GLOSSARY of Business Terms — A through C |
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A
Accounting – Recording and bookkeeping financial transactions in terms of money and numbers.
Accounting Period – Financial statements are calculated for a specific period of time, either a month, quarter, or year.
Accounts Payable – What your business owes to creditors and suppliers for goods and services received
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Accounts Receivable – The amount of monies due to you by customers for goods delivered or services rendered.
Accrual Accounting – An accounting system where income is realized when earned, not when received; expenses are recorded when incurred, not when paid.
Assumptions – Assuming responsibility for another's obligations or debts.
Auction – A public sale where goods are sold to the highest bidder.
Audit – A verification of financial and accounting records conducted by an accountant or the Internal Revenue Service (IRS).
Automatic Data Processing – Processing data by computer and electronic accounting machines.
B
Balance Sheet – A financial statement that displays your assets and liabilities at a point in time.
Bankruptcy – The voluntary condition where a business or insolvent person cannot pay the debts owed to creditors and therefore petitions for bankruptcy or is put in bankruptcy by creditors. A trustee (a.k.a., a "third person") then takes over the debts. A person who declares bankruptcy will usually have special legal rights taken away such as the right to practice law or be a judge. Also, he or she may be refused credit for a certain period of time after the petition. However, many debts will be erased even after the petitioner sells his or her assets.
Bond – A promise by a third party to repay a principal and interest if another party does not make payment.
Break–Even Point – The point at which the volume of sales equals the total cost. This is also the point at which your business can start making a profit because there is no profit or loss.
Business Plan – A document from a company's management that details a comprehensive plan that clearly describes a proposed business's past, present, and future objectives. It is usually used to gain investments from the outside business world by use of data and facts.
C
Canceled Loan – The retraction of an approved loan before the money is given to you.
Capital – Goods used to make income. Also, a business's assets minus its liabilities (or net worth).
Capital Asset – Property and equipment held for long periods of time that cannot easily be turned into cash.
Cash Accounting – An accounting system where income is realized when collected, not when earned; expenses are recorded when paid, not when incurred.
Cash Discount – An incentive or discount offered to a buyer if he or she pays the debt early or within a certain amount of time.
Cash Flow – The amount of money left over after all your expenses and finances are paid for a certain period of time (month, year, etc.).
Caveat Emptor – Meaning, "Let the buyer beware."
Charge–Off – Also known as a "write-off." An uncollectible accounts receivable balance.
Charged-Off Loan – A principal loan amount plus its interest that is uncollected and moved off the accounts receivable list.
Closed Loan – A loan that has had its first or complete disbursement after the closing.
Closing – The time or situation when title or real estate is conveyed from seller to the buyer; full payment is paid by the buyer to the seller; appropriate documents are transferred; and prorating of expenses occurs.
Collateral – Property of value offered to support a loan. Subject to seizure if you default on the loan.
Collateral Document – A legal document stating what you are offering as collateral.
Compound Interest – Interest that is added to the principal amount and the original interest accumulated.
Compromise – When the full amount of a loan cannot be collected by the government after attempting enforced collection, a compromise is installed that allows for only a partial amount to be paid.
Consolidation – When two or more companies are combined into one under a new name. Note: Not to be confused with merger, which occurs when two or more companies are combined under the name of one of the companies and no new entities are formed.
Consortium – A group of organizations or companies that invest a large capital amount in activities that an individual member could not fund by himself or herself.
Contingent Liability – A liability that depends on a future event that may or may not occur.
Contract – A written agreement between parties where each agrees to certain terms. Make sure you have an attorney review any contracts before you sign them. The contract may not be binding if drawn up incorrectly.
Corporation – A business organization that is granted a state charter to separate the entity from its owners. Characteristics include limited liability and the use of shareholders.
Costs – The expenditure of resources necessary to bring a good or product into existence.
Credit Rating – A profile of a customer used as a determinant as to his or her potential for prompt payment of debts.
Credit Report – A history of repayments on past liabilities.
