ABC/Activity Based Costing
ABC/activity based costing - Alternative costing method for strategic management; divides production into activities, defines costs for activities, and alloc...
cost accounting
CFO Upgrade Glossary
Comprehensive glossary of ERP, AI, and financial automation terms. Learn key concepts related to enterprise resource planning, artificial intelligence, and modern financial management.
A
Absorption Costing
absorption costing - Also known as full costing -- a costing method where inventory absorbs direct costs and variable and fixed factory overhead
cost accounting
Accelerated Depreciation Methods
accelerated depreciation methods - Several alternative depreciation approaches that result in relatively more depreciation in early years of use, and smaller...
accounting
Accounting
accounting - A set of concepts and techniques that are used to measure and report financial information about an economic unit
financial reporting
Accounting Changes
accounting changes - Changes from one acceptable method of accounting to another acceptable method; like straight-line depreciation to a declining balance ap...
accounting
Accounting Cycle
accounting cycle - The procedures needed to process transactions through an accounting system; including journalization, posting, adjusting, and preparing fi...
financial reporting
Accounting Equation
accounting equation - A financial relationship at the heart of the accounting model: Assets = Liabilities + Owners' Equity
financial reporting
accounting fundamentals
Accounting Period
Accounting period - The time frame used for financial reporting, normally months, quarters or years.
finance
accounting
Accounting Principles Board
Accounting Principles Board - The private sector group charged with developing accounting standards from 1959 to 1973; primary authoritative pronouncements w...
accounting
Accounting Rate of Return
accounting rate of return - A project evaluation tool that focuses on accounting income rather than cash flows; average annual increase in income by the amou...
financial reporting
Accounting Standards Codification
Accounting Standards Codification - Research tool deemed to be the primary authoritative source and reference guide on accounting standards
accounting
Accounting Standards Update (ASU)
Accounting Standards Update (ASU) - The official notification issued by the Financial Accounting Standards Board of a new or modified accounting rule
financial reporting
Accounts
Accounts - Financial statements prepared at the end of a period to reflect the profit of loss or the period and financial position at the end of the period.
finance
accounting
Accounts Payable
Accounts Payable - Amounts due for payment to suppliers of goods or services, also described as trade creditors.
finance
accounting
Accounts Receivable
Accounts Receivable - Amounts due from customers, also described as a trade debtors.
finance
accounting
Accrual
accrual - Expenses and revenues that gradually accumulate throughout an accounting period
accounting
Accrual Basis
accrual basis - The accounting process whereby revenues are measured and recorded as earned, while expenses are recorded as incurred
accounting
Accrued Revenues
accrued revenues - Revenues that have been earned and recorded, but are not as yet collected
accounting
Achievable Standards
achievable standards - A standard that takes into account normal spoilage and inefficiency; intended to allow workers to reach the established benchmarks
accounting
Activity Cost Pool
activity cost pool - The costs assigned to a particular activity
cost accounting
Activity Driver
activity driver - Event that causes consumption of an activity
accounting
Activity-based Costing
activity-based costing - (ABC) A costing system for situations where overhead is high and/or a variety of products are produced; costs are traced to activiti...
cost accounting
Adjusted Trial Balance
adjusted trial balance - A trial balance prepared after adjusting entries have been prepared and posted to the ledger
accounting
Adjusting Process
adjusting process - To analyze account balances and update them at the end of an accounting period to reflect the correct measure of revenues and expenses
accounting
Aging of Accounts Receivable
aging of accounts receivable - Analysis used to estimate the uncollectible accounts; involves stratification of receivables based upon age
accounting
All-inclusive Approach
all-inclusive approach - A concept of income by which virtually all nonequity-based transactions and events are captured and reported in the income statement...
financial reporting
accounting fundamentals
Allowance Method for Uncollectibles
allowance method for uncollectibles - A method that estimates uncollectibles as a portion of total receivables and establishes an offsetting contra allowance...
accounting
American Institute of Certified Public Accountants
American Institute of Certified Public Accountants - (AICPA) an organization whose members are CPAs interested in advancing the accounting profession
accounting
Amortisation
Amortisation - Process similar to depreciation, usually applied to intangible fixed assets.
finance
accounting
Amortization
amortization - The process used to allocate the cost of an intangible asset to the accounting periods benefited
cost accounting
accounting fundamentals
Amortized Cost Method
amortized cost method - The approach mandated for held-to-maturity securities; investments are reported at their cost with any premium or discount amortized ...
cost accounting
Annual Accounts
Annual accounts - Also known as financial, company or statutory accounts. Businesses must produce an annual set of accounts detailing business finances.
finance
accounting
Annual Equivalent Rate (Aer)
Annual Equivalent Rate (AER) - An interest rate reflecting what you'll actually pay, or earn, on your money after the effects of compounding are taken into acco...
finance
accounting
Annual General Meeting (Agm)
Annual general meeting (AGM) - A meeting of the members (shareholders) of a company at which the board of directors lay the company's accounts and report for sh...
finance
accounting
Annual Percentage Rate (Apr)
Annual Percentage Rate (APR) - The rate of interest you agree to pay on money borrowed, and a useful way to compare how much interest you would pay on loans fro...
finance
accounting
Annual Report and Accounts
Annual report and accounts - Most organisations are required to produce an annual report on their activities and enclose the accounts of the company's performan...
finance
accounting
Annuities
annuities - Streams of level (i.e., the same amount each period) payments occurring on regular intervals
accounting
Annuity
annuity - Level streams of payments; with each payment being the same, and occurring at a regular interval
accounting
Annuity Due
annuity due - Also known as an annuity in advance; involves a level stream of payments, with the payments being made at the beginning of each time period
accounting
API (Application Programming Interface)
API (Application Programming Interface) - a set of protocols that allows different software applications to communicate and exchange data seamlessly
technology
integration
+1
Articles of Association
Articles Of Association - Document setting out the relative rights of shareholders in a limited liability company.
finance
accounting
Artificial Intelligence (AI)
Artificial Intelligence (AI) - computer systems that can perform tasks typically requiring human intelligence, such as analysis, decision-making, and natural la...
AI
technology
+2
Assets
assets - The economic resources owned by an entity; entailing probable future benefits to the entity
accounting
Audit
Audit - An official inspection of a company's accounts.
finance
accounting
Auditing
auditing - The examination of transactions and systems that underlie an organization's financial statements with the goal or reporting thereon
financial reporting
Auditors
Auditors - Professional accountants who check the books of account, ask for explanations from the directors and examine the report and accounts, verifying that ...
finance
accounting
Available-for-sale Securities
available-for-sale securities - Investments in debt that are neither "held-to-maturity" or "trading;" a default category that is accounted for at fair value ...
financial reporting
B
Bad Debt
Bad debt - The amount owed by a customer who cannot, or will not, pay for goods or services they have had.
finance
accounting
Balance Sheet
balance sheet - A financial statement that presents a firm's assets, liabilities, and owners' equity at a particular point in time
financial reporting
accounting fundamentals
Balanced Scorecard
balanced scorecard - A set of performance measures that are congruent with assessing improvement in financial, customer, and business process outcomes
financial reporting
Bank Rate
Bank rate - In the UK it is set by the Bank of England, to control the money supply and inflation. Banks usually lend at anything from 2 per cent above bank rat...
finance
accounting
Bank Reconciliation
bank reconciliation - A control procedure to establish and verify the correct cash balance via identification of errors, irregularities, and adjustments
accounting
Bank Statement
bank statement - The document received from a bank which summarizes deposits and other credits, and checks and other debits to a bank account
accounting
Base Rate
Base rate - Set by the Bank of England, this is the country's base rate of interest and influences the rate of interest on financial products and services.
finance
accounting
Basic EPS
basic EPS - The simplest earnings per share number; earnings available to common shares divided by weighted average shares, without factoring in potential di...
accounting
Batch-level Activity
batch-level activity - Activities that relate to each batch of production; independent of the number of units within that batch
cost accounting
Benchmarking
benchmarking - Measuring products or processes against industry standards, an essential part of total quality management
accounting
Betterment
betterment - Expenditures that improve or increase the service potential of an asset even beyond its original new condition; such costs may be capitalized by...
cost accounting
accounting fundamentals
Big Data
big data - Electronically warehoused information, capable of being mined and analyzed, containing the “who, what, when, where, and why” of all business activity...
accounting
Board of Directors
Board of directors - A group of people to whom the shareholders have delegated the task of running the day-to-day affairs of the company. They normally define t...
finance
accounting
Bond
Bond - A form of IOU issued by the company, or a government or other institution, offering to pay interest in return for borrowing your money, or to pay you ...
finance
accounting
Bonds Payable
bonds payable - An obligation divided into transferable units requiring the issuer to make periodic interest payments and an eventual repayment of the face a...
accounting
Book Value
book value - Cost minus accumulated depreciation; the net amount at which an asset is reported on the balance sheet
financial reporting
cost accounting
+1
Book Value per Share
book value per share - Common stockholders' equity divided by common shares outstanding, to indicate stockholders' equity per share
accounting fundamentals
Boot
boot - Term used to describe additional monetary consideration that may accompany an exchange transaction
accounting
Bootstrapping
Bootstrapping - Building a company without external investment, often relying on personal savings and running with the lowest possible operating costs
finance
accounting
Bottom-up Participative Budget
bottom-up participative budget - A budget approach driven by the direct participation of lower-level employees
financial planning
Break-even Point
break-even point - The level of activity where revenues equal total expenses, producing a zero net income; also the point where the contribution margin is sa...
financial reporting
cost accounting
Budget
budget - A planning tool that outlines the financial plans for an organization; there are various types of budgets -- operating, capital, and financial
financial reporting
financial planning
Budget Committee
budget committee - A group of senior managers from each business unit charged with leading the budget preparation and review process
financial planning
Budget Slack
budget slack - The influence of behavior to "pad" a budget via misstating expected revenues and/or expenses; to create more favorable budget vs. actual perfo...
financial planning
Business to Business
Business to Business - (B2B) A system that enables data interchange between companies; sometimes sufficiently robust to permit automatic inventory replenishm...
accounting
C
Callable Bond
callable bond - A bond that provides the issuer an option to reacquire the bonds before scheduled maturity at a preset price
accounting
Callable Preferred
callable preferred - Preferred stock that can be repurchased by issuer for a preset price
accounting
Called Up (Share Capital)
Called Up (Share Capital) - The company has called upon the shareholders who first bought the shares, to pay for their shares.
finance
accounting
Capacity Utilization
capacity utilization - The degree to which an organization's output capabilities are being deployed or utilized
accounting
Capital
Capital - Anything invested into a company that has a tangible value or benefit to its own, such as a machinery, patents, or financial assets like cash.
finance
accounting
Capital Employed
Capital employed - Sometimes called total assets less current liabilities or total shareholders' funds plus long-term finance (the two calculations provide the ...
finance
accounting
Capital Expenditure
Capital Expenditure - Spending on non-current (fixed) assets of a business.
finance
accounting
Capital Expenditure (CAPEX)
Capital expenditure (CAPEX) - Funds used by the company to buy, maintain or improve its fixed assets such as buildings, vehicles, equipment, or land.
finance
accounting
Capital Expenditure Decision
capital expenditure decision - Also known as capital budgeting; planning and decision making related to longer term projects and expenditures
financial planning
Capital Expenditures
capital expenditures - Ordinary and necessary costs incurred to place an item of property, plant, or equipment in its condition for intended use; such amount...
cost accounting
accounting fundamentals
Capital Stock
capital stock - A non-specific reference to the ownership interests of shareholders in a corporation
accounting
Cash
cash - Items acceptable to a bank for deposit and free from restrictions for satisfying current debts; includes coins, currency, bank deposits, etc.
accounting
Cash Basis
cash basis - An accounting approach where revenue is recorded when cash is received (no matter when "earned"), and expenses are recognized when paid (no matt...
accounting
Cash Budget
cash budget - An essential budget component detailing planned cash receipts, disbursements, and financing actions
financial planning
Cash Discount
cash discount - A reduction in invoice price offered to customers to encourage prompt payment of invoices
accounting
Cash Equivalents
cash equivalents - Short-term interest-earning financial instruments that are deemed to be highly secure and will convert back into cash within 90 days
financial reporting
Cash Flow
Cash flow - the movement of money into and out of a business. Understanding and managing cash flow is critical for business survival and growth
finance
accounting
+2
Cash Flow Projections
Cash Flow Projections - Statements of cash expected to flow into and out of a business over a particular period.
finance
accounting
Centralized Decision Making
centralized decision making - A business style where top leaders make and direct most important decisions
accounting
Certified Financial Manager
Certified Financial Manager - (CFM) a professional designation of competency in the field of financial management that is issued by the Institute of Manageme...
financial reporting
Certified Management Accountant
Certified Management Accountant - (CMA) a professional designation of competency in the field of management accounting that is issued by the Institute of Man...
accounting
Certified Public Accountant
certified public accountant - An individual who is licensed by a state to practice public accounting
accounting
Change in Accounting Estimate
change in accounting estimate - A revision of assumptions used in a related accounting calculation (e.g., change in estimated useful life of an asset); handl...
accounting fundamentals
Charge Over Assets
Charge over assets - Used when all or some of the assets of an organisation have been used as collateral to secure a transaction of some kind (usually the borro...
finance
accounting
Chart of Accounts
chart of accounts - A listing of the accounts of an entity, along with any identification coding
accounting
Chartered Global Management Accountant
Chartered Global Management Accountant - (CGMA) sponsors a designation that distinguishes professionals who have advanced proficiency in finance, operations,...
accounting
Closing Process
closing process - The process by which temporary accounts are "zeroed" out and the effects transferred to retained earnings
accounting
Collateral
Collateral - Security, usually for a loan. It is effected by enabling the giver of the loan the right to seize the asset that is being used as collateral and se...
finance
accounting
Commercial Substance
commercial substance - The quality of an exchange transaction such that it changes the future cash flow potential of the entity
accounting
Commitments
commitments - Promises to engage in some future action; not necessarily creating a recordable accounting liability but potentially necessitating enhanced dis...
accounting fundamentals
Committed Fixed Cost
committed fixed cost - Costs that arise from an organization's commitment to engage in operations; unavoidable elements like depreciation, rent, insurance, p...
cost accounting
taxation
Common Fixed Costs
common fixed costs - Fixed costs that are incurred to support more than one business unit
cost accounting
Common Stock
common stock - The residual equity interest in a corporation; last in liquidation but usually receiving the full benefits of any corporate growth
accounting fundamentals
Companies Act
Companies Act - Legislation to control the activities and administration of limited liability companies.
finance
accounting
Comparability
comparability - An enhancing quality of accounting such that even though different companies may use different accounting methods, there is still sufficient ...
accounting
Compensated Absences
compensated absences - Term to describe paid time off; vacations, sick leave, etc.
accounting
Compensating Balance
compensating balance - An amount that must be left on deposit and cannot be withdrawn
accounting
Complex Capital Structure
complex capital structure - Companies with options, warrants, or convertible bonds and stocks that may result in the issuance of additional shares
accounting
Compound Interest
compound interest - Interest calculations that provide for periodic inclusion of accumulated interest into the base on which interest is calculated; "interes......
accounting
Comprehensive Income
comprehensive income - Net income plus items of other comprehensive income (e.g., market value adjustments of available for sale securities)
financial reporting
Conservatism
conservatism - A general principle of accounting measurement; when in doubt, understate assets and income and overstate liabilities
financial reporting
accounting fundamentals
Consignment
consignment - To place inventory in the custody of another party without requiring them to purchase it, as a sales agent
accounting
Consistency
consistency - An enhancing quality of accounting such that deviations in outcomes from period to period should be the result of deviations in underlying perf...
accounting
Consolidation
consolidation - To prepare financial reports for a parent and subsidiary company as a single economic unit
financial reporting
Contingent Liabilities
contingent liabilities - Events that may or may not give rise to an actual liability because the outcome is uncertain; examples include lawsuits, environment...
accounting fundamentals
Continuous Budget
continuous budget - A budget that is constantly updated; as one month/quarter is completed another is added to the set the projections
financial planning
Contra Asset
contra asset - An account that is subtracted from a related account -- contra accounts have opposite debit/credit rules
accounting
Contribution Income Statement
contribution income statement - An internal report that identifies each segment's controllable elements; the contribution margin, controllable fixed costs, u...
cost accounting
Contribution Margin
contribution margin - Revenues minus all variable expenses, whether related to production or selling and administration (not to be confused with gross profit)
cost accounting
Control Account
control account - The total of all subcomponent account records for an account; e.g., the sum of all individual accounts receivable
accounting
Controller
controller - The primary person responsible for the cost and managerial accounting functions
cost accounting
Conversion Cost
conversion cost - Cost components needed to change raw materials to finished goods, specifically direct labor and manufacturing overhead
cost accounting
Convertible Bond
convertible bond - A bond that may be converted by the holder into stock of the issuing company
accounting
Convertible Preferred
convertible preferred - Preferred stock that can be exchanged for common stock at some preagreed ratio
accounting
Corporation
corporation - A form of business organization where ownership is represented by divisible units called shares of stock
accounting
Corporation Tax
Corporation tax - Paid by UK companies on their profits.
finance
accounting
Cost Accounting
cost accounting - The process by which an organization's cost is collected, assigned, and interpreted
cost accounting
Cost Center
cost center - An area of responsibility under the control of a manager who is responsible for costs incurred within the unit; the unit generally has little r...
cost accounting
Cost Driver
cost driver - The factor that is viewed as causing costs to be incurred within an organization
cost accounting
Cost Flow Assumption
cost flow assumption - An assumption about how costs are assigned to inventory in the accounting records
cost accounting
Cost Object
cost object - The output for which costing information is to be determined under ABC; can be product or service related, or customer, market, etc.
cost accounting
Cost of Goods Manufactured
cost of goods manufactured - The amount of cost attributable to goods reaching the end of production; beginning work in process (wip) + (direct materials, di...
cost accounting
Cost of Goods Sold
cost of goods sold - The total cost attributed to units of inventory actually sold during a period
cost accounting
Cost of Production
Cost of production - Similar to cost of goods sold and used mostly in academic accounts.
finance
accounting
Cost of Production Report
cost of production report - A report used in a process costing environment to tabulate the costs incurred within a particular stage/department
cost accounting
Cost of Sales
Cost Of Sales - See 'cost of goods sold'.
finance
accounting
Cost-push Inflation
Cost-push inflation - Cost-push inflation occurs when production input costs, such as wages and raw materials, rise and producers pass the increased costs on to...
finance
accounting
Cost-volume-profit Analysis
cost-volume-profit analysis - (CVP) Analysis focusing on the interplay of pricing, volume, variable and fixed costs, and product mix
cost accounting
Coupon Bond
coupon bond - A bond that has detachable coupons that are exchanged for interest payments; historically popular but falling into disuse
accounting
CPA
CPA - An individual who is licensed by a state to practice public accounting
accounting
Credit
credit - The nature of an action to an account to indicate an increase (liabilities, equity, and revenue) or decrease (assets, expenses, and dividends); usua...
accounting fundamentals
Credit (Terms of Business)
Credit (Terms Of Business) - The supplier agrees to allow the customer to make payment some time after the delivery of the goods or services. Typical trader cre...
finance
accounting
Credit Memorandum
credit memorandum - A seller-prepared document evidencing an approved return of merchandise for credit against an account
accounting
Credit Note
Credit Note - A document summarising the reduction in charge on an invoice (bill), usually because the customer has returned defective goods or has received ina...
finance
accounting
Credit Sale
Credit Sale - A business entity sells goods or services and allows the customer to make payment at a later date.
finance
accounting
Creditor
Creditor - A person or firm that has lent your business money or to whom you owe money.
finance
accounting
Creditors
Creditors - Suppliers to whom we owe money.
finance
accounting
Cumulative Preferred
cumulative preferred - Preferred stock that is entitled to a periodic dividend, and those dividends must be paid (eventually) before any monies can be distri...
accounting
Current Asset
Current Asset - An asset that is expected to be converted into cash within the trading cycle. Contrasting a Fixed asset that is held to use within the business ...
finance
accounting
Current Assets
current assets - Assets that will be converted into cash or consumed within one year or the operating cycle, whichever is longer
accounting fundamentals
Current Liabilities
current liabilities - Obligations that will be liquidated within one year or the operating cycle, whichever is longer
accounting
Current Liability
Current Liability - A liability which is expected to be settled in the entity's normal operating cycle, generally within 12 months after the balance sheet date.
finance
accounting
Current Operating Approach
current operating approach - A concept of income where income is limited to transactions related to central ongoing operations; not an acceptable approach fo...
financial reporting
Current Ratio
current ratio - A measure of liquidity, calculated by dividing current assets by current liabilities
accounting fundamentals
Customer-level Activity
customer-level activity - Activities that relate to each customer; independent of the volume of goods and services provided to the specific customer
accounting
D
Dashboard
dashboard - Customized business software that delivers key real time business data in an easily monitored layout
accounting
Database
database - An information storehouse, usually electronic, that can be queried to extract data meeting certain parameters. Enables singular data entry and mul...
accounting
Debenture Bond
debenture bond - A bond that lacks specific collateral; payment is only assured by the general faith and creditworthiness of the issuer
accounting
Debit
debit - The nature of an action to an account to indicate an increase (assets, expenses, and dividends) or decrease (liabilities, equity, and revenue); usual...
accounting fundamentals
Debit (In Bookkeeping)
Debit (In Bookkeeping) - Entries in the debit column of a ledger account representing increases in assets or expenses, or decreases in liabilities or income.
finance
accounting
Debit Card
debit card - Transactions are equivalent to an electronically generated check that results in an almost immediate withdrawal of funds.
accounting
Debit Memorandum
debit memorandum - A purchaser-prepared document evidencing a return of merchandise to a seller
accounting
Debtor
Debtor - A person or firm that owes money to your business.
finance
accounting
Debtors
Debtors - The amount outstanding on customers' accounts.
finance
accounting
Decentralized Decision Making
decentralized decision making - A business style where top leaders concentrates on strategy, and leaves day-to-day operation and decision-making tasks to low...
accounting
Declining Balance Depreciation Method
declining balance depreciation method - An accelerated depreciation method by which a constant rate (that is a multiple of the straight-line rate) is multipl...
accounting
Deferred Income
Deferred Income - Income invoiced, or paid for, in advance of providing the service resulting in the income being deferred to a later accounting period, to when...
finance
accounting
Deferred Taxation
Deferred Taxation - Income & expenditure may be recognised at different time for accounting and tax purposes. Deferred tax is a way to balance this timing diffe...
finance
accounting
Defined Benefit Plan
defined benefit plan - A type of pension plan where the benefits are a function of years of service, pay, and age; the ultimate employer cost is not known in...
cost accounting
Defined Contribution Plan
defined contribution plan - A type of pension plan where the benefits are based on amounts in trust for the benefit of the employee; employer contributions a...
accounting
Demand-pull Inflation
Demand-pull inflation - Occurs when demand is high, and suppliers increase prices until demand reduces.
finance
accounting
Depletion
depletion - The process used to allocate the cost of a natural resource asset to the accounting periods benefited
cost accounting
accounting fundamentals
Deposits in Transit
deposits in transit - Receipts entered on company records but not yet posted by the bank
accounting
Depreciable Base
depreciable base - Cost minus salvage value; the amount of cost that will be allocated to the service life
cost accounting
Depreciation
depreciation - The process used to allocate the cost of a long-lived property to the accounting periods benefited
cost accounting
Derivatives
derivatives - Investments accounted for a fair value that generally derive their value from some other item; examples include commodity futures, options, and...
accounting
Diluted EPS
diluted EPS - An earnings per share number; adjusted to reflect the potential effect of dilutive securities
accounting
Dilutive Securities
dilutive securities - Options, warrants, convertible bonds, convertible stocks, and other items that have the potential to increase the number of shares outs...
accounting
Direct Approach
direct approach - The preferred method for preparing the statement of cash flows; operating cash flows are presented according to their direct source (e.g., ...
financial reporting
Direct Costs
direct costs - A cost easily traced to a specific job; generally direct material and direct labor
cost accounting
Direct Labor
direct labor - Gross wages paid to those who physically and directly work on the goods being produced
accounting
Direct Labor Budget
direct labor budget - A budget that details expected direct labor needs, along with the related costs of labor
cost accounting
financial planning
Direct Labor Efficiency Variance
direct labor efficiency variance - A variance comparing standard hours of direct labor to the actual hours worked; measured at the standard rate per hour [(s...
accounting
Direct Labor Rate Variance
direct labor rate variance - A variance that reveals the difference between the standard rate and actual rate for the actual labor hours worked [(standard ra...
accounting
Direct Material
direct material - The costs of all materials that are an integral part of a finished product and that have a physical presence that is readily traced to that...
cost accounting
Direct Material Purchases Budget
direct material purchases budget - A budget that details expected direct material purchases, along with the related cash payments
financial planning
Direct Method/Allocating Service Cost
direct method/allocating service cost - An allocation process whereby service department costs are assigned directly to productive departments (compare to st...
cost accounting
Direct Write-off Method
direct write-off method - A simple, non-GAAP, method that expenses uncollectible accounts only as they are determined to be uncollectible and are written off
accounting
Director
Director - A member of the board of directors who bears the responsibility of managing the company on behalf of the shareholders.
finance
accounting
Director(s)
Director(S) - Person(s) appointed by shareholders of a limited liability company to manage the affairs of the company.
finance
accounting
Discontinued Operations
discontinued operations - The special income statement reporting of the impact of disposing or abandoning of a component of a business
financial reporting
Discount on Bonds
discount on bonds - The difference between face value and issue price of a bond, where the issue price is less; causes the effective yield to be higher than ...
accounting
Discretionary Fixed Cost
discretionary fixed cost - Fixed cost resulting from yearly spending decisions; proper planning can result in avoidance of these costs as necessary (e.g., ad...
cost accounting
financial planning
Dishonoring a Note
dishonoring a note - To fail to pay a note at maturity
accounting
Dividend
Dividend - Money paid by a company from its profits to its shareholders.
finance
accounting
Dividend Payout Ratio
dividend payout ratio - Dividend per share divided by earnings per share
accounting
Dividend Rate
dividend rate - Dividend per share divided by stock price; also called dividend yield
accounting
Dividends
dividends - Amounts paid from profits of a corporation to shareholders as a return on their investment in the stock of the entity
accounting
Dividends in Arrears
dividends in arrears - An omitted dividend on cumulative preferred stock that must eventually be paid before any monies can be distributed to common stockhol...
accounting
Double-declining Balance Depreciation
double-declining balance depreciation - An accelerated depreciation method by which a constant rate (that is 200% of the straight-line rate) is multiplied by...
accounting
Drawings
Drawings - Cash taken for personal use, in sole trader or partnership businesses, treated as a reduction of ownership interest.
finance
accounting
E
Earning
Earning - A phrase that is often interchangeable with profits.
finance
accounting
Earnings
earnings - A concept that relates to income from continuing operations plus/minus discontinued operations
financial reporting
Earnings per Share
Earnings per share - EPS; generally understood as the amount of income for each share of stock, but is actually better refined as basic and diluted EPS (see ...
financial reporting
Earnings per Share (EPS)
Earnings per share (EPS) - A measure of how much profit a company is making for its shareholders.
finance
accounting
EBIT
EBIT - An analyst's calculation to reflect "earnings before interest and taxes"
taxation
EBITDA
EBITDA - An analyst's calculation to reflect "earnings before interest, taxes, depreciation, and amortization"
taxation
Economies of Scale
economies of scale - Efficiencies associated with increases in volume
accounting
Effective-interest Amortization
effective-interest amortization - A theoretically preferable method for amortizing premiums and discounts on bonds; interest expense is a constant percentage...
accounting
Employee
employee - A person who works for a specific business and whose activities are directed by that business
accounting
Encumbrance
encumbrance - A budgetary restriction occurring in advance of a related expenditure
financial planning
Enterprise Resource Packages
Enterprise Resource Packages - (ERP) Comprehensive database software that tracks an almost endless array of business and accounting data
accounting
Entity Assumption
entity assumption - Accounting information should be presented for circumscribed distinct economic units
accounting
Entity-sustaining Activity
entity-sustaining activity - Activities that relate to an entity's ability to operate; independent of business volume
accounting
Entity, Entities
Entity, Entities - Something that exists independently, such as a business which exists independently of the owner.
finance
accounting
Equity
Equity - Used by analysts to determine the financial health of a company. It also represents what would be left if all of a businesses' assets were liquidated ....
finance
accounting
Equity Method
equity method - Method to account for stock investment when significant influence is present; changes in equity of the investee are recognized by the investo...
accounting fundamentals
Equivalent Units
equivalent units - A measure of physical units expressed in terms of finished units
accounting
ERP System
Enterprise Resource Planning (ERP) system - a comprehensive software platform that integrates and manages core business processes across an entire organization
ERP
software
+2
Ex-dividend
ex-dividend - The event (date) when a transfer of stock ownership between shareholders will occur without the right for the purchaser to receive any previous...
accounting
Exchange Transaction
exchange transaction - Trading one asset for another; to be booked at fair value if the transaction has commercial substance
accounting fundamentals
Expense
Expense - Generally the running costs of a business.
finance
accounting
Expenses
expenses - The costs incurred in producing revenues
cost accounting
F
F.o.b. Destination
F.O.B. destination - Free on Board destination; meaning the transfer of ownership of inventory will occur when the goods reach their destination and the sell...
accounting
F.o.b. Shipping Point
F.O.B. shipping point - Free on Board shipping point; meaning the transfer of ownership of inventory will occur when the goods are shipped and the purchaser ...
accounting
Factory Overhead Budget
factory overhead budget - A budget that details the anticipated factory overhead, including calculations related to the allocation of such amounts
cost accounting
financial planning
Fair Value Accounting
fair value accounting - Sometimes called "mark-to-market;" to record an investment at its fair value and recognize changes in value as they occur
accounting
Faithful Representation
faithful representation - A fundamental quality of accounting such that information must be truthful; complete, neutral, and free from error
accounting
Fica
FICA - Federal Insurance Contributions Act (also known as social security and Medicare); establishes a tax that employers must withhold and match for governm...
taxation
Financial Accounting
financial accounting - An area of accounting that deals with external reporting to parties outside the firm; usually based on standardized rules and procedures
accounting
Financial Accounting Standards Board
Financial Accounting Standards Board - An organization charged with producing standards for financial reporting in the USA
financial reporting
Financial Management
Financial management - Planning, analysing, monitoring, organising, reviewing, and controlling a company's finances.
finance
accounting
Financial Statements
financial statements - Core financial reports that are prepared to represent the financial position and results of operations of a company
financial reporting
Financing Activities
financing activities - A cash flow category; including receipts from stock issues, bonds, notes and loans, -- and payments for loan repayment, acquisitions o...
accounting
Financing Lease
financing lease - A lease that effectively transfers the risks and rewards of ownership to the lessee
accounting
Finished Goods
finished goods - Finished goods represent the cost of completed products awaiting sale to a customer
cost accounting
First-in, First-out
first-in, first-out - FIFO; An inventory cost flow assumption based on the notion that the earliest costs are to be assigned to units sold
cost accounting
Fiscal Year
fiscal year - A one-year accounting period that does not correspond to a calendar year
accounting
Fixed Asset
Fixed Asset - An asset that is held by an enterprise for use in the production or supply of goods or services, for rental to others, or for administrative purpo...
finance
accounting
Fixed Assets
Fixed assets - Assets that you intend to keep for longer than twelve months.
finance
accounting
Fixed Cost
fixed cost - A total cost that is the same regardless of volume; total cost is constant and per unit cost decreases with volume increases
cost accounting
Fixed Costs
Fixed costs - Costs that vary over time rather than in proportion to throughput, e.g. Rent of premises, salaries etc.
finance
accounting
Fixed Overhead Spending Variance
fixed overhead spending variance - A fixed overhead variance that compares actual fixed overhead to the budgeted fixed overhead
cost accounting
financial planning
Fixed Overhead Volume Variance
fixed overhead volume variance - A fixed overhead variance that compares the budgeted fixed overhead to the fixed overhead that is applied to production base...
cost accounting
financial planning
Flexible Budget
flexible budget - A budget that covers a range of potential outcomes by relating expense levels to the potential revenues
financial planning
Forecast
Forecast - Forecast estimate of future performance and position based on stated assumptions and usually including a quantified amount.
finance
accounting
Form 1099
Form 1099 - A form required to be issued to an independent contractor reporting amounts paid; to assist with tax compliance issues (this form used to report ...
taxation
auditing
Full Disclosure Principle
full disclosure principle - All relevant facts that would influence investors' and creditors' judgments about the company are disclosed in the financial stat...
financial reporting
Futa
FUTA - Federal Unemployment Tax levied on employer to provide funds for unemployed workers; rate is dependent on existence of SUTA and employer history of la...
taxation
Future Value
future value - Or "compound interest;" amount that a current payment (or stream of payments) will grow in time; includes interest on previous interest based ...
accounting
G
GAAP
GAAP - Generally accepted accounting principles -- encompass the rules, practices, and procedures that define the proper execution of accounting
accounting
Gearing
Gearing - The proportion of borrowings to total financing (i.e. shareholders' funds plus total borrowing).
finance
accounting
General Ledger
general ledger - A record of the accounts comprising financial statements, and their respective balances
financial reporting
Going Concern Basis
Going Concern Basis - Financial statements are prepared on this basis assuming that the business will continue operating into the foreseeable future.
finance
accounting
Going-concern Assumption
going-concern assumption - In the absence of evidence to the contrary, accountants assume that a business will continue to operate well into the future
accounting
Goods Available for Sale
goods available for sale - A calculated amount corresponding to the beginning inventory plus net purchases; represents the total pool of inventory available ...
accounting
Goods in Transit
goods in transit - Goods in the process of being transported to the buyer; ownership is based on freight terms
accounting
Goodwill
goodwill - The excess of the purchase price of an acquired company over the fair value of the identifiable net assets acquired
accounting fundamentals
Gross
Gross - The total amount of money a company has earned in a period of time before deductions such as taxes.
finance
accounting
Gross Method
gross method - A method of recording purchases of inventory at invoice price
accounting
Gross Pay
gross pay - Also known as gross earnings; this it is the total amount earned by an employee before any deductions
taxation
Gross Profit
gross profit - A calculated amount corresponding to net sales minus cost of goods sold
cost accounting
Gross Profit (Or Margin)
Gross Profit (Or Margin) - Sales minus cost of sales before deducting administration and selling expenses (see also gross margin).
finance
accounting
Gross Profit Method
gross profit method - A technique that purports to estimate inventory and cost of goods sold by applying historic percentage relationships to observable sale...
cost accounting
H
Held-to-maturity Investments
held-to-maturity investments - Investments purchased with intent to hold to maturity; usually investment in debt; accounted for by amortized cost method
cost accounting
High-low Method
high-low method - A simple means for separating costs into fixed and variable components, based upon the difference between costs at the highest and lowest o...
cost accounting
Historical Cost Principle
historical cost principle - The concept that many transactions and events are to be measured and reported at acquisition cost
cost accounting
I
Ideal Standards
ideal standards - A standard that could only be achieved under perfect operating conditions; such standards are rarely expected to be achieved
accounting
Impairment
impairment - When the carrying amount of an asset is not recoverable from its future cash flow
accounting fundamentals
Income Statement
income statement - A financial statement that summarizes the revenues, expenses, and results of operations for a specified period of time
financial reporting
Income Summary
income summary - A non-financial statement account used only to facilitate the closing process by summarizing and zeroing-out the revenue and expense accounts
financial reporting
Income Taxes
income taxes - Taxes that are based on the amount income; for employees such amounts must be withheld by employers and remitted to the government
financial reporting
taxation
Incremental Budgeting
incremental budgeting - A budgeting approach where the prior year experience sets a base line for a new budget; changes are made based on new information but...
financial planning
Independent Contractor
independent contractor - One who performs a designated task or service for a company, and the company has the right to control or direct only the result of t...
accounting
Indirect Approach
indirect approach - An alternative method for preparing the statement of cash flows; operating cash flows are presented as a reconciliation of income to cash...
financial reporting
Indirect Costs
indirect costs - A cost not easily traced to a specific job; generally categorized as factory or manufacturing overhead
cost accounting
Inflation
Inflation - A percentage figure that represents how much prices of goods and services increased over a specific period.
finance
accounting
Initial Public Offering
initial public offering - The first time stock in a corporation is offered to the investing public; registration and other requirements must be met; proceeds...
accounting
Insolvency
Insolvency - When a company becomes unable to pay off its creditors, or its liabilities exceed its assets.
finance
accounting
Institute of Management Accountants
Institute of Management Accountants - (IMA) a professional association for management accountants that sponsors the CMA and CFM designations
accounting
Intangible Asset
intangible asset - Long-term asset that lacks physical existence; contract rights, copyrights, patents, trademarks, etc.
accounting fundamentals
Intangible Fixed Asset
Intangible Fixed Asset - An asset, such as a right, that cannot be touched (e.g. a trademark or Goodwill).
finance
accounting
Integration
Integration - connecting different software systems to work together and share data seamlessly
technology
software
+2
Interest
interest - The charge imposed on the borrower of funds for the use of money
accounting
Internal Auditor
internal auditor - A person within an organization who reviews and monitors the controls, procedures, and information of the organization
accounting
Internal Rate of Return
internal rate of return - Also known as time-adjusted rate of return or IRR; discount rate causing present value of cash inflows to equal present value of th...
accounting
International Accounting Standards Board
International Accounting Standards Board - An organization charged with producing accounting standards with global acceptance
accounting
International Financial Reporting Standards (IFRS)
International Financial Reporting Standards (IFRS) - The specific accounting rules developed by the International Accounting Standards Board
accounting
Intraperiod Tax Allocation
intraperiod tax allocation - Separately reported items like discontinued operations, prior period adjustments, and other comprehensive income, are to reporte...
financial reporting
taxation
Inventoriable Cost
inventoriable cost - Product costs that attach to inventory
cost accounting
Inventory
inventory - Goods held for resale to others
accounting
Investee
investee - The company in which another has an investment
accounting
Investing Activities
investing activities - A cash flow category; including receipts from disposal of investments and long-term assets -- and payments to acquire long-term assets...
accounting fundamentals
Investment Center
investment center - A evaluative unit where managers are accountable for cost and profit outcomes, including consideration of the amount of capital that is d...
cost accounting
Invoice (Bill)
Invoice (Bill) - A document from supplier to buyer summarising goods or services supplied and the price payable.
finance
accounting
Invoice Factoring
Invoice factoring - When a business sells its invoices to a third party, which will then add their own fee to the charges and seek the money from the debtor.
finance
accounting
Invoice Price
invoice price - List price less any trade discounts
accounting
Issue Price
issue price - The amount a company receives in exchange for the initial issue of debt or other financial instrument
financial reporting
J
Job Cost Sheet
job cost sheet - A document representing a compilation of cost data for a specific job
cost accounting
Job Costing Method
job costing method - A costing approach whereby actual labor and material is tracked for each job or product
cost accounting
Journal
journal - A chronological listing of the transactions and events of an organization, in debit/credit format
accounting
Journalizing
journalizing - The process of recording transactions and events into the journal
accounting
Junk Bond
junk bond - A bond that is issued by a company of low credit worthiness, and entails substantial risk of nonpayment; generally offers a high interest rate to...
accounting
Just in Time Inventory
just in time inventory - Raw materials are received from supplies just as they are needed in the production process
cost accounting
K
Kaizen
Kaizen - Japanese term used to describe a blitz like approach to study processes and install efficiency within an organization
accounting
Kanban
Kanban - Japanese term which means some form of signal that a particular inventory is ready for replenishment
accounting
Kpi (Key Performance Indicator)
KPI (Key Performance Indicator) - measurable values that demonstrate how effectively a company is achieving key business objectives
metrics
performance
+2
L
Land Improvements
land improvements - Includes the cost of parking lots, sidewalks, landscaping, irrigation systems, and similar expenditures that are incurred to better land
cost accounting
Last-in, First-out Method
last-in, first-out method - LIFO; An inventory cost flow assumption based on the notion that the most recent costs are to be assigned to units sold
cost accounting
Lean Manufacturing
lean manufacturing - Indicative of an environment where waste has been trimmed; entails a focus on standardization, speed, and quality, without compromising ...
accounting
Lease/Lessee and Lessor
lease/lessee and lessor - Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset
accounting fundamentals
Leasing
Leasing - Acquiring the use of an asset through a rental agreement.
finance
accounting
Legal Capital
legal capital - Usually the par value of the stock of a corporation
accounting
Lessee
lessee - Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset
accounting fundamentals
Lessor
lessor - Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset
accounting fundamentals
Liabilities
liabilities - Amounts owed by an entity to others
accounting
Limited Liability
Limited Liability - Most commonly used to describe the limit of liability of a shareholder (member) to contribute to the assets of a company if it goes into liq...
finance
accounting
Limited Liability Company
Limited Liability Company - Company where the liability of the owners is limited to the amount of capital they have agreed to contribute.
finance
accounting
Liquid Asset
Liquid asset - An asset that can be easily converted into cash.
finance
accounting
Liquidity
liquidity - The ability of a firm to meet its near-term obligations as they come due
accounting
List Price
list price - An established price determined by reference to a catalog or general price list; before any discounts
accounting
Long-term Investments
long-term investments - Investments made for long-term holding purposes; including land for speculation, securities of other companies, etc.
accounting
Long-term Liabilities
long-term liabilities - Any obligation that is not current, and include bank loans, mortgage notes, and the like
accounting
Lower of Cost or Net Realizable Value
lower of cost or net realizable value - To report inventory at the lower of its cost or net realizable value
cost accounting
Lump-sum Purchase
lump-sum purchase - A single price paid for a package of assets; the purchase price must be allocated to each of the components
accounting fundamentals
M
Machine to Machine
Machine to Machine - (M2M) enables connected devices to communicate with each other
accounting
Maker
maker - The party creating the note and agreeing to make payment
accounting
Management Buyout (Mbo)
Management buyout (MBO) - The management of a company buy that company, or part of it, from its owners.
finance
accounting
Management by Exception
management by exception - A management focus of attention on areas where corrective measures appear necessary
accounting
Managerial Accounting
managerial accounting - An area of accounting concerned with reporting results to managers and others who are internal to an organization
accounting
Manufacturing Overhead
manufacturing overhead - All costs of manufacturing other than direct materials and direct labor (also called factory overhead)
cost accounting
Margin
Margin - The amount of money a company makes, expressed as a percentage. For example, a gross profit of £1m on sales of £10m is a 10% profit margin.
finance
accounting
Market Capitalisation
Market Capitalisation - The stock-market value of a company. It is calculated by multiplying the total number of issued ordinary shares by today's price per sha...
finance
accounting
Market-level Activity
market-level activity - Activities that relate to the number of markets in which an entity operates; independent of the number of products, customers, etc.
accounting
Master Budget
master budget - Also known as the comprehensive budget; an integrated set of articulated budgets relating to numerous operational subcomponents (labor, mater...
cost accounting
financial planning
Matching Principle
matching principle - To associate expenses with revenues, and record them in simultaneous accounting periods
accounting
Materiality
materiality - A matter of accounting judgment; when amounts involved are slight, expediency may dictate waiving the technically correct alternative in lieu o...
accounting
Materials Price Variance
materials price variance - A variance that reveals the difference between standard price for materials purchased and amounts actually paid for those material...
accounting
Materials Quantity Variance
materials quantity variance - A variance comparing standard quantity to actual quantity of materials; variation is measured at the standard price per unit [(...
accounting
Materials Requisition Form
materials requisition form - Form showing what material has been removed from the raw materials stock and put into production
cost accounting
Maturity Date
maturity date - The date on which a note and related interest are due to be paid
accounting
Maturity Value
maturity value - The amount due at maturity of a note; includes principal and interest
accounting
Memorandum (For a Company)
Memorandum (For A Company) - Document setting out main objects of the company and its powers to act.
finance
accounting
Method of Least Squares
method of least squares - A complex means for separating costs into fixed and variable components, based upon minimizing the variances between all observatio...
cost accounting
Mixed Costs
mixed costs - A cost that has both fixed and variable components
cost accounting
Modified Accelerated Cost Recovery System
Modified Accelerated Cost Recovery System - A "depreciation" approach common to the tax code; generally permits more rapid "recovery" of asset cost than GAAP...
cost accounting
accounting fundamentals
+1
Modified Cash Basis
modified cash basis - Like the cash basis, except that certain large expenditures for durable assets may be recorded as assets initially
accounting fundamentals
Monetary Unit Assumption
monetary unit assumption - Accounting measures transactions and events in units of money, in contrast to some other unit of measure (e.g., acres of land)
accounting
Moving-average Method
moving-average method - Under the perpetual inventory system; to recompute running average cost with each purchase transaction
cost accounting
Multiple-step Income Statement
multiple-step income statement - A complex income statement with sections that segregate cost of goods sold calculations and other components of income and e...
financial reporting
cost accounting
N
Natural Business Year
natural business year - Applicable to certain businesses that have a seasonal business pattern, and an attempt is made to establish an accounting fiscal year...
accounting
Natural Resources
natural resources - Oil and gas reserves, mineral deposits, thermal energy sources, and standing timber are just a few examples of such assets that a firm ma...
accounting fundamentals
Negative Equity
Negative equity - When the value of an asset is less than what you initially paid.
finance
accounting
Net
Net - The amount of profit left after deductions such as tax have been made.
finance
accounting
Net Assets
Net Assets - Assets minus liabilities (equals ownership interest).
finance
accounting
Net Book Value
Net Book Value - Costs of non-current (fixed)( asset minus accumulated depreciation.
finance
accounting
Net Income
net income - Income from continuing operations plus/minus discontinued operations, but before items of “other comprehensive income”
financial reporting
Net Loss
net loss - The excess of expenses over revenues for a designated period of time
accounting
Net Method
net method - A method of recording purchases of inventory at invoice price less available cash discounts
accounting
Net Pay
net pay - Also known as net earnings; this is the gross pay less all applicable deductions ("take home pay")
taxation
Net Present Value
net present value - Or NPV, a method of evaluating capital projects that uses a predetermined interest rate to determine the present value of an investment's...
accounting
Net Profit
Net Profit - Sales minus cost of sales minus all administrative and selling costs.
finance
accounting
Net Realizable Value (Nrv)
net realizable value (NRV) - (inventory) Estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal,...
cost accounting
Net Realizable Value (Receivables)
net realizable value (receivables) - The amount of cash expected to be collected on outstanding accounts receivable; accounts receivable minus the allowance ...
accounting
Nominal Accounts
nominal accounts - Accounts that will be reset to a zero balance with each new accounting period; revenue, expense, and dividend accounts (also called "tempo......
accounting
Nominal Interest Rate
Nominal interest rate - An interest rate that isn't adjusted for inflation.
finance
accounting
Nominal Value (Of a Share)
Nominal Value (Of A Share) - The amount stated on the face of a share certificate as the named value of the share when issued.
finance
accounting
Nonredeemable Bond
nonredeemable bond - A bond that cannot be paid off before scheduled maturity
accounting
Nonrefundable Bond
nonrefundable bond - A bond that cannot be paid off with the proceeds of a new debt issue
accounting
Nontrade Receivables
nontrade receivables - Amounts due from transactions and events not directly related to sales of products or services
accounting
Notes Payable
notes payable - Formal short-term borrowings usually evidenced by a specific written promise to pay
accounting
Notes Receivable
notes receivable - A written promise from a client or customer to pay a definite amount of money on a specific future date
accounting
Nsf Check
NSF check - Non-sufficient funds check; a customer check returned for lack of funds (a "hot check")
accounting
O
Operating Activities
operating activities - A cash flow category; generally related to transactions that enter into the determination of income -- items that are not investing or...
financial reporting
Operating Cycle
operating cycle - The period of time it takes to convert cash back into cash (i.e., purchase inventory, sell the inventory on account, and collect the receiv...
accounting
Operating Expenditure (OPEX)
Operating expenditure (OPEX) - On-going costs for running a business, service or system that includes day-to-day expenditure.
finance
accounting
Operating Expenses
operating expenses - General expense category for selling and administrative costs
cost accounting
Operating Leases
operating leases - A lease where the lessee makes periodic payments for periodic use of an asset, but does not assume the ultimate risks and rewards of ownin...
accounting fundamentals
Operating Profit/Loss
Operating profit/loss - The profit or loss a company makes, which reflects how a business is performing.
finance
accounting
Opportunity Cost
opportunity cost - The cost of a foregone alternative; may include lost revenue
cost accounting
Ordinary Annuity
ordinary annuity - Also known as an annuity in arrears; involves a level stream of payments, with the payments being made at the end of each time period
accounting
Ordinary Shares
Ordinary Shares - Shares in a company which entitle the holder to a share of the dividend declared and a share in net assets on closing down the business.
finance
accounting
Other Assets
other assets - The category of a classified balance sheet for reporting assets that are not logically attached to one of the other specific sections
financial reporting
accounting fundamentals
Other Comprehensive Income
other comprehensive income - An account for changes in value of available for sale securities; not part of net income but is included in the broader concept ...
financial reporting
Outsourcing
outsourcing - Utilization of independent parties to manufacture products (sometimes known as make-or-buy) or manage data processing, tech support, payroll se...
accounting
Outstanding Checks
outstanding checks - Checks entered on company records but not yet cleared by the bank
accounting
Overapplied Overhead
overapplied overhead - Applied overhead exceeds the actual amount; usually viewed as a favorable outcome, because less has spent than anticipated for the lev...
cost accounting
Overhead Application Rate
overhead application rate - A rate used to apply manufacturing overhead to output; estimated factory overhead for a period divided by the estimated applicati...
cost accounting
Overheads
Overheads - Costs that do not change regardless of the level of production and are not typically involved with the cost of production, such as rent.
finance
accounting
Owner Investments
owner investments - Resources provided to an organization by a person in exchange for a position of ownership in the organization
accounting
Owners' Equity
owners' equity - The residual of assets minus liabilities, representing the collective interest or position of the entity's owners
accounting fundamentals
P
Paid-in Capital in Excess of Par
paid-in capital in excess of par - The amount by which a stock's issue price exceeds its par value; also referred to as "additional paid-in capital"
accounting
Par Value
par value - Par value is a technical provision establishing the “legal capital” of the firm and is frequently associated with common and preferred stock to s......
accounting
Par Value on Bonds
par value on bonds - The face or contract amount of a bond; the amount to be repaid at maturity along with any interest
accounting
Partnership
partnership - A non-corporation representing an association of two or more persons organized to carry out a business plan for a profit motive
accounting
Patent
Patent - An official legal document stating that a company has the sole right to make, use, or sell a particular invention.
finance
accounting
Payback Method
payback method - Easy method for evaluating capital projects; calculated by dividing the initial investment by the annual cash inflow
accounting
Paye
PAYE - Stands for Pay As You Earn. A method of collecting income tax on behalf of the Government by taking it directly from your employees' wages.
finance
accounting
Payee
payee - The party to whom a note is made payable
accounting
Pbit
PBIT - Profit before interest and tax.
finance
accounting
Pcaob
PCAOB - Public Company Accounting Oversight Board -- a private-sector, non-profit corporation charged with overseeing the auditors of public companies
auditing
Pension Plan
pension plan - A general term to describe some form of arrangement for continuing payments to retirees
accounting
Period Cost
period cost - A cost not attributable to the acquisition or manufacture of inventory; expensed as incurred
cost accounting
Periodic Inventory System
periodic inventory system - An inventory system that utilizes a Purchases account and does not update inventory with each sale; inventory is updated by physi...
accounting
Periodicity Assumption
periodicity assumption - An accounting assumption that purports to divide a continuous business process into measurement intervals, such as months, quarters,...
accounting
Perpetual Inventory System
perpetual inventory system - A "real-time" inventory system that updates inventory records with each purchase and sale
accounting
Petty Cash
petty cash - A fund established for making small payments that are impractical to pay by check; also known as imprest cash fund
accounting
Physical Inventory
physical inventory - The process of counting inventory actually on hand
accounting
Post-closing Trial Balance
post-closing trial balance - Reveals the balance of accounts after the closing process, and consists of balance sheet accounts only
financial reporting
Posting
posting - The process of transferring journal entry effects into the respective general ledger accounts
accounting
Preemptive Right
preemptive right - A right that may or may not be provided to shareholders enabling them with a first right of refusal to buy any additional shares offered b...
accounting
Preferred Stock
preferred stock - A class of stock that generally benefits from a stipulated periodic dividend and priority in liquidation; but, usually lacking in upside pa...
accounting
Premium on Bonds
premium on bonds - The difference between face value and issue price of a bond, where the issue price is more; causes the effective yield to be lower than th...
accounting
Prepaid Expenses
prepaid expenses - Goods or services purchased in advance of their consumption
accounting
Prepayment
Prepayment - An amount paid for in advance for and benefit to the business, such as insurance premiums or rent in advance. Initially recognised as an asset, the...
finance
accounting
Present Value
present value - Also known as discounting; determines the current worth of cash to be received in the future
accounting
Price Earnings Ratio
price earnings ratio - The per share market value of a stock divided by its earnings per share
accounting
Prime Cost
prime cost - Product costs that are direct in nature; direct materials and direct labor
cost accounting
Principal
principal - The basic stated amount of a note on which interest is usually calculated; generally relating to the amount borrowed
accounting
Principles-based
principles-based - The idea that accounting standards should articulate broad-based principles rather than specific and detailed rules
accounting
Prior Period Adjustment
prior period adjustment - To correct errors from prior years; prior financial statements are retroactively changed to make them correct
financial reporting
Pro Forma Financial Statements
pro forma financial statements - "As if" budgeted financial statements
financial reporting
financial planning
Process Costing
process costing - Process costing is a method to allocate the total costs of production to homogenous units produced via a continuous process that usually in...
cost accounting
Process Costing Methods
process costing methods - A product costing method particularly well suited to situations where production occurs in a continuous process; costs are pooled a...
cost accounting
Product Cost
product cost - Costs that attach to a product; the summation of direct materials, direct labor, and factory overhead
cost accounting
Product Elasticity of Demand (Ped)
Product elasticity of demand (PED) - The degree to which demand for products or services changes due to changes in price.
finance
accounting
Product-level Activity
product-level activity - Activities that relate to the number of products produced; independent of the number of units produced
accounting
Production Budget
production budget - A budget that details planned levels of production; takes into account sales and inventory build/decline
cost accounting
financial planning
Profit
Profit - Calculated as revenue (income) minus expenses.
finance
accounting
Profit and Loss Account
Profit and loss account - A financial statement that shows the income and outgoings of a company over a certain period of time showing the net profit or loss fo...
finance
accounting
Profit Center
profit center - Business unit that has control over both costs and revenues and is therefore evaluated on the profit outcomes
cost accounting
Proof of Cash
proof of cash - A detailed bank reconciliation that verifies not only beginning and end balances, but also validates deposits and withdrawals during the month
accounting
Property, Plant, and Equipment
property, plant, and equipment - Assets with long lives that will be used in an entity's production processes; land, buildings, and equipment
cost accounting
accounting fundamentals
Prospectus
prospectus - The documentation describing financial and business aspects of an initial public offering
financial reporting
Provision
Provision - A liability of uncertain timing or amount.
finance
accounting
Provision for Doubtful Debts
Provision For Doubtful Debts - An estimate of the risk of not collecting full payment from credit customers, reported as a deduction from trade receivable (debt...
finance
accounting
Public Accounting
public accounting - Accounting activities provided by a person to the general public, typically relating to audit, tax and similar services
taxation
auditing
Purchase Discounts
purchase discounts - A cash discount available on purchases of merchandise on account; encourages prompt payment
accounting
Q
Quick Ratio
quick ratio - An extreme measure of liquidity, calculated by dividing quick assets (cash, short-term investments, and accounts receivable) by current liabili...
accounting fundamentals
R
Radio Frequency Identification
radio frequency identification - (RFID) Micro processes embedded in inventory that emit radio frequency signals that enable a computer to automatically track...
accounting
Raw Materials
raw materials - The components that will be used in manufacturing units that are not yet started -- also known as direct materials
accounting
Real Accounts
real accounts - Asset, liability, and equity accounts; balances are carried forward from the end of one period into the beginning of the next period
accounting fundamentals
Real Interest Rate
Real interest rate - The rate of interest minus the current rate of inflation.
finance
accounting
Registered Bond
registered bond - A bond for which ownership records are maintained, and interest is paid to the registered owner
accounting
Registrar of Companies
Registrar Of Companies - An official authorised by the government to maintain a record of all annual reports and other documents issued by a company.
finance
accounting
Relevancy
relevancy - A fundamental quality of accounting such that information should be timely and bear on the decision-making process by possessing predictive or co...
accounting
Relevant Cost
relevant cost - Items where future costs and revenues are expected to differ for the alternative decisions under consideration
cost accounting
Relevant Range
relevant range - The level of activity for which assumptions underlying CVP are expected to hold true
accounting
Remeasurement
remeasurement - Uses a variety of exchange rates to convert assets and liabilities of a foreign affiliate to the reporting currency; adjustment may impact op...
financial reporting
accounting fundamentals
Replacement
replacement - A restoration of an asset, at least partially, to its original condition; such costs may be capitalized by reducing accumulated depreciation
cost accounting
accounting fundamentals
Reserves
Reserves - The claim which owners have on the assets of a company because the company has created new wealth for them over the period since it began. Most commo...
finance
accounting
Residual Income
residual income - An internal assessment technique that adjusts income for a presumed cost of capital (or other threshold rate of return); operating income -...
financial reporting
cost accounting
+1
Residual Value
residual value - Amount expected be realized at the end of an asset's service life; "salvage value"
accounting fundamentals
Resource
resource - The elements consumed by activities and cost objects
cost accounting
Resource Driver
resource driver - The concept that activities create the need for resources which will be consumed in the production process
cost accounting
Responsibility Center
responsibility center - The part of an organization under the control of a manager
accounting
Restatement
restatement - The financial statements of prior periods are redone to reflect the correct amounts
financial reporting
Retail Inventory Method
retail inventory method - An inventory costing technique used by retailers that extrapolates inventory values by applying cost-to-retail percentages to known...
cost accounting
Retained Earnings
retained earnings - The excess of a corporation's income over its dividends
financial reporting
Retrospective Adjustment
retrospective adjustment - Revision of the financial statements for prior periods to reflect the application of a current change in accounting method
financial reporting
Return on Assets Ratio
return on assets ratio - A ratio comparing income (net income plus interest) to the average total assets
financial reporting
accounting fundamentals
Return on Capital Employed (Roce)
Return on Capital Employed (ROCE) - This ratio is arguably the most vital for the control of performance in large, delegated, businesses. It is made up from the...
finance
accounting
Return on Equity Ratio
return on equity ratio - A ratio comparing income (net income minus preferred dividends) to the average total equity
financial reporting
accounting fundamentals
Return on Investment
return on investment - ROI: A model consisting of a margin component (Operating Income/Sales) and turnover component (Sales/Average Assets); reduces to Opera...
financial reporting
accounting fundamentals
Return on Investment (ROI)
Return on investment (ROI) - The earning power of an asset or activity measured as a ratio of the net income of the activity to the operational cost. ROI lets a...
finance
accounting
Revenue
revenue - Inflows and other benefits received in exchange for the providing of goods and services
accounting
Revenue Expenditure
revenue expenditure - Not a capital expenditure; to be expensed as incurred
accounting
Revenue Recognition
revenue recognition - The point at which revenue is recognized in the accounting records; ordinarily the point of sale
accounting
Reversing Entry
reversing entry - Optional accounting procedure which may prove useful in simplifying record keeping; a journal entry to "undo" an adjusting entry
accounting
ROI (Return on Investment)
ROI (Return on Investment) - a financial metric that measures the profitability of an investment relative to its cost
finance
metrics
+2
Rules-based
rules-based - The idea that accounting standards must be very specific to provide adequate guidance and drive consistency in reporting
accounting
S
Sales Budget
sales budget - A budget that details anticipated sales levels
financial planning
Sales Discounts
sales discounts - A cash discount offered to customers to encourage prompt payment of invoices
accounting
Sarbanes-oxley Act
Sarbanes-Oxley Act - "SOX" -- Legislation that imposes stringent controls over reporting and auditing; created the Public Accounting Oversight Board
auditing
Scattergraph
scattergraph - A simplistic mapping of observed data points, where a line is "visually" drawn to represent the estimated cost function
cost accounting
Scorecards (Balanced)
scorecards (balanced) - A system for evaluating elements that are important to the organization and under the control of an employee holding that position
accounting
Secured Bond
secured bond - A bond that provides specific assets as collateral to help assure the payment stream
accounting fundamentals
Secured Loan
Secured Loan - Loan where the lender has taken a special claim on particular assets or revenues of the company to give extra protection in the event of the loan...
finance
accounting
Securities
Securities - Government bonds, ordinary shares in companies, debentures, loans, preference shares, etc. are all collectively described as securities.
finance
accounting
Securities and Exchange Commission
Securities and Exchange Commission - "SEC" -- regulatory body with which public companies must file and report
accounting
Security
Security - Typically required by lenders against a loan, such as premises or plant equipment.
finance
accounting
Segment
segment - A business unit for which separate financial information is evaluated by an operating decision maker who allocates resources and judges performance...
financial reporting
Serial Bond
serial bond - A bond issue that has multiple repayment dates, rather than the entire issue maturing at one fixed maturity date
accounting
Service Life
service life - The period of time that a depreciable asset will be in use by an entity; the time interval over which the asset will be depreciated
accounting fundamentals
Sg&a
SG&A - Selling, general, and administrative costs; the period costs of the business
cost accounting
Sg&a Budget
SG&A budget - A budget that details anticipated selling, general, and administrative costs
cost accounting
financial planning
Share Capital
Share Capital - Name given to the total amount of cash which the shareholders have contributed to the company.
finance
accounting
Share Certificate
Share Certificate - A document providing evidence of share ownership.
finance
accounting
Share Premium
Share Premium - The price paid for shares in a company over and above their nominal value.
finance
accounting
Shareholders
Shareholders - Owners of a limited liability company.
finance
accounting
Significant Influence
significant influence - The ability to sway management and decision making of another entity, but generally not enough to assert absolute control
accounting
Simple Interest
simple interest - Interest calculations that do not provide for periodic inclusion of accumulated interest into the base on which interest is calculated
accounting
Single-step Income Statement
single-step income statement - A simple income statement with a section for all revenues and another for all expenses; there is no direct association between...
financial reporting
Sinking Fund Bond
sinking fund bond - A bond issue that requires periodic setting aside of monies into a separate fund to provide for eventual repayment of the debt at maturity
accounting
Six Sigma
Six Sigma - A trademarked quality management system developed by Motorola; driven by pursuit of statistical results that reflect near perfection in productio...
cost accounting
Sme
SME - Small or Medium Sized Enterprises. A business is deemed an SME if it meets two of three criteria: it has a turnover of £25m or less, it employs fewer ...
finance
accounting
Sole Proprietorship
sole proprietorship - A non-corporation business owned by a sole individual
accounting
Sole Trader
Sole Trader - An individual owning and operating a business alone.
finance
accounting
Source Document
source document - A document evidencing a transaction or event and potentially providing for the initiation of a journal entry
accounting
Special Order
special order - A customer order that is outside of the normal pricing and terms
accounting
Specific Identification Method
specific identification method - Inventory costing method where the actual cost of each unit of merchandise is tracked and used for accounting purposes
cost accounting
Stable Currency Assumption
stable currency assumption - An accounting assumption that presumes the currency is not impacted over time by inflation
accounting
Stakeholders
Stakeholders - A general term devised to indicate all those who might have a legitimate interest in receiving financial information about a business because the...
finance
accounting
Standard Cost
standard cost - A measure of what costs should be incurred to achieve the observed output
cost accounting
Standards
standards - Benchmarks against which actual productive activity is compared
accounting
Statement of Cash Flows
statement of cash flows - A financial statement that summarizes the cash flows relating to operating, investing, financing, and noncash investing/financing a...
financial reporting
Statement of Retained Earnings
statement of retained earnings - A financial statement that discloses changes in retained earnings during a designated period of time; those changes usually ...
financial reporting
Statement of Stockholders' Equity
statement of stockholders' equity - A financial statement that is often presented in lieu of a statement of retained earnings and other disclosures about equ...
financial reporting
accounting fundamentals
Static Budget
static budget - A budget that does not anticipate alternative outcomes; estimated sales and expenses are fixed and establish the relevant benchmarks
financial planning
Step Cost
step cost - A cost function that is fixed over a range, and then increases by a measured step to a new level at the next higher increment of activity
cost accounting
Step Method/Allocating Service Cost
step method/allocating service cost - An allocation process whereby some service department costs may be assigned to other service departments as part of a s...
cost accounting
Stock
stock - Transferable units of ownership in a corporation
accounting
Stock Dividend
stock dividend - A noncash corporate activity to provide shareholders with additional shares in proportion to existing ownership; makes for more shares outst...
accounting fundamentals
Stock Split
stock split - A corporate action to increase the number of shares and reduce the par per share by a stipulated ratio (e.g., 2 for 1)
accounting
Straight-line Depreciation
straight-line depreciation - A simple depreciation method by which the depreciable base is spread uniformly over the service life
accounting
Straight-line Method
straight-line method - A method for amortizing premiums and discounts on bonds; the premium or discount is spread uniformly over the life of the bond as an a...
accounting
Subsidiary Account
subsidiary account - A subcomponent account record providing individual balance details; e.g., the record for one customer out of a group of customers compri...
accounting
Sunk Cost
sunk cost - Historical amount expended on a project or object; not relevant to current decisions or future actions
accounting
Sustainability
sustainability - Development without depletion of natural resources or negative effects on the environment
accounting
Suta
SUTA - State Unemployment Tax levied on employer to provide funds for unemployed workers; rate is adjusted for employer history of layoffs, etc.
taxation
T
T-account
T-account - An abstract representation of an account, with the left side of the "T" representing debits and the right side credits
accounting
Tangible Fixed Assets
Tangible Fixed Assets - A fixed asset (also called a non-current asset) which has a physical existence. Used to differentiate it from an Intangible fixed asset.
finance
accounting
Target Income
target income - A level of income that is to be obtained; CVP projects activity levels necessary to achieve this benchmark
financial reporting
Temporary Accounts
temporary accounts - Accounts that will be reset to a zero balance with each new accounting period; revenue, expense, and dividend accounts (also called "nom......
accounting
Theory of Constraints
theory of constraints - (TOC) Efficiency is improved by seeking out and eliminating constraints within the organization
accounting
Time Value of Money
time value of money - Conceptual notion holding that money to be received sooner is worth more than money to be received later
accounting
Timeliness
timeliness - An enhancing quality of accounting such that information is available in sufficient time to be capable of influence
accounting
Top-down Mandated Budget
top-down mandated budget - A budget approach where upper level management establishes parameters under which the budget is to be prepared
financial planning
Total Paid-in Capital
total paid-in capital - The sum of legal capital plus paid-in capital in excess of par
accounting
Total Quality Management
total quality management - (TQM) A process for continuous improvement by focusing on customer service and systematic problem solving via teams made up of fro...
accounting
Traceable Fixed Costs
traceable fixed costs - Fixed costs that would not exist if the unit under evaluation ceased to exist
cost accounting
Trade Creditors
Trade Creditors - Persons or businesses who supply goods or services to a business in the normal course of trade and allow a period of credit before payment mus...
finance
accounting
Trade Debtors
Trade Debtors - Persons or businesses who buy goods or services from a business in the normal course of trade are allowed a period of credit before payment is d...
finance
accounting
Trade Discount
trade discount - A reduction from list price that is not entered in the accounting records; customarily offered in "setting" the invoice amount
accounting
Trade Receivables
trade receivables - Amounts due from customers from credits sales of products or services
accounting
Trading Securities
trading securities - Investments in debt acquired with the intent of generating profits by reselling the investment in the very near future; classified as cu...
accounting fundamentals
Transfer Pricing
transfer pricing - The system of setting prices at which goods are exchanged between affiliated units; usually involving cross-border transactions
accounting
Translation
translation - Uses prevailing exchange rates to convert assets and liabilities of a foreign affiliate to the reporting currency; adjustment may impact other ...
financial reporting
accounting fundamentals
Treasury Stock
treasury stock - Shares of a company's own stock that it has reacquired
accounting
Trial Balance
trial balance - A listing of account balances from the ledger, used to test the equality of debits and credits
accounting
Turnover
Turnover - The total sales of a business during a specified period.
finance
accounting
U
Underapplied Overhead
underapplied overhead - Applied overhead is less than the actual amount; usually viewed as a unfavorable outcome, because more has spent than anticipated for...
cost accounting
Understandability
understandability - An enhancing quality of accounting such that information is clear and concise to those with reasonable business knowledge
accounting
Unearned Revenue
unearned revenue - Revenue that has been collected in advance of providing goods and services to "earn it;" reported as a liability until earned
accounting fundamentals
Unit-level Activity
unit-level activity - Activities that relate to the number of units of output; each additional unit of production requires another activity
cost accounting
Units-of-output Depreciation
units-of-output depreciation - A depreciation approach where the depreciable base is allocated to the expected total units of output; mileage, hours, etc.
accounting
V
Variable Cost
variable cost - A per unit cost that is the same regardless of volume; total variable cost increases with volume increases
cost accounting
Variable Costing
variable costing - A costing method where inventory absorbs direct costs and variable factory overhead; the income statement identifies the contribution margin
financial reporting
cost accounting
Variable Costs
Variable costs - Costs that vary in some kind of proportion to throughput (production), e.g. materials. Each same product takes the same amount of material, so ...
finance
accounting
Variable Overhead Efficiency Variance
variable overhead efficiency variance - A variance that reflects the level of efficiency associated with the application of variable overhead to production
cost accounting
Variable Overhead Spending Variance
variable overhead spending variance - A variance that reflects the difference between actual variable overhead and standard variable overhead associated with...
cost accounting
Variances
variances - Deviations from the norm that may provide warning signs of situations requiring corrective action by managers
accounting
Venture Capital
Venture capital - Capital invested into projects with long term growth potential but also higher risks, such as start-up businesses.
finance
accounting
Verifiability
verifiability - An enhancing quality of accounting such that different knowledgeable and independent observers reach similar conclusions
accounting
W
W-2
W-2 - An annual statement provided to employees stating the amount of earnings and withholdings; assists employee in preparing their own tax returns
financial reporting
taxation
W-4
W-4 - A form filled out by an employee stating the amount of exemptions to which they are entitled for tax purposes; such exemptions bear on the amount of in...
financial reporting
taxation
Warranty Liability
warranty liability - A liability that is recorded for the future costs of claims that are anticipated because of product warranty agreements
cost accounting
accounting fundamentals
Weighted-average Inventory Method
weighted-average inventory method - Under the periodic inventory system; inventory cost is based on the average cost of units purchased giving consideration ...
cost accounting
Weighted-average Process Costing
weighted-average process costing - A process costing technique where all units of production are assigned the same cost; determined by blending of current pe...
cost accounting
Work in Process
work in process - Goods that are in production but not yet complete; an accumulation of monies spent on direct material, direct labor, and applied manufactur...
cost accounting
Work in Progress
Work in progress - As its name implies, it is the value of the products on which work has been started but is not yet complete.
finance
accounting
Workers Compensation Insurance
workers compensation insurance - Insurance paid by the employer to cover work related injuries sustained by employees
accounting
Working Capital
working capital - The difference between current assets and current liabilities
accounting fundamentals
Z
Zero-based Budgeting
zero-based budgeting - A budget approach where each expenditure item must be justified for each new budget period
financial planning
Welcome to the CFO Upgrade Glossary. Here you’ll find clear, comprehensive definitions of key terms related to ERP systems, AI analysis, and financial automation. Whether you’re exploring ERP integration, understanding AI capabilities, or learning about financial management concepts, this glossary will help you navigate the world of modern business technology.