financial accounting

Definition
A field of accounting that treats money as a means of measuring economic performance instead of as a factor of production. It encompasses the entire system of monitoring and control of money as it flows in and out of an organization as assets and liabilities, and revenues and expenses. Financial accounting gathers and summarizes financial data to prepare financial reports such as balance sheet and income statement for the organization's management, investors, lenders, suppliers, tax authorities, and other stakeholders. Read more: http://www.businessdictionary.com/definition/financialaccounting.html#ixzz1oP7S7Kcc

management accounting
Definition
The process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions. Unlike financial accounting, which produces annual reports mainly for external stakeholders, management accounting generates monthly or weekly reports for an organization's internal audiences such as department managers and the chief executive officer. These reports typically show the amount of available cash, sales revenue generated, amount of orders in hand, state of accounts payable and accounts receivable, outstanding debts, raw material and inventory, and may also include trend charts, variance analysis, and other statistics. Also called managerial accounting. Read more: http://www.businessdictionary.com/definition/managementaccounting.html#ixzz1oP7j4cU8

cost accounting
Definition
A method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded. This data is then summarized and analyzed to arrive at a selling price, or to determine where savings are possible. In contrast to financial accounting (which considers money as the measure of economic performance) cost accounting considers money as the economic factor of production. Read more: http://www.businessdictionary.com/definition/costaccounting.html#ixzz1oP8M0RaS

financial statement
Definition
Summary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) and lenders, and what is its current financial position. The three basic financial statements are the (1) balance sheet, which shows firm's assets, liabilities, and net worth on a stated date; (2) income statement (also called profit & loss account), which shows how the net income of the firm is arrived at over a stated period, and (3) cash flow statement, which shows the inflows and outflows of cash caused by the firm's activities during a stated period. Also called business financials. Read more: http://www.businessdictionary.com/definition/financialstatement.html#ixzz1oPA64WWO

income statement
Definition

A summary of a management's performance as reflected in the profitability (or lack of it) of an organization over a certain period. It itemizes the revenues and expenses of past that led to the current profit or loss, and indicates what may be done to improve the results. In contrast to a balance sheet, an income statement depicts what happened over a month, quarter, or year. It is based on a fundamental accounting equation (Income = Revenue Expenses) and shows the rate at which the owners equity is changing for better or worse. Along with balance sheet and cash flow statement it forms the basic set of financial information required to manage an organization. Also called earnings report, operating statement, or profit and loss account. Read more: http://www.businessdictionary.com/definition/incomestatement.html#ixzz1oPAOWkEP

balance sheet
Definition
A condensed statement that shows the financial position of an entity on a specified date (usually the last day of an accounting period). Among other items of information, a balance sheet states (1) what assets the entity owns, (2) how it paid for them, (3) what it owes (its liabilities), and (4) what is the amount left after satisfying the liabilities. Balance sheet data is based on a fundamental accounting equation (assets = liabilities + owners' equity), and is classified under subheadings such as current assets, fixed assets, current liabilities, Long-term Liabilities. With income statement and cash flow statement, it comprises the set of documents indispensable in running a business. An audited balance sheet is often demanded by investors, lenders, suppliers, and taxation authorities; and is usually required by law. To be considered valid, a balance sheet must give a true and fair view of an organization's state of affairs, and must follow the provisions of GAAP in its preparation. Also called statement of condition, statement of financial condition, or statement of financial position. Read more: http://www.businessdictionary.com/definition/balancesheet.html#ixzz1oPAaXuXB

cash flow statement

Definition
Summary of the actual or anticipated incomings and outgoings of cash in a firm over an accounting period (month, quarter, year). It answers the questions Where the money came (will come) from? and Where it went (will go)? cash flow statements assess the amount, timing, and predictability of cash-inflows and cash-outflows, and are used as the basis for budgeting and business-planning. The accounting data is presented usually in three main sections: (1) Operating-activities (sales of goods or services), (2) Investing-activities (sale or purchase of an asset, for example), and (3) Financing-activities (borrowings, or sale of common stock, for example). Together, these sections show the overall (net) change in the firm's cash-flow for the period the statement is prepared. Lenders and potential investors closely examine the cash flow resulting from the operating activities. This section represents after-tax net income plus depreciation and amortization and, therefore, the ability of the firm to service its debt and pay dividends. With balance sheet and income statement (profit and loss account), cash flow statement constitutes the critical set of financial information required to manage a business. Also called statement of cash flows. Read more: http://www.businessdictionary.com/definition/cash-flowstatement.html#ixzz1oPAm4yvS

statement of owners' equity

Definition
Financial statement showing the beginning balance, additions to and deductions from, and the ending balance of the shareholders' equity account, for a specified period. Also called statement of shareholders equity. Read more: http://www.businessdictionary.com/definition/statement-of-ownersequity.html#ixzz1oPAzn0FS

notes to the financial statements

Definition

These are also called footnotes. It is additional information added at the end of financial statements to supply a full understanding of specific terms and the company's financial condition. Read more: http://www.businessdictionary.com/definition/notes-to-the-financialstatements.html#ixzz1oPBGLs1a

inventory
Definitions (2)
1. An itemized catalog or list of tangible goods or property, or the intangible attributes or qualities. 2. The value of materials and goods held by an organization (1) to support production (raw materials, subassemblies, work in process), (2) for support activities (repair, maintenance, consumables), or (3) for sale or customer service (merchandise, finished goods, spare parts). Inventory is often the largest item in the current assets category, and must be accurately counted and valued at the end of each accounting period to determine a company's profit or loss. Organizations whose inventory items have a large unit cost generally keep a day to day record of changes in inventory (called perpetual inventory method) to ensure accurate and on-going control. Organizations with inventory items of small unit cost generally update their inventory records at the end of an accounting period or when financial statements are prepared (called periodic inventory method). The value of an inventory depends on the valuation method used, such as first-in, first-out (FIFO) method or last-in, first-out (LIFO) method. GAAP require that inventory should be valued on the basis of either its cost price or its current market price whichever is lower of the two to prevent overstating of assets and earning due to sharp increase in the inventory's value in inflationary periods. The optimum level of inventory for an organization is determined by inventory analysis. Called also stock in trade, or just stock.

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liability

Definitions (3)
1. Finance: A claim against the assets, or legal obligations of a person or organization, arising out of past or current transactions or actions. Liabilities require mandatory transfer of assets, or provision of services, at specified dates or in determinable future. 2. Accounting: Accounts and wages payable, accrued rent and taxes, trade debt, and short and long-term loans. Owners' equity is also termed a liability because it is an obligation of the company to its owners. Liabilities are entered on the right-hand of the page in a doubleentry bookkeeping system. 3. Law: (1) Responsibility for the consequences of one's acts or omissions, enforceable by civil remedy (damages) or criminal punishment. (2) An obligation to do or refrain from doing something. Read more: http://www.businessdictionary.com/definition/liability.html#ixzz1oPClfg3R