profit and loss statement
Bluff Numbers Day Two
31 32 33 34 35 36 37 38 39 40 41
49 50 51 52 53 54 55 56 57 58 59
What is the first step in the accounting cycle?
Collect and verify source documents
What is the third step in the accounting cycle?
Post journal transactions to ledger
What is the last step in the accounting cycle?
Prepare the post-closing trial balance
Assets = Liabilities plus Owner’s
Equity
A = L + OE
This is the same as the balance sheet equation accounting equation
The amount of money owed to others for goods or services bought on credit. accounts payable
The money owed to a company for services rendered or goods purchased by customers on credit. accounts receivable
The money and things a company owns
Assets
The total of cash and other assets put into the business by the owner.
Capital
The amount of money that comes into and goes out of a company.
cash flow
The list of accounts unique to a specific company based on its business. These accounts are used to track dollar amounts coming into and going out of a company.
chart of accounts
The right-hand column of dollar amounts.
Credit
An entity or individual that lends money to a company creditor ( see liabilities)
The acronym used to remember which debit and credit accounts get increased.
DEAD COIL
The left-hand column of dollar amounts.
Debit
The fact that every transaction affects at least two accounts double-entry accounting
The money that’s spent by a company to continue its business activities and operations.
Expenses
Money earned for goods or services provided to customers. income ( see revenue)
Money or assets owned personally by the business owner and put in to the business for business use.
Investments
A record of financial transactions listed chronologically in a log.
Journal
The money a company owes liabilities ( see creditor
The money a company owes another beyond a year, usually in exchange for a product.
notes payable
The value of the owner’s investment in a company.
owner’s equity
The money that’s earned from a company’s business activities.
revenue ( see income)
The paper trail that provides evidence that money or capital came into or out of the company. source documents
An exchange (i.e., fee for service, money for tangibles or things, donations, contributions, etc.) that amounts to value that must be recorded.
Transaction
Cash or other assets taken out of the business by the owner for personal use.
Withdrawals
The sequence of detailed transactions that supports accounting entries. Provides a clear path of transactions that a reviewer can follow in order to understand specific accounting activity. audit trail
The log that contains a record of each account. It’s prepared after the general journal and before the trial balance general ledger
The process of transferring amounts from the general journal to the general ledger.
posting
This type of error switches the digits of a number, for example, writing 53 instead of 35. transposition error
A list of all the accounts and their balances. Most information needed for preparing the various financial statements is noted on this single page. trial balance
This type of error misplaces the decimal in a number; for example, writing $180 instead of
$1,800. slide error
A statement that itemizes the revenue and expenses, and computes the net income or loss for a period of time. Also referred to as a profit and loss statement , a P&L , and a statement of earnings . income statement
Revenue – Expenses = Net
Income (or Net Loss) income statement equation
Occurs when a company’s revenues exceed its expenses. net income
Occurs when a company’s expenses exceed its revenue. net loss
An item of value owned by an individual or firm.
Asset
Insurance that pays for income lost when a business is closed because of a covered disaster. business interruption insurance
Increasing market penetration by moving into new markets and broadening the consumer base. diversification
An agreement, signed by an employee, not to disclose sensitive information about a business. employee confidentiality agreement
Insurance protecting a business from lawsuits. general liability insurance
Misconduct by a professional, such as a doctor, lawyer, or accountant. It is judged by comparing the professional’s action or inaction against a
“reasonable person” standard malpractice
To lessen or minimize the severity of one's losses or damage. mitigate
A fixed periodic payment made to insurance companies in exchange for insurance. premiums
Insurance protecting a company from lawsuits if someone is injured by its product. product liability insurance
Situation where there is a chance of either loss or no loss, but no chance of gain ; for example, either a building will burn down or it won't pure risk
Steps a manufacturer takes to ensure that its products are safe and meet the company’s standards.
Quality assurance
The potential for a negative event. risk
To reduce the risk to an asset through reducing the probability of a problem and limiting the effects of a problem once it occurs.
Risk mitigation
A situation where the possibility of either a financial loss or a financial gain exists, as in purchase of shares
Speculative risk
A partnership between two businesses, where the businesses share resources instead of developing them internally. Sometimes the term joint venture is used for these partnerships. strategic partnership
A monetary guarantee that an obligation will be fulfilled. If the obligation is not fulfilled, the offended party gets to recoup its losses via the bond. surety bond
Monetary compensation for an employee injured while working, often mandated by law. Such compensation pays a percentage of lost wages and the employee’s medical care for that injury. workers compensation
A document sent to shareholders at the end of every year
Annual report
A summary of a firm’s assets, liabilities, and owner equity. It can also be called a statement of financial position. balance sheet
Methods for analyzing the financial status of a firm, including balance sheets and cash flow statements. financial analysis tools
A financial document showing a company’s revenues and expenses, and the difference between them. It is usually published quarterly or annually — though many managers prepare one each month profit and loss statement
Establishing a planned level of spending for a given time period. budgeting
A planned level of cash income and spending for a given time period. cash budget
Opportunities, risks, and threats that are outside of an organization’s control. Political, environmental, technological, and social factors external factors
To estimate for the future based on current data extrapolation
The process of making extrapolations about the future based on past data forecasting
The process of allocating a firm’s resources to maximize value. manage
A projection of income and expenses based on a forecasted sales revenue for a given time period. operating budget
An analysis based on subjective judgment that is not quantifiable, such as management expertise, labor relations, etc. qualitative analysis
An analysis based on understanding the reasoning of a given event or behavior. quantitative analysis
The process of allocating money to a specific project, business unit, or cause. A way to assign the available resource in a very specific and economic way. resource allocation
