| A | B |
|---|
| Accounts payable record | “identifies the companies from which credit purchases were made and the amount purchased |
| Accounts receivable record | “identifies customers that made purchases using credit and the status of each account” |
| Asset | “what is owned” |
| Asset records | “name the buildings and equipment owned by the business |
| Balance sheet | “a report showing the assets |
| Basic financial equation | “Revenue – Expenses = Profit or Loss” |
| Budget | “detailed plans for the financial needs of individuals |
| Business budget | “anticipate income |
| Cash budget | “an estimate of the actual money received and paid out for a specific period; cash flow” |
| Cash records | “list all cash received and spent by the business” |
| Current assets | “include cash and those items that can be readily converted to cash such as inventory and accounts receivable” |
| Current liabilities | “amounts owed by the business that will be paid within one year” |
| Current ratio | “current assets/current liabilities; should be at least 1:1; shows that the business can pay its debts when they come due” |
| Debt to Equity ratio | “Total liabilities/owners’ equity; tells how much the company is relying on borrowed money instead of money provided by the owners; should be no higher than 2:1” |
| Depreciation records | “identify the amount assets have decreased in value due to their age and use” |
| Direct deposit | “employer transfers net pay electronically into the employee’s bank account” |
| Discrepancies | “differences between actual and budgeted performance” |
| Expenses | “costs of operating a business; operations |
| Expansion planning | “financial planning to determine whether enough money is made to cover growth opportunities” |
| FICA | “Federal Insurance Contributions Act; see Social Security and Medicare” |
| Financial planning | “a program for allocation and management of finances and capital through budgeting |
| Financial records | “used to record and analyze the financial performance of a business” |
| Financial performance ratios | “comparisons of financial elements that indicate how well the business is performing. Ex. Current ratio |
| Financial statements | “reports that sum up the financial performance of a business” |
| FUTA | “Federal Unemployment Tax; see unemployment taxes” |
| Income statement | “a report of the revenue |
| Income taxes | “Federal and state taxes withheld from payroll based on the amount of wages and income and number of employee dependents” |
| Inventory records | “identify the type and number of products on hand for sale” |
| Liabilities | “what is owed” |
| Long-term assets (aka fixed assets) | “assets with a lifespan of more than one year; examples-land buildings |
| Long-term liabilities | “debts owed for land |
| Net income ratio | “Total sales/Net income; shows how much profit is being made by each dollar of sales for the period being analyzed.” |
| Net loss | “Expenses > Revenue” |
| Operating budget | “financial plan for ongoing operations of the business for a specific period of time” |
| Operation planning | “financial planning to determine whether the company is making enough money to operate; Revenue-Expenses = Profit or Loss” |
| Owners’ equity | “the value of the owners’ investment in the business; value of business after liabilities are subtracted from assets” |
| Payroll records | “financial information on all employees of the company |
| Profit (aka net income) | “Revenue > Expenses” |
| Record of accounts | “identify all purchases and sales made using credit” |
| Return on Equity ratio | “Net profit/Owners’ equity; shows the rate of return the owners are getting on the money they invested in the company” |
| Revenue | “all income that a business receives over a period of time” |
| Social Security and Medicare (aka FICA) | “payroll withholding at 7.65%; employers match 7.65%” |
| Start-up budget | “plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable” |
| Start-up planning | “financial planning to determine the amount of money needed to start and operate a business until a profit is made” |
| Steps for preparing a budget | “prepare a list of income and expense items |
| SUTA | “State Unemployment Tax see unemployment taxes” |
| Tax records | “show all taxes collected |
| Unemployment taxes (aka FUTA and SUTA) | “payroll withholdings paid to the unemployment insurance system; based on the business’ total employee wages” |
