Accounting and Finance Vocabulary Liabilities: Obligations of the firm to outsiders or claims against its assets by outsiders (debts of the firm). Assets: Resources of the firm that are expected to increase or cause future cash flows (everything the firm owns) Owners’ Equity :The residual interest in, or remaining claims against, the firm’s assets after deducting liabilities (rights of the owners) Accounting : A process of identifying, recording, summarizing, and reporting economic information to decision makers in the form of financial statements. Annual report : A document prepared by management and distributed to current and potential investors to inform them about the company’s past performance and future prospects.
Accounting and Finance Accounting information is useful to anyone who makes decisions that have economic results. • MANAGERS • OWNERS • INVESTORS • CREDITORS • GOVERNMENT REGULATORS
Accounting and Finance The Balance Sheet In Accounting , An Itemized Statement of What one owns, What one owes, What one s worth is called a Balance Sheet The balance sheet equation: Assets = Liabilities + Owners’ Equity or Owners’ Equity = Assets - Liabilities
Accounting and Finance Balance Sheet Reports What a Business: Owns – Assets Owes – Liabilities Worth – Owners Equity
Accounting and Finance Income Statement reports How much you earned Last Year • Revenue • Expense • Profit
Accounting and Finance What is the need for Accounting & Finance in a Business: Assess Monitor Forecast Future
Accounting and Finance Expense Tangible Financial Statements Balance Sheet profitable. Intangible • For a business enterprise, all the relevant financial information is presented in a structured format that is easy to understand. These are called ________ . There are several important financial statements. • Managers want to know if a new product will be _____________ • An outflow of cash or other valuable assets from a person or company to another person or company is an ___________ • In Accounting , An Itemized Statement of What one owns, What one owes, What one s worth is called a _______________ ________ assets are physical things , for example machines and property. ________ assets are not physical in nature, for example a company's reputation.