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The established system of keeping track of money.

Accounting

A report that tells you a story about money coming in and

going out of a business. No one report tells the whole story.

financial statement

Anyone who can be affected by an organization's actions,

including managers, employees, customers, vendors, creditors,

and shareholders

stakeholder

A categorized list of words that are related to a particular topic.

taxonomy

The particular ways a business can be set up legally. These include sole proprietorship,

partnership, and corporation

business structures

The industries in which a business operates. These include

manufacturing, merchandising, and service

business types

A business that is separate and apart from any other business or person. One or more people may

own this. The owners are protected from personal liability

for the company.

corporation

A distinct thing such as a company, a firm, a business, or a

set of principles or rules

entity

A business structure that combines the limited personal

liability of a corporation with the tax benefits of a partnership or a

sole proprietorship.

limited liability company

Companies that produce goods. Usually produce wholesale goods to sell to retailers (or

merchandisers) who then sell the goods to the public for a markup.

manufacturing company

Companies sell ready-made products to their customers

merchandising company

A business that is owned by two or more people. The owners have

personal liability for the company.

partnership

Service companies sell a service rather than a product or a thing to

their customers.

service company

A small or very big business that is owned by one person or a

married couple. The owner(s) has (have) personal liability for the

company sole proprietorship

A specific type of fraud; misrepresenting the truth on any one of the financial statements.

accounting fraud

The professional organization that CPAs may join. The AICPA

creates and administers the CPA exam and promotes CPAs in a

positive light

American Institute of Certified Public Accountants (AICPA)

Those who run the company and are responsible for its success or

failure

executives

A private not-for-profit board that establishes specific rules and

regulations that the SEC adopts and that accountants must follow

Financial Accounting Standards Board (FASB)

Misrepresenting the truth, cheating, or deceiving others on

purpose.

fraud

Guidelines that accountants use to prepare financial statements,

making multiple statements comparable to one another.

generally accepted accounting principles (GAAP)

The government agency that collects taxes and enforces tax

laws.

Internal Revenue Service (IRS)

Principle that requires accounting rules to be followed at all times. Same as principle of regularity.

principle of consistency

Principle that assumes the business won’t be interrupted.

principle of continuity

Principle that says financial statements can’t contain

counterbalancing entries simply to make a company look better

than it is.

principle of non-compensation

Principle requiring that each transaction be accounted for in a

given period and split across many periods if necessary

principle of periodicity

Principle requiring that statements follow the same basic

outline

principle of permanence of methods

Principle that declares that preparers of statements must use

caution when recording transactions and error on the side

of financial safety.

principle of prudence

Principle that requires accounting rules to be followed at all times.

Same as principle of consistency.

principle of regularity

Principle that says that statements must be presented honestly and accurately at all

times. principle of sincerity

The government agency that regulates securities (stocks and

bonds), enforces accounting laws, and dictates financial

reporting rules.

Securities and Exchange Commission (SEC)

A forced contribution of money to meet the needs and wants of

government.

Tax

A debt instrument is a legal contract—and often called an “indenture.”

Bond

The stages that a business moves through, from an idea

through startup, growth or takeoff, maturity, decline, and

closing down (cessation of operation).

business life cycle

A transaction in which an employer makes a lump-sum payment to compensate an

employee for leaving or retiring early from a job.

Buyout

Any form of wealth that can be used to create more wealth, such as cash, which can be invested

to generate income.

Capital

A legally recognized form of organizing a business that

protects its owners from being personally responsible for

business debts.

Corporation

Owing money, goods, or services to someone else.

Debt

A person who takes initiative in business, organizes and

manages business resources and operations, and assumes the

risks of the business. entrepreneur

A broad category of investments that includes bonds. Get their name from the fact that the

stream of payments are fixed by contract. Corporations and the government can issue a variety

of these securities. fixed income security

Something bought and sold that cannot be touched—for example,

legal advice. intangible

Intangible property that is a result of something created by the mind—for example, trademarks, and

patents.

intellectual property

In bankers’ terms, money paid for the use of another person’s

money. Interest

Legal responsibility for damage or for debt.

liability

Selling a business capital item such as machinery in order to have access to ready cash.

liquidation

The percentage of total industry sales that a single company

makes on a particular product. market share

The world of business, trade, and economics.

marketplace

A legal form of organizing a business in which owners share

profits and are personally responsible for debts of the

business.

partnership

The money originally invested or the amount borrowed on which

interest is calculated. Principal

An experimental model of a product.

prototype

A legal form of business organization in which a single

individual is personally liable for business debts.

sole proprietorship

A share of ownership in a corporation

stock

Top management’s “game plan” for achieving targeted, long-term

objectives. Strategy

Estimating the value or worth of something (such as a building or machinery owned by a business).

Valuation

A firm that often can have access to a great amount of capital and expertise to help your firm—all in

exchange for a substantial ownership stake. Though, these only invest in firms that offer the

prospect of becoming very profitable.

venture capitalist firm

A professional who measures and assesses financial

information for an individual or firm.

accountant

The cycle of purchasing inventory and then converting that

inventory back into cash through sales.

Cash flow cycle

The corporate officer responsible for financial risks, record keeping, and financial reporting in a firm.

CFO (Chief Financial Officer)

All business costs. These are deducted from revenue to

determine net income (profit or loss).

expense

An analyst who studies financial information for a firm, ranging

from cash flow analysis to profit forecasting.

Financial manager

A figure representing a firm’s profit or loss for a period.

Net income

The process of bringing a new product to market, including

engineering and market research.

Product development cycle

The decline of a product in the market due to the introduction of

better competitor products or rapid technology developments.

obsolescence

Dollar amounts earned by a firm from selling products, services, or

both revenue

A charge imposed by the government

Tax

The satisfaction one receives from a good (a product, service

or combination thereof) utility

Gifts made in a will

bequests

The expense required to acquire or produce something.

cost

A pool of donated money that is usually invested. The earnings

from those investments are used to fund an organization’s goals.

Endowment

An organization whose purpose is to support activities of public or private interest. It is not operated solely for the purpose of making

a profit.

Not-for-profit organization

Money earned after expenses are subtracted from revenue.

profit

A measure of a company’s profitability, usually measured as

a percentage. Profit margin