MGT 3210 chapter 12 key terms

MACRS rate

an Internal Revenue Service acronym for the Modified Accelerated Cost Recovery System. This approach lets taxpayers depreciate more of the cost earlier in the life of a capital expense.

articulate

he concept that data flows from the income statement through the statement of retained earnings and owners' equity to the balance sheet

budget

a financial plan for the future, based on a single level of operations. A quantitative expression of the use of resources necessary to achieve a business' strategic goals

Financial Accounting

a formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators

Managerial Accounting

accounting methods that are specifically intended to be used by mangers for planning, directing, and controlling a business

asset

something that the business owns that is expected to have economic value in the future

Operating Activities

activities involved in producing and selling goods and services

external factors

aspects of the world outside the business which could cause the business's costs to change

accounting equation

assets minus liabilities equals owner's equity (assets - liabilities = owners' equity).

Outsourcing

contracting with people or companies outside your business to do work for your business

account

in terms of accounting practice, a chronological list of all additions to and subtractions from a single type of asset, e.g., cash, receivables, loans outstanding

financial flexibility

a business' ability to manage cash flows in such manner that the company can respond appropriately to unexpected opportunities and needs

Liquidity

a measure of how quickly a company can raise money through internal sources by converting assets to cash

Standard Budgeting

a method for business forecasting and control in which specific expected volumes and prices per unit are used

Cost-Volume-Profit Analysis

a method for planning operations necessary to attain a specified profit goal. Break-even analysis is a specific application

Cash Flow Statement

a statement of the sources and uses of cash in a business for a specific period of time

balance sheet

a statement of what a business owns (assets), what it owes to others (liabilities) and how much value the owners have invested in it (equity)

Income Statement

a statement that lists revenues, expenses, and show the amount of profit a business made for a specified period of time

Budget Cycle

a term applied to the schedule and the process for setting the schedule for making purchases by an individual or an organization

Financing Activities

activities through which cash is obtained from and paid to lenders, owners and investors

tax accounting

an accounting approach based on specific accounting requirements set by governmental taxing agencies

investment

an asset that is acquired for the purpose of either generating future incomes and cash flows or appreciating in value to provide an increase in future wealth

Cost of Goods Sold

an expense recognized at the time of a sale of merchandise in the amount of the cost of the merchandise to the seller

expense

an increase in owner's equity caused by selling your product

revenue

an increase in owners' equity caused by selling your product or service

internal factors

aspects of or choices within a business which cause the business's costs to change

Financial Statement

formal summaries of the content of an accounting system's records of transactions

Liabilities

legal obligations to give up things of value in the future

on account

merchandise purchased or sold with payment due in the future, usually within one month

pro forma financial statements

planning documents for future business activities that are formatted to look like the common financial statements of the income statement, balance sheet, and statement of cash flows

Depreciation

regular and systematic reduction in income that transfers asset value to expense over time

financial strength

the ability of a business to survive adverse financial events

going concern

the accounting concept that a business is expected to continue in existence for the foreseeable future.

permanent accounts

the accounts of assets, liabilities and owner's equity, excluding accounts for reviews and expunges

Operating Income

the amount of income earned by the regular operations of the business

Business Entity

the concept that a business has an existence separate from that of its owners

Variance

the difference between an actual and budgeted revenue and cost

Owner's Equity

the difference between assets and liabilities of a business

Net Present Value (NPV)

the difference between the present value of cash inflows and the present value of cash outflows over a specified period of time.

profit planning

the process of creating a set of interconnected budgets that combine into a master budget that can be used for assessing and controlling the business processes

varience analysis

the process of determining the effect of price and quantity changes on revenues and expense

Investing Activities

the purchase and sale of land, buildings, equipment, and securities

total cost

the sum of all costs that are incurred within an accounting period. For the purposes of cost-volume-profit analysis, set equal to the sum of fixed costs and variable costs.

retained earnings

the sum of all profits and losses, less all dividends paid since the beginning of the business

Current Ratio

the value of current assets divided by current liabilities

Generally Accepted Accounting Principles (GAAP)

these are standardized rules for accounting procedures set out by the Financial Account Standards Board and used in all audits and submissions of accounting reports to the government

variable cost

those costs that change with each unit produced, e.g., raw materials

fixed costs

those costs that remain constant regardless of the quantity produced, e.g., rent.