tax purposes, reporting business taxes for any 12 month period that does not end December 31st of each year
Fixed Assets
Assets of a business that will not be sold or consumed within one year. Generally, fixed assets (other than land) must be depreciated
Foreign Corporation
A corporation is referred to as a foreign corporation in all states other than the one in which it is actually incorporated. In order to conduct active business affairs in a different state, a foreign corporation must be registered with the other state for the authority to transact business and it must pay an annual fee for this privilege.
FUTA
Feder Unemployment Tax Act. Federal business unemployment taxes.
General Ledger
In double-entry accounting, the central listing of all accounts of a business
Gross Pay
The total amount of an employee’s compensation before the deduction of any taxes or benefits
Gross Profit
Gross sales minus the cost of goods sold
Gross Sales
The total amount received for goods and services during an accounting period
Gross Wages
The total amount of an employee’s compensation before the deduction of any taxes or benefits
Income
Any money that a business has received or will receive during a certain period
Income Statement
Financial statement that shows the income and expenses for a business. Also referred to as an “operating statement” or “profit and losses statement”
Incorporator
The person who signs the Articles of Incorporation. Usually a person, but some states allow a corporation or partnership to be an incorporator.
Indemnify
To reimburse or compensate. Directors and officers of corporations are often reimbursed or indemnified for all the expenses they may have incurred in incorporating.
Initial Capital
The money or property that an owner or owners contribute to starting a business
Intangible Personal Property
Generally, property not attached to land that you cannot hold or touch
Inventory
Goods that are held by a business for sale to customers
Invoice
A bill for the sale of goods or services that is sent to the buyer
Issued Shares
The number of authorized shares of stock that are actually transferred to shareholders of the corporation. Also referred to as outstanding shares.
Ledgers
The accounting books for a business. Generally, refers to the entire set of accounts for a business.
Liabilities
The debts of a business
LIFO
Last-in, first-out method of valuing inventory. Total value is based on the cost of the earliest items purchased
Liquidity
The ability of a company to convert its assets to cash and meet its obligations with that cash
Long-term Assets
The assets of a business that will be held for over one year. Those assets of a business that are subject to depreciation (except for land)
Long-term Debts
Debts that will not be paid off in one year
Long-term Liabilities
The debts of a business that will not be due for over one year
Long-term Loans Payable
Money due on a loan more than one year in the future
Long-term Notes Payable
Money due more than one year in the future
MACRS
Modified accelerated cost recovery system. A method of depreciation for use with assets purchased after Jan 1st, 1987
Managers
In a limited liability company, those persons selected by the members of the company to handle the management functions of the company. Managers of limited liability companies may or may not be members/owners of the company. Managers are roughly analogous to the officers of a corporation
Members
In a limited liability company, those persons who have ownership interests (equivalent to shareholders in a corporation). Most states allow single member limited liability companies
Minutes
A written record of the activities of a meeting
Net Income
The amount of money that a business has after deducting the cost of goods sold and the cost of all expenses. Also referred to as “net profit”
Net Loss
The amount by which a business has expenses and costs of goods sold greater than income
Net Pay
The amount of compensation that an employee actually will be paid after the deductions for taxes and benefits
Net Profit
The amount by which a business has income greater than expenses and cost of goods sold. Also referred to as “net income”
Net Sales
The value of sales after deducting the cost of goods sold from gross sales.
Net Wages
The amount of compensation that an employee will actually be paid after the deductions for taxes and benefits
Net Worth
The value of the owner’s share in a business. The value of a business determined by deducting the debts of a business from the assets of a business. Also referred to as “owners equity”
No-par Value
Shares of stock that have no specific face value. The board of directors can assign a value to the shares for sale and can then allocate a portion of the sales price to the pain-in-capital account
Nontaxable Income
Income that is not subject to any state or local sales tax
Not-for-profit Corporation
A corporation formed under state law that exists for a socially worthwhile purpose. Profits are not distributed but retained and used for corporate purposes. May be tax-exempt. Also referred to as “nonprofit”
Officers
Manage the daily operations of a corporation. Generally consist of a president, vice president, secretary, and treasurer. Appointed by the board of directors
Operating Margin
Net sales divided by gross sales. The actual profit on goods sold, before deductions for expenses
Operating Statement
Financial Statement that shows the income and expenses for a business. Also referred to as “income statement” or “profit and loss statement”
Owner’s Equity
The value of an owner’s share in a business. Also referred to as “capital”
Par Value
The face value assigned to shares of stock. Par-value stock must be sold for at least the stated value, but can be sold for more than the par value
Partnership
An unincorporated business entity that is owned by two or more persons
Payee
Person or business to whom a payment is made
Payor
Person or business that makes a payment
Perpetual Duration
Existence of a corporation forever
Personal Property
All business property other than land ant he buildings that are attached to the land
Petty Cash
Cash that a business has on hand for payment of minor expenses when use of a business check is not convenient. Not to be used for handling sales revenue
Petty Cash Fund
A cash fund. Considered part of cash on hand
Petty Cash Register
The sheet for recording petty cash transactions
Physical Inventory
The actual process of counting and valuing the inventory on hand at the end of an accounting period
Piercing the Corporate Veil
A legal decision that allows a court to ignore the corporate entity and reach the assets of the shareholders, directors or officers
Plant Assets
Long-term assets of a business. Those business assets that are subject to depreciation (other than land)
Posting
In double-entry accounting, the process of transferring data from journals to ledgers
Pre-paid Expenses
Expenses that are paid for before they are used (insurance, rent, etc)
Preemptive Rights
A shareholder right that allows shareholders the opportunity to maintain their percentage of ownership of the corporation in the event that additional shares are offered for sale
Preferred Stock
Generally, stock that provides the shareholder with a preferential payment of dividends, but doesn’t carry voting rights
Profit and Loss Statement
Financial statement that shows the income and expenses for a business. Also referred to as an “income statement” or “operating statement”
Proxy
A written shareholder authorization to vote shares on behalf of another. Directors may never vote by proxy (except in some close corporations)
Quorum
The required number of persons necessary to officially conduct business at a meeting. Generally, a majority of the shareholders or directors constitutes a quorum.
Real Property
Land and any buildings or improvements that are attached to the land.
Reconciliation
The process of bringing a bank statement into agreement with the business check register
Recovery Period
Specific time period for dividing up the cost into proportionate amounts
Registered Agent
The person designated in the Articles of Incorporation who will be available to receive service of process (summons, subpoena, etc.) on behalf of the corporation. A corporation must always have a registered agent
Registered Office
The actual physical location of the registered agent. Need not be the actual principal place of business of the corporation
Resolution
A formal decision that has been adopted by either the shareholders or the board of directors of a corporation
Retail Price
The price for which a product is sold to the public
Retained Capital
Corporation owner’s equity. See also capital surplus
Retained Earnings
In a corporation, the portion of the annual profits of a business that are kept and reinvested in the business, rather than paid to share holders in the form of dividends
Revenue
Income that a business brings in from the sale of goods or services or from investments
S-Corporation
A type of business corporation in which all the expenses and profits are passed through to its shareholders to be accounted for at tax time individually in the manner of partnerships. A specific IRS designation that allows a corporation to be taxed similarly to a partnership, yet retain limited liability for its shareholders
Salary
Fixed weekly, monthly, or annual compensation for an employee
Sales
Money brought into a business from the sale of goods or services
Sales Income
Revenue derived from selling a product of some type
Salvage Value
The value of an asset after it has been fully depreciated
Service Income
Income derived from performing a service for someone
Service of Process
To accept subpoenas or summonses for a corporation
Shareholder’s Equity
In a corporation, the owner’s equity of a business divided by the number of outstanding shares
Shareholder
Owner of issued stock of a corporation and, therefore, owner of an interest in the corporation. They elect the board of directors and vote on major corporate issues
Short-term Loans Payable
Money due on a loan within one year
Short-term Notes Payable
Money due within one year
Single-entry Accounting
A business record keeping system that generally tracks only income and expense accounts. Used generally by small businesses, it is much easier to use and understand than double-entry accounting.
Sole Proprietorship
An unincorporated business entity in which one person owns the entire company
Stock Transfer Book
The ledger book (or sheets) in which the registered owners of shares in the corporation are recorded
Straight Line Depreciation
Spreads the deductible amount equally over the recovery period
Supplies
Materials used in conducting the day-to-day affairs of a business (as opposed to raw materials used in manufacturing)
Tangible Personal Property
Property not attached to land that you can hold and touch
Taxes Payable
Total of all taxes due but not yet paid
Treasury Shares
Shares of stock that were issued, but later reacquired by the corporation and not canceled. May be issued as dividends to shareholders. They are issued, but not outstanding for terms of voting and quorums
Trial Balance
In double-entry accounting, a listing of all the balances in the general ledger in order to show that debits and credits balance.
Wages
Hourly compensation paid to employees, as opposed to salary
Wages Payable
Total of all wages and salaries due to employees but not yet paid out
Wholesale Price
The cost to a business of goods purchased for later sale to the public
Project Integration Management
The processes required to ensure that the various elements of the project are properly coordinated. It consists of project plan development, project plan execution, and integrated change control.
Project Scope Management
The processes required to ensure that the project includes all the work required, and only the work required, to complete the project successfully. It consists of initiation, scope planning, scope definition, scope verification, and scope change control.
Project Time Management
The processes required to ensure timely completion of the project. It consists of activity definition, activity sequencing, activity duration estimating, schedule development, and schedule control
Project Cost Management
The processes required to ensure that the project is completed within the approved budget. It consists of resource planning, cost estimating, cost budgeting and cost control
Project Quality Management
The processes required to ensure that the project will satisfy the needs for which it was undertaken. It consists of quality planning, quality assurance, and quality control
Project Human Resource Management
The processes required to make the most effective use of the people involved with the project. It consists of organizational planning, staff acquisition and team development
Project Communications Management
The processes required to ensure timely and appropriate generation, collection, dissemination, storage, and ultimate disposition of project information. It consists of communications planning, information distribution, performance reporting, and administrative closure
Project Risk Management
The processes concerned with identifying, analyzing and responding to project risk. It consists of risk management planning, risk identification, qualitative risk analysis, quantitative risk analysis, risk response planning and risk monitoring and control
Project Procurement Management
The processes required to acquire goods and services from outside the performing organization. It consists of procurement planning, solicitation planning, solicitation, source selection, contract administration and contract closeout.
4 Steps of Risk Assessment
- Hazard Identification
- Evaluating relationship between exposure to a risk and adverse effects.
- Exposure assessment - evaluating the conditions that lead to exposure to a risk.
- Risk characterization - describe nature of adverse effects, their likelihood, and the strength behind these characterizations.
Avoidance
Whenever an organization cannot offer a service while ensuring a high degree of safety, it should choose avoidance as a risk management technique.
Modification
Simply changing an activity to make it safer for all involved. Examples would be policy and procedural changes
Retention
An owner may decide that other available techniques aren’t suitable and it will therefore retain the risk of harm or loss.
Sharing
Involves sharing risk with another organization through a contract.
5 Management Functions
- Planning
- Organizing
- Staffing
- Leading
- Controlling
Planning
The development of specific strategies designed to achieve organizational goals.
Organizing
The process of structuring a company’s resources - personnel and materials - in a way that will allow it to achieve its objectives.
Staffing
Encompasses activities related to finding and sustaining a labor force that is adequate to meet the organization’s objectives.
Leading
The act of guiding and influencing other people to achieve goals.
Controlling
Is comprised of activities that measure and evaluate the outcome of planning, organizing, staffing and leading efforts.
Financial Accounting
The procedures we use to record business transactions and report the result of those transactions to shareholders, creditors, and other external entities.
Managerial Accounting
The reports and information for decision making within an organization, and is closely related to cost accounting, which is the determination of product costs for the valuation of inventory and cost of goods sold.
