Management 2

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  1. Accounting
    • universal language of business
    • converts raw data into something used to make business decisions 
  2. General anounting conventions
    accounting period, GAAP, accounting methods 
  3. accounting period
    length of time covered by a financial statement

    usually 1 year and calendar year 

    can also have interm statements (less than a year reports) 
  4. generally accepted accounting principles (GAAP)
    set of accounting principles and procedures that guide the preparation of financial statements 
  5. 2 methods of accounting
    cash= income and expenses are recorded when they are paid

    accrual= income and expenses are recorded when they are incurred (once money comes in)
  6. Financial Statements: describes the financial health of a company
    balance sheet

    income statement

    statement of cash flow

    statement of owners equity
  7. balance sheet
    statement of business financial position

    one point in time 

    assets= liabilities + owners equity
  8. Assets
    tangible or intangible

    current or fixed
  9. tangible vs intangible assets
    tangible= have physical form 

    intangible= are not physical but still have value 
  10. current vs fixed assets
    current= asset expected to be sold in less than 1 year ( cash, CD, accounts, inventory)

    fixed= asset expected to be sold in more than 1 year (building, computer, equipment)
  11. liquidity
    how quickly assets can be converted into cash

    on balance sheet listed in decreaseing order of liquidity (most liquid first)
  12. Liabilities
    a debut that needs to be re paid

    current or fixed
  13. current vs fixed liabilities
    current= items that must be paid in less than 1 year (salary, income tax)

    fixed= items that must be paid back in more than 1 year (mortgage, loan)
  14. Owners equity

    owners equity= total assets - total liabilities
    2 souces- contributed cash and retained earnings 
  15. contributed cash
    the amount invested in a business by the owner

    money the owner puts into the business
  16. retained earnings
    income earned through operations

    profit that is re invested into the company 
  17. income statement
    profit and loss statement

    shows weather a business made a profit

    over a specific period in time 
  18. income statement 

    revenues- expenses= net income

    cost of goods sold (COGS)

    gross profit


    net income 
  19. net sales or revenue
    the dollar value of the merchandise sold (amount sold)
  20. cost of goods sold
    the cost of obtaining inventory for the pharmacy
  21. gross profit
    total revenue remaining after subtracting out the COGS

    gross profit = sales - COGS
  22. Expenses
    any other expenditures excuding COGS

    fixed and variable 
  23. fixed vs variable expenses
    fixed= cannot easily be changed (mortgage)

    variable= things you can easily change (advertising)
  24. statement of cash flows
    shows cash in and out over a specific period of time 

    assess short term ability of the business to pay its bills (liquidity of the business)
  25. Cash flow components
    operating activities

    investing actvities

    financing activities
  26. operating activities
    transactions that determine net income

    sales and production of product
  27. investing activities
    impact long term assets

    purchase of land or equipment
  28. financing activities
    influences long term liabilities and owners equity

    banks and dividends
  29. Statement of owners equity
    net income

    net loss

    dividends paid out 
  30. Retained earnings
    income earned through operations that is not given to shareholders in the form of dividends 

    over a period of time
Card Set:
Management 2
2012-10-14 01:53:13

Accounting packet
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