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| accounting | Theory and system of setting up, maintaining, and auditing financial books of a firm; art of analyzing the financial position and operating results of a business by studying its sales, purchases and overhead. |
| budget | The written financial plan for a business, including estimated income and expenses for a given time period, usually spanning a year. |
| budget process | Analyzing previous years’ data; setting goals for the next fiscal year; developing a plan to meet the goals; forecasting budget decisions’ effects; and monitoring, evaluating, and updating budget as needed. |
| budget schedule | A detailed financial statement of one segment of a business over a period of time which is used to create budgeted income statements. |
| budget variance report | A comparison of a budgeted income statement to actual results. Managers use this to create more accurate future budgets and make operational corrections midyear, if necessary, to improve the overall results. |
| budgeted income statement | A projection of the revenues, expenses, and net income for a fiscal year. |
| cash budget | The projected inflow and outflow of money for a specific period. |
| cash payments budget schedule | The budget schedule that projects the outflow of cash for merchandise, operating expenses, and any other payment of cash. |
| cash receipts budget schedule | The budget schedule that projects the inflow of money from cash sales and money received on account, and any other receipt of cash. |
| comparative income statement | An income statement that shows sales, costs, and expenses for two consecutive years. Managers use this tool to identify trends and improve future performance. |
| contingency plan | A procedure to follow in case an existing plan or procedure fails. |
| contribution margin | The difference between the net sales and the variable costs. This indicator shows the amount of money a business has available to pay its fixed costs and contribute to net income. |
| contribution margin per unit | Shows how much money per unit is left to pay a business’s fixed costs and provide net income (the total contribution margin divided by the number of units sold) This indicator is also helpful when comparing the profitability of different product lines. |
| cost of merchandise sold | The costs that go into creating the products that a company sells. Only costs directly related to the production of the products are included. Also referred to as cost of goods sold or COGs. |
| financial accounting | Reports that follow GAAP and provide a financial summary of an organization’s activities. |
| financial statement | A statement of the financial position of a business on a specified date or for a period of time. |
| fixed costs | Costs that remain constant regardless of a business’s activity or volume. |
| forecasting | Predicting the sales of goods or services based on historical data gathered from financial statements. |
| GAAP (generally accepted accounting principles) | A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, established by the Financial Accounting Standards Board. |
| gross profit | The difference between the cost of the products sold and the net sales. |
| gross profit margin | Used to show profitability trends and calculated by dividing the gross profit by the total sales. This indicator is also used to show if a business is running efficiently and whether prices are set at appropriate levels. |
| income statement | A financial document that shows a company’s revenues, expenses, and net income over a specific period of time. (Usually broken into quarterly reports.) |
| managerial accounting | A branch of accounting that provides financial information about a business to help managers make decisions. |
| net income | A company’s income after expenses are subtracted from revenues for a particular period of time. |
| net sales | A company’s sales after subtracting returns, damaged and missing goods, and any sales discounts. |
| on account | Buying or selling on credit. When selling on credit, a customer receives an invoice an accounts receivable is set up. When buying on account, an accounts payable is created. Invoice is usually due in 30 days. |
| operational plan | The company statement of its goals for the budget year. |
| performance report | A financial statement that compares the budgeted and actual amounts for a certain time period for sales, cost of merchandise sold, and expenses. Also called budget variance report. |
| taxonomy | A categorized list of terms that are related to a particular topic. |
| total cost | Includes all of the costs incurred by a business over a specific period of time. (Fixed costs + Variable costs) |
| unit cost | The amount of money spent to produce one unit of merchandise. (total costs divided by number of units produced) |
| variable costs | Costs that change in relation to a business’s activity. (Responds to production volume) |
| break-even analysis | Reviewing the relationship between costs, volume, and profit to determine how many units must be sold to make a net income |
| break-even point | The amount of sales required to cover all costs at which net income is zero. |
| contribution margin | The difference between the net sales and the variable costs. Shows the amount of money a business has available to pay its fixed costs and contribute to net income. |
| loss leader | A product sold that earns little or no net income. Intended to attract customers to other more profitable products. |
| margin of safety | The dollar amount of net income a company earns beyond the break-even point. |
| planned net income | The calculation of how much a business wishes to earn after the break-even point. |
| required contribution margin | The dollar amount needed to pay fixed costs and have an amount remaining for planned net income. |
| sales volume changes | The information that tells managers how increasing or decreasing unit sales affects net income. |
| contribution margin per unit | Unit Sales Price – Variable Cost per Unit (used to calculate the break-even point for a new product because it has no historical data) |
| markup | The percentage by which a retailer increases wholesale price; also called gross profit. |
| MSRP | The price at which a manufacturer recommends retailers sell the product. |
| sales mix | The amount of each product sold. |
| sales volume | The quantity of items sold at a given unit price. |
| wholesale price | The price a manufacturer sells a product to a retailer. |
| accounts receivable turnover ratio | Shows the number of times a company’s accounts receivable is collected annually.(divide net sales on account by the accounts receivable amount) |
| actuals | he actual revenue earned and expenses incurred during a specific period of time. |
| asset management ratios | Ratios that measure company’s efficiency in managing its assets. |
| balance sheet | A statement that lists the assets, liabilities, and stockholders’ equity. It displays a company’s collateral, liquidity, and net worth. |
| base activity | The cost most closely proportional to factory overhead costs. |
| factory overhead calculation | base activity multiplied by a set percentage |
| cash flow statement | Provides data about all sources of cash inflows and what a company spends its money on, giving investors a quick way gauge a company’s financial stability. |
| conversion costs | The combination of direct labor and factory overhead costs used in process costing |
| cost accounting | Process of collecting and reporting the direct materials, direct labor, and factory overhead costs related to producing a good or service |
| cost sheet | Used in job-order costing, this form records and calculate direct materials costs, direct labor costs, and factory overhead costs to determine per unit cost |
| days sales outstanding | How many days it takes a company to receive payment |
| debt ratio | Measures a company’s debt in relation to its assets (total assets or equity). |
| direct labor | The labor costs specifically required to produce a product |
| direct materials | all significant materials that are an integral part of the finished product. |
| finished goods account | Includes direct materials, direct labor, and factory overhead specific to a product that is fully completed. |
| liabilities | what an entity owes |
