flexibility
spectrum of ideas generated
fluency
number of ideas generated or solutions proposed by the problem solver
annual report
document that includes a company's income statement, balance sheet, and cash flow statement, along with other related financial accounting information
cash flow statement
accounting report that summarizes a company's cash receipts, cash payments, and net change in cash for a specific time period
statement of changes in owner's equity
statement that summarizes the transactions that affected owner's equity during the accounting period
stockholder's equity
owner's equity of a corporation, consisting of contributed capital and retained earnings
owner's equity
owner's current investment in the assets of a company
liabilities
a company's economic obligations (debts) owed to its creditors
assets
a company's economic resources that it expects will provide future benefits to the company
balance sheet
accounting report that summarizes a company's financial position (assets, liabilities, and owner's equity) on a given date
net loss
excess of a company's expenses over its revenues from providing goods or services to its customers during a specific time period
net income
excess of a company's revenues over its expenses from providing goods or services to its customers during a specific time period
expenses
costs a company incurs to provide goods or services to its customers during an accounting period
revenues
prices charged to a company's customers for the goods or services the company provides to them
income statement
accounting report that summarizes the results of a company's operating activities for a specific period of time
financial statements
accounting reports used to summarize and communicate financial information about a company
solvency
company's long- term ability to pay its debts as they are due
profit
difference between the total revenues of a company and the total costs (expenses) of the company during a specific time period
international financial reporting standards (IFRS)
accounting and reporting standards (rules that are used for financial accounting in countries other than the US
generally accepted accounting principles (GAAP)
currently accepted principles, procedures, and practices that are used for financial accounting in the US
financial accounting
identification, measurement, recording, accumulation, and communication of economic information about a company for external users to use in their various decisions
cost analysis (accounting)
process of determining and evaluating the costs of specific products or activities of a company
budgeting
process of quantifying manager's plans and showing the impact of these plans on a company's operating activities
operating
management activity that enables a company to conduct its business according to its plan
management accounting
identification, measurement, recording, accumulation, and communication of economic information about a company for internal users in management decision making
evaluating
management activity that measures a company's actual operations and progress against standards or benchmarks
planning
management activity that establishes a company's goals and the means of achieving these goals
internal users
managers within a company who use information about the company for decision- making
external users
individuals outside of a company who use the company's information for decision making
integrated accounting system
a 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
corporation
a company organized as a separate legal entity, or body (separate from its owners), according to the laws of a particular state
partnership agreement
contract signed by partners of a partnership before the company begins operations
partnership
company owned by two or more individuals who each invest capital, time, and talent into the company and share in the profits and losses of the company
sole proprietorship
company owned by one individual who is the sole investor of capital into the company; most common type of company because it is the easiest to organize and the most simple to operate
not for profit organizations
organizations that use accounting information in their decision- making functions but do not have profit making as a goal. these include many educational institutions, religious institutions, charitable organizations, municipalities, governments, and some
solvent
when a company is capable of paying off its
debts
entrepreneur
an individual who is willing to risk the uncertainty of starting a company in exchange for the reward of earning a profit (and the personal reward of seeing the company succeed)
capital
the funds a company needs to operate or to extend operations
merchandising companies
purchase goods (referred to as merchandise or products) for resale to their customers. some of these companies are wholesalers, some are retailers
manufacturing companies
company that makes its products and then sells these products to its' customers
retailers
sell their goods directly to the final customer ex. JCpenny
wholesalers
primarily sell their goods to retailers or other commercial users
service companies
perform services or activities that benefit individuals or business customers
private enterprise
individuals, rather than government, own businesses that produce and sell services and goods for a profit
volume
activity level in a company
variable cost
cost that is constant per unit and changes in total in direct proportion to changes in volume
on graph, line is parallel to total costs
total costs
sum of the fixed costs and variable costs at a given volume
short term capital
capital which will be repaid within a year or less
risk
amount of uncertainty that exists about the future operations of a company
return
money received from investment and credit decisions
long term capital
capital which will be repaid to creditors or returned to investors after more than one year
line of credit
amount of money a company is allowed to borrow with a prearranged, agreed- upon interest rate and a specific payback schedule
fixed costs
costs that are constant in total and that are not affected by changes in volume
cost- volume- profit analysis (CVP)
shows how profit is affected by changes in sales volume, selling prices of products, and the various costs of a company
break- even point
unit sales volume at which a company earns zero profit (BE= fixed costs + 0/contribution margin)
total contribution margin
difference between the total sales revenue and the total variable costs (tcm= total revenues- variable costs)
contribution margin per unit
difference between the sales revenue per unit and the variable costs per unit (cmu= selling price- variable cost)
business plan
describes a company's goals and its' plans for achieving those goals. typically includes:
1. description of company
2. a marketing plan
3. description of the operations of the company
4. a financial plan
operating activities section
section of a company's cash flow statement (or cash budget) that summarizes the cash receipts and payments from its actual (or planned) operating activities
master budget
set of interrelated reports showing the relationships among a company's goals to be met, activities to be performed, resources to be used, and expected financial results
management by exception
management principle where an entrepreneur (or manager) focuses on improving the activities that show significant differences between budgeted and actual results
investing activities section
section of a company's cash flow statement (or cash budget) that shows the cash receipts and payments from its actual (or planned) investing activities
general and administrative expenses budget
budget showing the expenses and related cash payments associated with expected activities other than selling
financing activities section
section of a company's cash flow statement (or cash budget) that shows the cash receipts and payments from its actual (or planned) financing activities
cost report
report showing a comparison between a company's budgeted and actual expenses for an accounting period
cash budget
budget showing a company's expected cash receipts and payments and how they affect the company's cash balance
budget
report that gives a financial description of one part of a company's planned activity
service company's operating cycle
the average time it takes a service company to use cash to acquire supplies and services, to sell the services to customers, and to collect cash from its' customers
selling expenses budget
budget showing the expenses and related cash payments associated with planned selling activities
sales budget
budget showing the number of units of inventory that a company expects to sell each month, the related monthly sales revenue, and in which months the company expects to collect cash from these sales
retail company's operating cycle
average time it takes for retail to use cash to buy goods (called inventory), sell to customers, and to collect cash from customers
purchases budget
budget showing the purchases (per unit) required in each month to make the expected sales in that month (from the sales budget) and to keep inventory at desired levels
projected income statement
statement summarizing a company's expected revenues and expenses for the budget period
projected balance sheet
statement summarizing a company's expected financial position (assets, liabilities, and owner's equity) at the end of a budget period
withdrawal
payments from the company to the owner
wages and salaries payable
amounts owed to employees for work they have done
transaction
exchange of property or service by a company with another entity
total equity
total of the liabilities and owner's equity
source document
business record used as evidence that a transaction has occurred
residual equity
term that is used to refer to owner's equity because creditors have first legal claim to a company's assets
records revenues
a company does this during the accounting period in which the revenues are earned and are collectable (or collected)
prepaid insurance
cost paid for the right to insurance protection
net assets
assets minus liabilities
monetary unit concept
concept that transactions are to be recorded in terms of money
matching concepts
to determine its net income for an accounting period, a company computes and deducts the total expenses from the total revenues earned during the period
historial cost concepts
concept that a company records its transactions based on the dollars exchanged at the time the transaction occurred
equity
claims by creditors and owners against the assets of a company
entity
separation of accounting records of a company from the records of a company's owner or owners
end- of- period adjustments
increases or decreases to account balances at the end of the period to reflect the costs of providing goods or services that are not supported by source documents
earning process
purchasing (or producing) inventory, selling inventory (or services), delivering the inventory (or services) and collecting and paying cash
dual effect of transactions
a company must make at least two changes in its' assets, liabilities, or owner's equity when it records each transaction
depreciation
the part of the cost of a physical asset allocated as an expense to each time period in which the asset is used
creditor's equity
claims by creditors against the assets of a company
creditors
external parties to whom a company owes debts
balance
the amount in an account column at the beginning of the period plus the increases and minus the decreases recorded in the column during the period
accrual accounting
recording revenues and related expenses transactions in the same accounting period that goods or services are provided, regardless of when cash is received or paid
accounts receivable
amounts owed by customers to the company
accounts payable
amounts owed to suppliers for credit purchases
accounting system
process used to identify, measure, record, and retain information about a company's activities so that the company can prepare its' financial statements
accounting period
time span for which a company reports its revenues and expenses
accounting equation
assets= liabilities + owner's equity
accounts
documents used to record and retain the monetary information from a company's transactions