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Accounting 201 BYU Independent Study exam one terms

Terms in this set (55)

Accounting
The means whereby a company's financial transactions are identified, recorded, summarized and reported for the benefit of those who have an interest in the business. Users of business financial information might include owners, managers, creditors, government regulatory bodies and others. Accounting is sometimes referred to as the language of business because its ultimate purpose is to communicate business information.
Business
An organization created for the purpose of providing goods or services to customers. The three basic business functions are:
1: manufacturing
2: merchandising and
3: service

All businesses perform at least one off these functions and many do two or all three. Most businesses are operated to produce a profit for their owners. Some businesses may be operated on a non-profit basis but they still provide some kind(s) of goods or services to customers. A business is often referred to as a company.
Manufacturing business
A business that assembles or constructs a tangible product for sale to customers. Manufacturing business customers are typically wholesale or retail merchandisers involved in the distribution of manufactured products to the ultimate end user or consumer.
Merchandising business
A company involved in the purchase and sale of finished products. Merchandisers are also referred to as "distributors". Wholesale merchandisers typically purchase finished products from manufacturers and then sell those products to retail merchandisers. Retail merchandisers sell products to the end user or consumer.
Retail merchandiser
a distribution business that typically purchases finished goods from manufacturers or wholesale merchandisers for the purpose of selling those goods to the end user or consumer.
Wholesale merchandiser
a distribution or merchandising business that typically purchases finished products from manufacturers and then sells those products to retail merchandisers.
Service business
a company devoted to providing services to clients or customers rather than tangible products. Examples of service businesses include consulting firms, law firms, hospitals and car washes. Some companies are involved in providing both goods and services. A car dealership is both a merchandiser and a service business if they provide repair and maintenance sesrvices as well as car sales. In some ways, restaurants may be manufacturers, merchandisers, and service businesses. They make meals from raw materials, deliver the product to the end user and provide service in the process. Some restaurants provide more service than others and have higher menu prices as a result.
Non-profit business
a business operated with no intent to produce a profit for the business owners. Non-profit businesses are generally operated to fulfill some charitable or social purpose of interest to the business owners. Many hospitals are operated on a nonn-profit basis.
Capital
Money or other assets owned by a company.
financing
The way a company gets the capital or assets necessary to operate. Comapnies obtain assests through either debt or equity financing.
Creditor
Any entity to whom a company has an obligation. Creditors are providers of a company's debt financing.
debt financing
The acquiring of business assets through borrowing or the incurring of liabilities. Debt financing is also referred to as "temporary financing" due to the fact that any borrowed assets must be repaid in the future.
bankruptcy
a legal status resulting from a company's inabililty to pay its debts. Bankruptcy may be voluntarily declared by an insolvent company or it may be imposed by creditors due to defaults on loans or other debts.
foreclosure
the forced sale of an asset(s) intended to generate cash in full or partial payoff of a loan.
equity financing
the acquiring of assets or resources for a business through either owners' capital contributions or retained earnings. Equity financing is also referred to as permanent financing because there is no obligation for a company to repay the assets except in the event of business dissolution.
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