Accounting, A system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization., Accounting Equation, Assets = Liabilities + Owners’ Equity, Assets, Resources owned by a firm., Balance Sheet, A financial statement that reports the financial position of a firm by identifying and reporting the value of the firm’s assets, liabilities, and owners’ equity., Cash Budget, A detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash., External Audit, Check figures, examine the accounting methods the company used to obtain those figures, Financing Activities, Show the cash the firm received from issuing additional shares of its own stock or from taking out short-term and long-term loans, Horizontal Analysis, Analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends, Indirect Costs, Costs that are the result of a firm’s general operations and are not directly tied to any specific cost object., Internal Audit, Work within their organizations to detect internal problems such as waste, mismanagement, embezzlement, and employee theft, Liabilities, Claims that outsiders have against a firm’s assets., Liquidity Ratio, Financial ratios that measure the ability of a firm to obtain the cash it needs to pay its short-term debt obligations as they come due., Management Accountants, work within a company and provide analysis, prepare reports and financial, Net Income, The difference between the revenue a firm earns and the expenses it incurs in a given time period., Operating Activities, The amount of cash that flowed into the company from the sale of goods or services, as well as cash from dividends and interest received from ownership of the financial securities of other firms., Profitability Ratios, Ratios that measure the rate of return a firm is earning on various measures of investment, Retained Earnings, The part of a firm’s net income it reinvests., Revenue, Increases in a firm’s assets that result from the sale of goods, provision of services, or other activities intended to earn income, Variable Costs, Costs that vary directly with the level of production., Statements of Cash Flow, The financial statement that identifies a firm’s sources and uses of cash in a given accounting period..

Chapter 8: Accounting

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