U9 Flashcards
Explain accounting process.
Accounting process starts with inputs, like recipts and invoices into specialized accounting software. Next these entries are recoded chronologically into ‘journals’. These journal are posted into ledgers. Based on them there are generated trial balance at the end of each accounting period. Then accountand check correction of figures,it’ll ue directly to prepare main financial statements. Finally financial statements of big corparations need to be checked by external auditors
Explain Profit and loss account.
(= income statement \ P&L) summarizes business activity over period of time. It begins from revenue generated over period of time, next subtract all costs related to producing that revenue.
Explain Balance sheet
it reports the company financial condition on a specific time. The basic equation that need to be balance is: Assets = Liabilities + Shareholders’ equity
Explain cash flow statement
Shows the real cash that is available to keep the business runing day to day
invoice
sales document
recipt
purchasing document
records
data unit
journal
chronological set of financial records
ledger
journals divided in specific cathegory
trial balance
summary of ledger information
auditor
external person who checked correctnes of finansial statement
creditors
sb who lend you sth
asset
anything of value owned by the business
liability
any mount owed to creditor
shareholders equity
(owners’ equity) consits of share capita and retained profit
figures
numbers in financial statements
current liabilities
liabilities able to pay during one year
long-term liabilities
liabilities that are expexted to pay later then one year
current assets
assets that are able to exchange to money within one year
fixed asset
asstets that are expected to pay later then one year
working capital
( = current asstets - current liabilites) quick measure of whether there is enough cash freely avalilable to keep business runing day to day
Explain reasons of cash flow problems
- unexpected late payments
- unforeseen costs
- unexpected drop in demand
- investing too much in fixed assets
Explain solution for cash flow problems
- credit control
- stock control
- expenditure control
- sales promotion to generate cash quickly
- factoring
Explain structure of accounting department
Chief Financial Officer is on the Broad. 3 senior managers are below report to CFO: Financial Controller, Treasuer, Chief Accounting Officer
Resoponsibility of CFO
Represents Accounting Department on the Broad.
responsibility of financial controler
- planing: preparing forecast and budgets
- monitoring: comparing planned spending with actual spending
- producing financial data for the senior managment team
- analysing major investment decision
responsibility of treasuer
- managing cash flow
- raising new funds
responsibility of chief accounting officer
- keeping the company books
- preparing financial statements
- preparing tax returns
- developing strategies to minimalize taxes
Explain possible sources of new funds
- debt financing
(short term: trade credit, bank loan)
(long term: issuing bonds) - equity financing: reinvested earnings, sale of assets, issue of shares
cost/profit center
discrete business units where business are spent or profits are generated
Variance analysis
comparing planned costs/income with actual costs/income
Costing methods
standard vs marginal costing
ratio analysis (users/types)
to analyse performance in more depth to comapare comany in the same industry: liquidity, ratios, profitability ratios, leverage (debt) ratios, activity ratios
revenue
(= income / turnover / sales / the top line )
cost of goods sold
(= direct costs) includes manufacturing costs, blue-collar
blue-collar
salaries of manual workers
operational expenses
(= indirect costs / overhead) include salaries of sales and office staff, marketing costs, utility bills
non-operating income
include profits from investment in other companies
EBITDA
Earning Before Interest, Tax, Depreciation and Amortization
Earnings
(= profit / bottom line)
Depreciation/Amortization
Both are very simillar. ‘Depreciation’ can refer to the loss of value in tangoble asstes and amortization to the loss in value of an intagible asset
interest
refers to the money paid to the bank for loans
dividends
money paid to the ban for loans
retained profit
it transferred to the Balance Sheet where it joins the amounts from previous years
accounts recivable
Amount owed to the business by customers (= creditors)
inventory
value of raw materials & stock
current assets
includes marketable securities (shared intended for disposal within one year)
fixtures
part of a building that cannot be moved, such as light
fixed assets
include long-term financial investemnts
intangible assets
include patents, trademarks & goodlwill (reputation, contacts and expertise of companies that have been bought)
bank debt
(= loan capital) also includes any overdraft (= temporary negative balance)
accountant payable
the money owed to suppliers
Accrued
items are those where an expense has been incured, but the money is not yet paid
provision
one-time payments that are not part of regulat operations
mortgage
long-term bank loan
principal
amount raised by issuing the bonds
share capital
(= common stock)
retained profil
(= reserves / retained earnings) an amount accumulated over several years
owe
by winnym
write off
odpisać
recivable
możliwy do odzyskania
payable
do zapłaty
accured expenses
zaksięgowane wydatki
leverage
dźwignia finansowa
blue collar
błęknitny kołnierzyk
direct / variable cost
koszt bezpośredni / zmienny
fixed / operating cost
koszty stałe / operacyjne
indirect / direct cost
koszty pośrednie/bezpośrednie
capital expenditure
wydatki kapitałowe
mark up / marginal cost
marża/koszty krańcowe
