# Shared Flashcard Set

## Details

Accounting Chapters 1,3,4,10
Vocab
119
Accounting
01/24/2011

Term
Definition
 an evolving report that describes a company's goals and its current plans for achieving those goals
Term
 1. a description of the company 2. a marketing plan 3. a description of the operations of the company 4. a financial plan
Definition
Term
 risk
Definition
 how much uncertainty exists about the future operations of the company
Term
 return
Definition
 money back
Term
 capital
Definition
Term
 short-term capital
Definition
 borrowed money that will be repaid within a year or less
Term
 line of credit
Definition
 allows a company to borrow money "as needed" with a pre-arranged agreed upon interest rate and a specific payback schedule
Term
 long-term capital
Definition
 money borrowed that will be repaid to creditors or returned after more than a year
Term
 Cost-Volume-Profit analysis
Definition
 shows how profit will be affected by alternative sales volumes, selling prices of products, and various costs of the company
Term
 volume
Definition
 the activity level; how many are sold
Term
 fixed cost
Definition
 constant in total for a specific period of time; not affected by differences in volume during that same time period
Term
 variable costs
Definition
 constant per unit of volume, and changes in total in a time period in direct proportion to the changes in volume
Term
 Total Variable Cost=vX
Definition
 Total Variable Cost Formula
Term
 Total Cost
Definition
 the sum of fixed costs and the variable costs at that volume
Term
 Total Cost=f+vX
Definition
 Total Cost Formula
Term
 Net Income (Profit)=Revenues-Expenses
Definition
 Net Income Formula
Term
 break-even point
Definition
 unit sales volume at which a company earns zero profit
Term
 total contribution margin
Definition
 at a given sales volume, is the difference between the estimated total sales revenue and the estimated total variable costs
Term
 contribution margin per unit
Definition
 the difference between the estimated sales revenue per unit and the estimated variable costs per unit
Term
 Profit=[(selling price per unit)(unit sales volume)]-[(variable cost per unit)(unit sales volume)]-(total fixed costs)
Definition
 Profit Equation
Term
 unit sales volume= total fixed costs/contribution margin per unit
Definition
 Break Even Point Formula
Term
 Unit Sales Volume=(Total Fixed costs + Desired Profit)/Contribution margin per unit
Definition
 Unit Sales Volume to achieve a profit
Term
 service company
Definition
 performs services or activities that benefit individuals or business customers
Term
 Merchandising Company
Definition
 purchase goods for resale to their customers
Term
 Manufacturing Company
Definition
 make their products and then sell these products to their customers
Term
 budgets
Definition
 a report that gives a financial description of one part of a company's planned activities for the budget period
Term
 budgeting
Definition
 ongoing planning process
Term
 management by exception
Definition
 the entrepreneur focuses on improving the activities that show significant differences between budgeted and actual results
Term
 service company's operating cycle
Definition
 average time it takes the company to use cash to acquire supplies and services, to sell the services to customer, and to collect cash from its customers
Term
 retail company's operating cycle
Definition
 average time it takes the company to use cash to buy goods for sale, to sell goods to customers, and to collect cash from its customers
Term
 master budget
Definition
 set of interrelated reports showing the relationships among a company's 1) goals to be met, 2) activities to be performed, 3) resources to be used, 4) and expected financial results
Term
 1. Sales Budget 2. Purchases Budget 3. Selling expenses budget 4. General and administrative expenses budget 5. Cash budget 6. Projected income statement 7. Projected Balance sheet
Definition
 Master Budget Includes
Term
 sales budget
Definition
 shows the number of units of inventory that the company expects to sell each month, the related monthly sales revenue, and in which months the company expects to collect cash from these sales
Term
 purchases budget
Definition
 shows the purchases (in units) required in each month to make the expected sales (from the sales budget) in that month and to keep inventory at desired levels
Term
 selling expenses budget
Definition
 shows the expenses and related cash payments associated with planned selling activities
Term
Definition
 shows the expenses and related cash payments associated with expected activities other than selling
Term
 cash budget
Definition
 shows the company's expected cash receipts and payments, and how they affect the company's cash balance
Term
 operating activities section
Definition
 summarizes the cash receipts and payments the company expects as a result of its planned operations
Term
 investing activities section
Definition
 shows the cash payments and receipts the company expects from planned investing activities
Term
 financing activities section
Definition
 shows the cash receipts and payments the company expects from planned financing activities
Term
 budgeting
Definition
 process of quantifying manager's plans and showing the impact of these plans on a company's operating activities
Term
 cost report
Definition
 report showing a comparison between a company's budgeted and actual expenses for an accounting period
Term
 projected balance sheet
Definition
 statement summarizing a company's expected financial position (assets, liabilities, and owner's equity) at the end of the budget period
Term
 service companies
Definition
 perform services or activities that benefit individuals or business customers
Term
 merchandising companies
Definition
 purchase goods for resale to their customers
Term
 manufacturing companies
Definition
 make their products and then sell products to customers
Term
 entreprenuer
Definition
 an individual who is willing to risk uncertainty in exchange for the reward of earning a profit
Term
 solvent
Definition
 company that can pay off its debt
Term
 sole proprietorship
Definition
 a company owned by one individual who is the sole investor of capital into the company
Term
 partnership
Definition
 a company owned by two or more individuals who each invest capital, time, and/or talent into the company and share in the profits and losses of the company
Term
 partnership agreement
Definition
 contract that explains the responsibilities, obligations, and benefits of a partnership
Term
 coproration
Definition
 a company organized as a separate legal entity, or body, according to the laws of a particular state; owned by stockholders/shareholders
Term
 integrated accounting system
Definition
 means by which accounting information about a company's activities is identified, measured, recorded, and summarized so that it can be communicated in an accounting report
Term
 external users
Definition
 people outside the company
Term
 internal users
Definition
 managers and employees within the company
Term
 planning
Definition
 establishes the company's goals and the means of achieving these goals
Term
 management accounting
Definition
 identifying, measuring, recording, summarizing, and then communicating economic information about a company to internal users for management decision-making
Term
 Cost analysis/ Cos Accounting
Definition
 the process of determining and evaluating the costs of specific products or activities within a company
Term
 financial accounting
Definition
 identifying, measuring, recording, summarizing, and then communicating information about a company to external users for the use of their various decisions
Term
 Generally accepted accounting principles  GAAP
Definition
 currently accepted principles, procedures, and practices that companies use for financial accounting and reporting in the United States
Term
 financial statements
Definition
 accounting reports used to summarize and communicate financial information about a company
Term
 income statement
Definition
 summarizes the results of its operating activities for a specific period of time and shows the company's profit for that period
Term
 revenues
Definition
 the prices charged to a company's customers for the goods or services the company provided to them
Term
 expenses
Definition
 the costs of providing the goods or services
Term
 net income
Definition
 the excess revenues over expenses (company's profit)
Term
 net loss
Definition
 expenses are greater than revenues
Term
 balance sheet
Definition
 summarizes its financial position on a given date (usually the last day of the time period covered by an income statement) statement of financial position
Term
 assets
Definition
 economic resources that a company owns and that it expects will provide future benefits to the company
Term
 liabilities
Definition
 the company's economic obligations (debts) to its creditors
Term
 owner's equity
Definition
 the owner's current investment in the assets of the company
Term
 stockholder's equity
Definition
 corporation's owners' equity
Term
 statement of changes in owner's equity
Definition
 supporting financial statement that explains the amount shown in the owner's equity section of the company's balance sheet
Term
 cash flow statement
Definition
 summarizes its cash receipts, cash payments, and net change in cash for a specific period of time
Term
 annual report
Definition
 document that includes a company's income statement, balance sheet, and cash flow statement, along with other related financial accounting information
Term
 unlimited liability
Definition
 owners of a sole proprietorship or partnership assume all responsibility for the debts incurred by the company
Term
 agent
Definition
 person who has the authority of act for another
Term
 double taxation
Definition
 corporation is taxed and then the dividends that are passed down to shareholders are taxed as personal income
Term
 incorporation
Definition
 the process of filing the required documents and obtaining permission from a state to operate as a corporation
Term
 articles of incorporation
Definition
 state-approved documents for becoming a corporation
Term
 closely held corporation
Definition
 corporation owned by a small number of investors
Term
 publicly held corporation
Definition
 sell stock to the general public and generally there are no restrictions on the selling of stock by current stockholders
Term
 initial public offering (IPO)
Definition
 corporations first sale of stock to the public
Term
 secondary equity market
Definition
 where investors buy the stock of corporations from other investors rather than from the corporations
Term
 enterprise resource planning systems
Definition
 information system involving computer software that records and stores many different types of data in a data warehouse
Term
Definition
 companies that use internet to conduct transactions electronically
Term
 conceptual framework
Definition
 set of concepts that provides a logical structure for financial accounting and reporting
Term
 relevant
Definition
 information that has the capacity to influence a user's decision
Term
 reliable
Definition
 information that is capable of being verified
Term
 material
Definition
 when the monetary amount is large enough to make a difference in a user's decision
Term
 valid
Definition
 information that shows a realistic picture of what it is meant to represent
Term
 contributed captial
Definition
 total investments made by stockholders in the corporation
Term
 capital stock
Definition
 the ownership units in the corporation
Term
 common stock
Definition
 ownership unit of a corporation
Term
 preferred stock
Definition
 type of capital stock issued for which stockholders receive certain additional rights in exchange for giving up some of the usual stockholder's rights
Term
 legal capital
Definition
 monetary amount per share of a common stock (par value)
Term
 market value
Definition
 total dollar amount the corporation receives from selling its stock
Term
Definition
 the difference between the selling price and the par value in each stock transaction
Term
 retained earnings
Definition
 the amount of its lifetime net income that has been reinvested in the corporation to date
Term
 income from continuing operations
Definition
 reports a corporation's revenues and expenses that resulted from its ongoing operations
Term
 operating income
Definition
 found by subtracting cost of goods sold from net sales to obtain gross profit and then by deducting the selling expenses and the general and administrative expenses
Term
 gains
Definition
 increases in a corporation's income that result from transactions unrelated to providing goods and services
Term
 losses
Definition
 decreases in a corporation's income that result from transactions unrelated to providing goods and services
Term
 earnings per share (EPS)
Definition
 the amount of net income earned for each share of common stock
Term
 Earnings per share= net income/ average number of common shares
Definition
 earnings per share equation
Term
 publicly available information
Definition
 any information released to the public
Term
 notes to the financial statements
Definition
 informs external users of the company's accounting policies and of important financial information that is not reported in the financial statements
Term
 auditing
Definition
 the examination of a company's accounting records and financial statements by an independent certified public accountant (CPA)
Term
 10-K report
Definition
 includes the corporation's annual report and other information such as officer's names, salaries, and stock ownership
Term
 interim financial statements
Definition
 financial statements prepared for a period of less than one year
Term
 intracompany analysis
Definition
 when a company compares the corporation's current operating results and financial position with its past performance or with its expected performance
Term
 intercompany analysis
Definition
 involves comparing a company's operating results and financial position with that of competing companies, industry averages, or averages in related industries
Term
 horizontal analysis
Definition
 shows the changes in a company's operating results over time in percentages as well as dollar amounts
Term
 vertical analysis
Definition
 shows each item in a given financial statement of a give period or date as a percentage of another item on that statement
Term
 1. Income Statement 2. Balance Sheet 3. Statement of Retained Earnings 4. Cash Flow Statement
Definition
 4 Financial Statements
Term
 Sales Revenues -Cost of goods sold =Gross Profit -Operating Expenses =Net Income
Definition
 Normal Income Statement components
Term
 Assets= Liabilities+ Owner's Equity
Definition
 Accounting Equation
Term
 Selling Price (in units)- Variable Cost (in units)
Definition
 Contribution Margin Equation
Term
 Sales Revenue -Variable Cost =Contribution Margin -Fixed Cost =Net Income
Definition
 Income Statement with Contribution Margin
Term
 Sales Revenue -Expenses =Net Income
Definition
 Income Statement for Services
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