economics accountancy dictionary

SHORTCUTSA B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Click HereA priori - Literally, "at a prior time" or "in advance"; that which is prior to actual experience.

Abacus - 1. instrument of ancient origin used to perform arithmetic calculations by sliding counters along rods or in grooves. Or) 2. semi-annual accounting research journal (founded in 1965) published by the Sydney University Press, edited by the University of Sydney, Department of Accounting. The subject matter covers all areas of accounting including international accounting.

Abandonment - Voluntary surrender of property, owned or leased, without naming a successor as owner or tenant. The property will generally revert to a person holding a prior interest or, in cases where no owner is apparent, to the state.Abatement - Complete or partial cancellation of a levy imposed by a governmental unit. Abatements usually apply to tax levies, special assessments, and service charges.

Ability- to-pay principle - The idea that taxes should be levied on a person according to how well that person can shoulder the burden

Above full-employment equilibrium - A situation in which macroeconomic equilibrium occurs at a level of real GDP above long-run aggregate supply.

ABC method - Inventory management method that categorizes items in terms of importance. Thus, more emphasis is placed on higher dollar value items ("A"s) than on lesser dollar value items ("B"s), while the least important items ("C"s) receive the least time and attention. Inventory should be analyzed frequently when using the ABC method. The procedure for ABC analysis follows: (1) Separate finished goods into types (chairs of different models, and so on); separate raw materials into types (screws, nuts, and so on). (2) Calculate the annual dollar usage for each type of inventory (multiply the unit cost by the expected future annual usage). (3) Rank each inventory type from highest to lowest, based on annual dollar usage. (4) Classify the inventory as A-the top 20%; B-the next 30%; and C-the last 50% of dollars usage, respectively. (5) Tag the inventory with its appropriate ABC classification and record those classifications in the item inventory master records.

Abnormal returns - The difference between the actual return and that is expected i.e ‘normal return’.

Abnormal spoilage - Spoilage that is recognized as a loss when discovered. Normal spoilage is inherent in the manufacturing process and is unavoidable in the short run. Abnormal spoilage is spoilage beyond the normal spoilage rate. It is controllable because it is a result of inefficiency. It is not a cost of good production, but rather it is a loss for the period. Costs are assigned to the spoiled units and then credited to work-in-progress inventory and debited to a Joss account.Above the line - This term means an item is included in the total that has been calculated. Below the line is items that are underneath the line at which the total is

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Absolute advantage - The situation that exists when a given amount of resources can produce more of some product in one country than in another. Absolute poverty - When only a subsistence level is attained. When only the minimum levels of food, clothing and shelter can be met. Absorb - 1. to incorporate or assimilate amounts in an account in a way in which the first firm or entity loses its identity and is "absorbed" within the second firm or entity. Examples include the sequential transfer of expenditure account amounts to work-in-progress, finished goods, and cost of sales. Or) 2. to distribute or spread costs by the process of appropriation or allocation. Absorption costing - Method in which the costs of manufacturing, variable and fixed, are treated as product costs, the non-manufacturing costs (i.e, administrative and selling expenses) are classified as period costs. Absorption costing for inventory valuation is required for external reporting.

A comparison between absorption and direct costing follows:

Absorption Costing

1. Required for outside reporting 2. Includes fixed overhead as an inventoriable cost

3. Stresses gross profit

4. Has a higher net income when production exceeds sales

Variable Costing

1. Not accepted for outside reporting 2. Does not include fixed overhead as an inventoriable cost

3. Stresses contribution margin

4. Has a higher net income when sales exceed production




Absorption variance - The variance from budgeted absorption costing of manufactured product and the actual cost of the manufactured product.

ACAS – A body which mediates where conflict exists in business.

Accelerated depreciation - Method recognising high, amounts of depreciation in the earlier years and lower amounts in the later years of a fixed asset's life. Acceleration hypothesis - The hypothesis that when national income is held above potential, the persistent inflationary gap will cause inflation to accelerate, and when national income is held below potential, the persistent recessionary gap will cause inflation to decelerate.

Accelerationist theory - The theory that unemployment can only be reduced below the natural level at the cost of accelerating inflation.

Accelerator - The level of investment depends upon the rate of growth of demand. A given percentage change in demand may require a larger percentage change in investment. The accelerator shows by how much the rate of growth of investment exceeds the rate of growth of demand (and of output).

Accelerator theory - The level of investment depends the rate of change of national income, and a result tends to be subject to be substantial fluctuations.

Account - Is a section of the general ledger that specifically deals with a single aspect of the business (eg. an electricity account, rent account, advertising expense account).

Accounts - The financial records of a business' transactions.

Account aging - is used to refer to tracking past due accounts in accounts receivable (debtors) or accounts payable (creditors) using the dates the charges were first recorded.

Accountant - One who performs accounting services. Accountants prepare financial statements and tax returns, audit financial records, and develop financial plans. They work in private accounting (e.g., for a corporation), public accounting (e.g., for a CPA firm), not-for-profit accounting (e.g., for a governmental agency). Accountants often specialise in a particular area such as taxes, cost accounting, auditing, and management advisory services. A book keeper is distinguished from an accountant as one who employs lesser professional skills. The bookkeeping function is primarily one of recording transactions in the journal and posting to the ledger. Accounting - 1. Umbrella term encompassing the multitude of disciplines including auditing, taxation, financial statement analysis, and managerial accounting. Accounting-related functions include financial accounting, cost accounting, not-for-profit accounting, and financial planning. Or 2. Process of recording, measuring, interpreting, and communicating financial data. The accountant prepares financial statements to reflect financial condition and operating performance. Also, the accounting practitioner renders personal accounting services to clients such as preparing personal financial statements and tax planning.

Accounting concepts - Are the basic underlying assumptions that are adhered to in the preparation of financial statements, i.e., theses include the assumptions




of accruals, going concern, consistency and prudence.

Accounting convention - Methods or procedures employed generally by accounting practitioners. They are based on custom and are subject to change as new developments arise. The accountant in performing the reporting function should follow existing accounting conventions that apply to the given situation. Accounting cost – The value of an economic resource used up in production.

Accounting cycle - The transactions that occur for a business over the whole financial year.

Accounting entity assumption - This assumption treats the firm as a separate legal entity from the owner.

Accounting entity - Business or other economic unit (including subdivisions) being accounted for separately. A system of accounts is kept for the entity. An accounting entity is isolated so that recording and reporting for it are possible. Examples of accounting entities are corporations, partnerships, trusts, and industry segments. A distinction should be made between an accounting entity and a legal entity. For example, a proprietor's accounting entity might be the business whereas the legal entity would include personal assets. Also, in the corporate environment, affiliated companies can be differently organised for legal and accounting purposes (e.g., industry segments).

Accounting equation - The basis of all accounting. It shows the balance sheet: assets = liability + equity, but can also be expressed as assets - liabilities = owner's equity.

Accounting event - Transaction entered in the accounting records of a business. It can be an external transaction-that is, one with an outsider, such as recording a sale. It can also refer to an internal transaction such as making an adjusting entry (e.g., expense or revenue accrual).

Accounting period - Refers to the time period for which accounts cover, usually it is one year. In Hong Kong the accounting year is from April 1st to March 31st

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Accounting profit - The difference between total revenues and total explicit costs.

Accounting principles - Rules and guidelines of accounting. They determine such matters as the measurement of assets, the timing of revenue recognition, and the accrual of expenses. The "ground rules" for financial reporting are referred to as generally accepted accounting principles (GAAP). An example of an accounting principle is accrual.Accounting ratio - Usually is the comparing of two or more sets of accounting data. Often this is done by dividing or in some other way manipulating one f item on the financial statement by another. Ratios help with the interpretation of financial statements by focusing on specific relationships.

Accounting software - Programs used to maintain books of account on computers. The software can be used to record transactions, maintain account balances, and prepare financial statements and reports. Many different accounting software packages exist, and the right package must be selected given the client's circumstances and needs. An accounting software package typically contains numerous integrated modules (for example, spreadsheet and word processing abilities). Some modules are used to account for the general ledger, accounts receivable, accounts payable, payroll, inventory, and fixed assets.




Accounting system - Methods, procedures, and standards followed in accumulating, classifying, recording, and reporting business events and transactions. The accounting system includes the formal records and original source data. Regulatory requirements may exist on how a particular accounting system is to be maintained (e.g., insurance company).Accounts payable - Are the amounts owed by a business to others. It is a summarised from the purchases ledger.

Accounts payable ledger - A subsidiary ledger in which a summary of money owed to the business suppliers is kept. The General ledger will just of the total of all outstanding amounts recorded in the subsidiary ledger.

Accounts payable to sales (creditors turnover ratio) - Is a measure of the speed with which a firm pays suppliers compared to sales.

Accounts receivable - An account in the General Ledger which contains the balance of all outstanding amounts owed to the business as a result of credit sales.

Accounts receivable ledger - A subsidiary ledger which holds the individual records of the business credit customers. The general ledger simply has the total amount that is taken from this ledger.

Accounts receivable turnover (debtors turnover ratio) - This is a measure of the speed by which customers pay there bills. The ratio compares net credit sales to average accounts receivable.

Accretion - 1, growth in assets through mergers, acquisitions, and internal expansion. Examples are timber, livestock, nursery stock, and aging of wine. Or 2. adjustment of the difference between the face value of a bond and the price of the bond bought at an original discount.

Accrual - The recognition of when expenses when incurred or revenue when earned or regardless of when the actual cash is received or paid.

Accrual method of accounting - This method of accounting is required under law in most countries. It means that revenue and expenses must be recorded in the financial year that the activity takes place. This gives rise to the need to make adjusting entries. i.e. net profit is the difference between revenues and the expenses incurred in generating those revenues.

Accruals - If during the course of a business certain charges are incurred but no invoice is received then these charges are referred to as accruals (they 'accrue' or increase in value). A typical example is interest payable on a loan where you have not yet received a bank statement. These items (or an estimate of their value) should still be included in the profit & loss account. When the real invoice is received, an adjustment can be made to correct the estimate. Accruals can also apply to the income side.

Accrued assets - Assets from revenues earned but not yet received.

Accrued expenses - Expenses incurred during an accounting period for which payment is postponed.




Accrued income - This refers to income earned during an accounting period but not paid by the end of that period.

Accrued liability - This is a liability which was incurred, but for which payment is not yet made, during a given financial period. Common examples would be: wages, taxes, etc.

Accrued revenue – Money that has been earned but not yet received as of the end of the accounting period.

Accumulated depreciation account - This is an account in General Ledger which records the combined amount of depreciation that has been charged against that asset. When the value in this account is equal to the purchase price of the fixed asset the asset is said to have been written off. All fixed assets (except land) have their own accumulated depreciation account. Also referred to as PFD (provision for depreciation).

Accumulation - 1. cumulative retained profit. Or 2. investment of a fixed dollar amount regularly and reinvestment of dividends and capital gains. Or 3. process of compounding. Or 4. periodic addition of interests to the principal amount.

Accuracy - Correctness of an accounting item (e.g., account balance, invoice, financial statement); also called accurate presentation. The concept refers to an accounting objective that the item fully reflects and valuates the set of facts involved, including all economic implications of the underlying transactions and events.

Acid test ratio - Similar to the current ratio but excludes, stocks from current assets. Sometimes called the quick ratio.

Acquisition - One company taking over controlling interest in another company. See also MERGER.

Acquisition cost - The amount, net of both trade and cash discounts, paid for property, plus transportation costs and ancillary costs.

Active Balances - Money held for transactions and precautionary purposes.

Activity based costing (ABC) - This system of costing identifies the various different activities performed in a firm and uses a variety of cost drivers (volume and non-volume based cost drivers) to assign overhead costs (or indirect costs) to products. ABC recognises that there is a causal relationship of cost drivers with the firms activities.Activity based management (ABM) - Approach to the management of activities within business processes as the route to continuously improve both the value received by customers and the profit earned by providing this value. Causes of activities are identified, measured, and used along with other activity information for performance evaluation; emphasis is on the reduction or elimination of nonvalue-adding activities. ABM draws on ABC data as a major source for information.

Activity drivers - In activity based costing (ABC), activity costs are assigned to outputs using activity drivers. Activity drivers assign activity costs to outputs based on individual outputs’ consumption or demand for activities.

Actual cost - Expenditure required to buy or produce an item. T actual cost of a purchased item includes the list price (net of discount plus delivery and storage.




The actual cost to manufacture a product the total of direct material, direct labour, and factory overhead.

Actual GDP - The gross domestic product that the economy in fact produces.

Actual growth - The percentage annual increase in national output actually produced.

Adaptors - Individuals who tend to solve problems using existing or slightly modified approaches than those used in the past by the business.Adaptive Expectations Hypothesis - The theory that people base their expectations of inflation on past inflation rates.

Added value - The difference between the selling price of a product or service and the cost of inputs such as materials and components.

Add-ins/ons - 1. refers to when an item is designed or intended for use in conjunction with another item, e.g. accessories to a vehicle in a purchase order. Or 2. can also refer to accessory computer software program that extends the capabilities or performance of an existing application.

Additional paid in capital - excess received from stockholders over par value or stated value of the stock issued; also called contributed capital in excess of par. Adequate disclosure - Comprehensive and clear disclosure in the body of financial statements, footnotes, or supplemental schedules so that readers of a company's financial position and operating results can make proper investment and credit decisions.

Ad hoc - Normally is used to mean the being concerned with a specific end or goal, often set up with quite limited planning e.g., a ad hoc committee established to handle a specific problem.

Adjunct account - Is an that is used to accumulates either/or subtractions or additions to another account. Thus the original account may retain its main and specific identity. Examples include accounts like accumulated depreciation, which is a reduction to the fixed asset.Adjustable Peg - A system in which exchange rates are fixed in the short term but are occasionally changed in response to persistent payments imbalances.Adjusting entries - are needed to correctly match revenue and expenses to the correct financial year. Some transactions that are entered have attributed the revenue and expenses to the wrong financial year.

Adjustments may include:

Prepayments (Deferrals) – cash paid before consumption

Prepaid expenses – for expenses paid in cash and recorded as assets before they are used. Unearned revenue – for revenues received in cash and recorded as liabilities before they are earned.

Accruals – cash paid after consumption




Accrued expenses – for expenses incurred but not yet paid in cash or recorded. Accrued revenue – for revenues earned but not yet recorded or received

Deprecation – The act of expensing fixed assets over time

Depreciation – the process of expensing a fixed asset over its useful life. Normally done to regulations set out in taxation law. Adjustment - may be either: 1. an decrease or increase to an account resulting from using adjusting entries. Or 2. may also refer to when an account balance is changed due to some event, e.g., adjustment of an account due to the return of merchandise for credit.

Administered price -A price set by the conscious decision of a seller rather than the impersonal market forces.

Ad valorem tariffs - Tariffs levied as a percentage of the price of the import. Ad valorem tax - A tax on a good or service whose amount depends on the value of the good or service.Advance - Normally refers to an amount paid before has been earned. e.g. payment ahead of actual expenditures on a construction project.

Adverse opinion - Term used when an auditor reports that the company's financial statements do not present fairly the financial position, results of operations, or changes in financial position or are not in conformity with GAAP.

Adverse selection - Self-selection, within a single risk category, of persons of above-average risk.

Advertising elasticity of demand - The responsiveness demand to a change in advertising expenditure.

Advertising media - The various means by which advertisements can be communicated to the public.

Advertising: sales ratio – Advertising expenditure expressed as a % of sales

Affiliate – A relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company.

Agency - Relationship between two individuals where one is a principal and the other is an agent representing the principal in transactions with other parties. For example, a trust officer in a bank can engage in activities on behalf of clients.

Agency costs - Reduction in the value of the organisation when an agent (a subunit manager) pursues his interest to the detriment of the principal's (the organization's) interest.Agent - An independent person or business that is appointed to deal with the sales and distribution of a product or range of products.




Agents - Decision makers, including households, firms, and government bodies.

Aggregate - the sum or total.

Aggregate demand - Total desired purchases by all the buyers of an economy's output. It consists of four elements, consumer spending (C), investment (I), government spending (G) and the expenditure on exports (X), less any expenditure on imports of goods and services (M): AD = C + 1+ G + (X -M).Aggregate demand (AD) curve - A curve showing the combinations of real national income and the price level that makes aggregate desired expenditure equal to national income; the curve thus relates the total amount of output that will be demanded to the price level of that output.

Aggregate demand for labour curve - A curve showing the total demand for labour in the economy at different levels of real wage rates.Aggregate demand shock - A shift in the aggregate demand curve.

Aggregate expenditure (AE)- Total desired expenditure on final output of the economy; AE = C + 1 + G + (X - M), representing the four major components of aggregate desired expenditure.

Aggregate expenditure (AE) function - The function that relates aggregate desired expenditure to national income.

Aggregate supply - The sum total of planned production for the whole economy. Aggregate supply curve - The relationship between planned rates of total production for the whole economy and the price level. Aggregate supply of labour curve - A curve showing the total number of people willing and able to work at different average real wage rates. Aggregate supply shock - A shift in the aggregate supply curve. Agile manufacturing - A strategy which allows a business to react to rapidly changing conditions.Aging of accounts - Classifying accounts by the time elapsed after the date of billing or the due date. The longer a customer's account remains uncollected or the longer inventory is held, the greater is its realisation risk. If a customer's account is past due, the company also has a opportunity cost of funds tied-up in the receivable that could be invested elsewhere for a return.

Agreed upon procedures - Applies to engagements relating to agreed-upon procedures to specified elements or accounts. Agreed-upon procedures is when the accountant is hired to issue a report of findings based on specified financial statement items. The users of the report agree upon the procedures to be conducted by the accountant that the user believes are suitable. The user takes responsibility for the adequacy of the procedures. In this engagement, the accountant does not express an opinion or negative assurance. Instead, the report should be in the form of procedures and findings. A representation letter is prepared that depends on the nature of the engagement and the specified users.

AIDA model - S simple way of planning an advert's design: it stands for attention, interest, desire, action.




Allocate - 1. spread a cost over two or more accounting periods usually based on time. An example is assigning the prepaid cost of a three-year insurance policy by one-third each year. Or 2. charge a cost or revenue to a number of departments, products, processes, or activities on some rational basis. For example, a cost may be assigned to divisions of a company based on sales. Or 3. distribute the cost associated with the acquisition of two or more items based on their relative fair market values. This relates to a lump sum purchase.

Allocation - The act of distributing by allotting or apportioning; distribution according to a plan, e.g., allocating costs is the assignment of costs to departments or products over various time periods, products, operations, or investments. See allocate.

Allocative efficiency - The situation that occurs when no resources are wasted - when no one can be made better off without making someone else worse off. Allocative efficiency in any activity is achieved where any reallocation would lead to a decline in net benefit. It is achieved where marginal benefit equals marginal cost. Private efficiency is achieved where marginal private benefit equals marginal private cost (ME = MC). Social efficiency is achieved where marginal social benefit equals marginal social cost (MSB = MSC)

Allowance -1. an acceptable reduction in quantity or quality such as normal spoilage in a manufacturing operation. Or 2. a reduction in the amount owed a supplier because of damaged goods received or delays encountered. Or 3. a valuation account reducing the cost of an asset such as the allowance to reduce marketable securities from cost to market value.

Allowance for bad debts (provision for bad/doubtful debts) - An account established to record a subtraction from accounts receivable, to allow for those accounts that will not be paid.

Allowance method - The allowance method results in a good matching of bad debt expense against sales. The journal entry at year-end to record anticipated uncollectibility of accounts receivable is to debit bad debts and credit allowance for bad debts. When it is known that a customer will actually not pay the balance, because of bankruptcy, for example, the entry is to debit allowance for bad debts and credit accounts receivable. If for whatever reason the customer does pay at a later date, there is a recovery; reverse the last entry and make a second entry debiting cash and crediting accounts receivable. It should be noted that firms other than small financial institutions are required to use the direct write off method for tax purposes.

Amalgamation - A consolidation or merger, as of several corporations. In business, the distinction being that the surviving entity incorporates the asset base of others into its base.

Amortisation - The depreciation (or reduction) applied to an intangible asset i.e. Goodwill, patent etc. This account expenses the value of the intangible asset over its life

Ancillary - Normally is used to refer to something lesser or extra importance. An example of ancillary revenue would be revenue gained from the selling of products or services that are not considered to be primary to the businesses generation of revenue.

Annual general meeting (AGM) - A legal requirement for all companies; all shareholders may attend. They vote on who they want to be on the board of directors for the coming year and on other issues raised by the board or themselves.




Annualise - A statistical technique whereby figures covering a period of less than one year are extended to cover a 12-month period. The technique, to be accurate, must take seasonal variations into consideration.

Annualised hours contracts - A payment system based on a fixed number of hours to be worked each year. but a flexible number of hours each day, week or month.

Annual report - Evaluation prepared by companies at the end of the reporting year which might be either on a calendar or fiscal basis. Contained in the annual report are the company financial statements including footnotes., supplementary schedules, managements discussion of analysis and earnings, president's letter, audit report, and other explanatory data (e.g., research and marketing efforts) helpful in evaluating the entity's financial position and operating performance. The annual report is read by stockholders, potential investors, creditors, employees, regulatory bodies, and other interested financial statement users.

Annuity - in finance, is a series of fixed payments, usually over a fixed number of years; or for the lifetime of a person, in which case it would be called a life-contingent annuity or simply life annuity.

Anomaly - An exception from the common rule. It is something that is irregular and difficult to explain using existing theory or rules. Examples may include the fact that some small stocks to outperform large stocks on ocasion.

Ansoff matrix - A model which identifies growth strategies for businesses based on an analysis of their products and their markets

Anticipated inflation - An inflation rate that has been correctly forecast.

Antitrust policy - Policy designed to prohibit the acquisition and exercise of monopoly power by business firms.Apportion - To share out or divide according to a plan.

Appraisal – 1. evaluating the usefulness of the employee the business. Or 2. estimate of the value of an asset. An asset may be a piece of property, a collectible, or a precious metal. In the case of property, for example, an appraisal is made for the purposes of: (1) allocating the purchase price to the assets acquired (e.g., land, building, equipment); (2) determining the amount of hazard insurance to carry; (3) determining the value at death for estate tax purposes; and (4) determining a reasonable asking price in a sale. Or 2. activities such as inspection and testing of materials, in-process items, finished goods, and packaging.

Appreciation - The increase in the value of an asset in excess of its depreciable cost, which is due to economic, and other conditions, as distinguished from increases in value due to improvements or additions made to it. Or an increase in the value of a domestic currency in terms of other currencies.

Appropriate / Appropriation / Appropriated - Distribution of net income to different accounts and may also include the allocation of retained earnings for a specific or designated purpose, e.g. new equipment.

Appropriation account - The part of the profit and loss account which shows how the profit after tax is distributed - either as dividends or kept in the company as retained profits.




Appropriate technology - A technology which accords with the factor endowments of the country. Thus labour intensive technology would be appropriate in a labour abundant economy and capital intensive technology would be inappropriate.

Arbitrage - The movements of funds to take advantage of differences in exchange or interest rates; such movements quickly eliminate any such differences.

Arbitrator - A person who listens to both sides in an industrial dispute (trade union and management) and then gives a ruling of what the arbitrator thinks is fair to both sides.

Arc elasticity - A measure of the average responsiveness of quantity to price over an interval of the demand curve.

Arm’s length transaction - Is when the transaction is conducted as though the parties to the transaction were unrelated, thereby avoiding any semblance or accusation of conflict of interest.

Arrears - Bills which should have been paid. For example, if you have forgotten to pay your last 3 months rent, then you are said to be 3 months in arrears on your rent.

Arrow's impossibility theorem - A mathematical result showing that, under certain assumed conditions, there is no scheme for aggregating individual preferences into a valid set of social preferencesArticles of incorporation - The primary legal document of a corporation; they serve as a corporation's constitution. The articles contain basic information on the corporation as required by law.

ASEAN (Association of Southeast Asian Nations) - A trading block of countries in SE Asia. ASEAN is focused on developing a free trade area among the member nations.

Asian tigers - Four Asian nations, Hong Kong, Singapore, South Korea and Taiwan, with spectacularly high growth rates of manufactured exports.

Ask price - The term "ask" normally refers to the lowest price at which a trader will sell stock at any given time. The term "bid" refers to the highest price a trader will pay to purchase the stock. Traders make money on the difference between the bid price and the ask price. That difference is refereed to as the "spread".

Assessment - 1. proportionate share of a shared expense. Or 2. amount of tax due to a the governmental or other association.

Asset - Anything of value that is owned by a business or in other words assets represent what a business owns or is due. Equipment, vehicles, buildings, creditors, money in the bank, cash are all examples of the assets of a business. Typical breakdown includes 'Fixed assets', 'Current assets' and 'non-current assets'. Fixed refers to equipment, buildings, plant, vehicles etc. Current refers to cash, money in the bank, debtors etc.




Asset-based (asset-led) marketing - Where a business develops and markets products based on its main strengths.

Asset stripping - The selling off of profitable sections and closing down of loss making sections of business following an acquisition.

Asset structure – The proportion of capital employed in each type of asset.

Asset turnover - A measure of the productivity of assets. This ratio measures the efficiency of corporate assets in generating revenue. A higher ratio is desired. What is considered a high ratio for one industry, however, may be considered a low ratio for another industry. If there is a low turnover, it may be an indication that the business should either utilize its assets in a more efficient manner or sell them. Asset turnover ratios can also be calculated for specific assets such as the ratios of sales to cash and sales to inventory. Higher ratios reflect favourably on the firm's ability to employ assets effectively.

Assisted areas - Areas that are designated as having problems by the UK or EU and are eligible for support in a variety of forms.

Associate - In business, is when one person is brought together with another person or company into a relationship to perform some aspect of business.

Asymmetric Information - Where one party in an economic relationship (e.g. an agent) has more information than another (e.g. the principal).

Asymmetric Shocks - Shocks (such as an oil price increase or a recession in another part of the world) that have different-sized effects on different industries, regions or countries.At cost - The 'at cost' price usually refers to the price originally paid for something, as opposed to, say, the retail price.

ATM - Automatic teller machine.

At risk - Tax term. A taxpayer can deduct losses for tax purposes only to the degree of risk. At-risk amounts are restricted to the cash investment and the debt for which the taxpayer is personally liable. Assume an individual incurs losses from real estate activities of $40,000. If the cash investment and personal debt incurred were $35,000, the most that could be deducted as losses is $35,000. Note there is an expansion of the at-risk amounts to real estate only to include certain non-recourse loans from qualified lenders.

Attest - Formal statement by an auditor after thorough examination and consideration, as to whether financial statements fairly present financial position and operating results. With an attest, the public accountant provides an objective evaluation to aid financial statement users.Attrition - Reduction in numbers usually as a result of resignation, retirement, or death.

Auction (market) – A trading market in which the buyers enter bids and sellers enter competitive offers at the same time. This, as different to the over-the-counter market, where the trades are negotiated. Some examples are the NYSE and AMEX.

Audit - The process of checking every entry in a set of books to make sure they agree with the original paperwork (eg. checking a journal's entries against the




original purchase and sales invoices).

Audit committee - Body formed by a company's board of directors to oversee audit operations and circumstances. It selects and appraises the performance of the CPA firm. Audit trail - A list of transactions in the order they occurred.

Auditing – An accounting procedure which checks thoroughly the authenticity of a company’s accounts.

Auditing evidence - Proof the auditor uses to substantiate a recorded item so that proper reliance may be placed on financial statement figures. Proof of accounting data includes examining source documents in support of a transaction. The degree to which evidence gathering is necessary partly depends on the quality of the client's internal control system. Also, the trend in an account should be looked at over time as a basis for determining the extent of testing required. For example, if travel expense went from 2% of sales last year to 25% of sales this year, this inconsistency requires close examination. Test checks of accounts and transactions are necessary. Evidence can be obtained through various means such as physical verification of inventory records or confirmation letters sent to verify recorded amounts of accounts receivable.

Auditing standards - Guidelines that auditors follow when examining financial statements and other data.

Audit opinion - Report rendered by the independent CPA at the end of an audit investigation. The auditor reports on the nature of his or her work and on the degree of responsibility assumed.

Auditor - An accountant usually certified by a national professional association of accountants, if one exists in the corporation’s country, or certified by another country's recognized national association of accountants. Corporations will often work with both internal auditors and external auditors.

Audit report - Is the signed, document which gives the results of the audit. Results of the audit may include the findings, and conclusions or opinions, also recommendations may be made.

Audit trail - A step-by-step record by which financial, business, and quality assurance data can be traced to its source. For example: checking the validity of an accounting entry through the step-by-step record by which accounting data can be traced to their source.

Autarky - A situation in which a country engages in no foreign trade.

Authority - The right to command a situation, a task or an activity.

Authorised share capital – The maximum amount which can be legally raised by a company.




Authorised capital stock - The maximum number of shares of common stock that can be issued under a company's Articles of Incorporation. Issued shares are normally less than the number of authorised shares.

Autocratic leadership - A leadership style where the leader makes all decisions independently. The instructions and strategies are issued from above with little opportunity for contributions to decision-making from less senior employees .

Automatic teller machine (ATM) - An unattended machine (outside some banks) that dispenses money or allows an individual to conduct unassisted business transactions with the ATM when a personal coded card is used.

Automatic fiscal stabilisers - Tax revenues that rise and government expenditure that falls as national income rises. The more they change with income, the bigger the stabilising effect on national income.

Automatic stabiliser - A mechanism that decreases the size of fluctuations in aggregate expenditure.

Autonomous consumption - The part of consumption that is independent of, or does not depend on, the level of disposable income. Changes in autonomous consumption shift the consumption function.Autonomous expenditure - In macroeconomics, elements of expenditure that do not vary systematically with other variables, such as national income and the interest rate, but are determined by forces outside of the theory.

Average age of inventory - Calculated by the formula: 365 / inventory turnover.

Average cost or unit cost – The cost of producing one unit, calculated by dividing the total cost by output

Average (total) cost - Total cost (fixed plus variable) per unit of output.Average cost method - Is using a weighted average cost for items in inventory rather than actual cost for each specific item.

Average cost pricing or mark-up pricing - Where firms set the price by adding a profit mark-up to average cost.

Average fixed costs - Total fixed costs divided by the number of units produced.

Average product (AP) - Total product divided by the number of units of the variable factor used in its production.

Average propensity to consume (APC) - Consumption divided by disposable income for any given level of income. The proportion of total disposable income that is consumed.

Average propensity to save (APS) - Saving divided by disposable income. The proportion of total disposable income that is saved.




Average rate of return (ARR) - A method of investment appraisal which measures the net return per annum as a percentage of the initial spending. Average revenue (AR) - Total revenue per unit of output. When all output is sold at the same price, average revenue will be the same as price. Average tax rate (ATR) - The total tax payment divided by total income. The proportion of total income paid in taxes.

Average total costs (ATC) - Total costs divided by number of units produced. Average variable costs (AVC) - Total variable costs divided by the number of units produced.Average settlement period - Is calculated: For Debtors = Trade Debtors X 365 days / Credit Sales For Creditors = Trade Creditors X 365 days / Credit Purchases.

Avoidable cost - Cost that will not be incurred if an activity is suspended; also called escapable cost. For example, it is the cost that can be saved by dropping a particular product line or department (e.g., salaries paid to employees working in a particular product line or department). All costs are avoidable, except (1) sunk costs and (2) costs that will continue regardless of the decision.

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Back charge - Item previously charged to an account but unpaid. The current invoice requests payment of the previous charge as well as of current charges.

Back door listing - This is a method that a company which failed to get listed on the stock exchange acquires and merges with a company that is already listed on that exchange, thereby getting a 'back door' listing.

Backlog - Is used to refer to the value of the unfilled orders placed with a company (manufacturing).

Back order - Customer's order that cannot be filled at the present time usually because the merchandise is not currently in stock. As soon as the product is available, it will be shipped to the customer. There usually exists a company policy of how long an unshipped order remains an order without some sort of confirmation or communication. An excessive amount of back orders may indicate to the accountant that poor inventory planning exists.

Back up - To make a duplicate copy of original data or files usually stored on a separate data storage medium. Backup ensures the recoverability of files in the event of loss of the original data.

Backward vertical integration - Merging with a firm involved with the previous stage of production.Bad debt - Account or note receivable that proves to be entirely or partially uncollectible despite collection efforts. If the allowance method of estimating bad debts is used, the entry at time of uncollectibility is to debit allowance for bad debts and credit accounts receivable. If the direct write-off method is employed, the entry is to debit bad debt expense and credit accounts receivable.

Bad debts account - An account in the General Ledger to record the value of un-recoverable debts from customers. Real bad debts or those that are likely to happen can be deducted as expenses against tax liability (provided they refer specifically to a customer).

Bad debts reserve account - An account used to record an estimate of bad debts for the year (usually as a percentage of sales). This cannot be deducted as an expense against tax liability.

Balance - 1. the difference between total debits and total credits in an account. Or 2.the equality of total debits and total credits of all accounts in a general ledger in the preparation of a trial balance. Or 3. the equality of a control account in the general ledger (e.g., accounts receivable) and the total balance of all accounts in the subsidiary ledger (e.g., customer accounts). Or 4. balance in a bank account. Or 5. balance of a loan.

Balanced budget - One in which total expenditures equal total revenue. An entity has a budget surplus if expenditures are less than revenues. It has a budget deficit if expenditures are greater than revenues.

Balanced budget multiplier - The change in income divided by the tax-financed change in government expenditure that brought it about.

Balanced scorecard - An approach to performance measurement that also focuses on what managers are doing today to create future shareholder value. A balanced scorecard is a set of performance measures constructed for four dimensions of performance. The dimensions are financial, customer, internal processes, and learning and growth. Having financial measures is critical even if they are backward looking. After all, they have a great effect on the evaluation of the




company by shareholders and creditors. Customer measures examine the company's success in meeting customer expectations. Internal process measures examine the company's success in improving critical business processes. And learning and growth measures examine the company's success in improving its ability to adapt, innovate, and grow. The customer, internal processes, and learning and growth measures are generally thought to be predictive of future success (i.e., they are not backward looking). After reviewing these measures, note how "balance" is achieved: (I) performance is assessed across a balanced set of dimensions (financial, customer, internal processes, and innovation); (2) quantitative measures (e.g., number of defects) are balanced with qualitative measures (e.g., ratings of customer satisfaction); and (3) there is a balance of backward-looking measures (e.g., financial measures like growth in sales) and forward-looking measures (e.g., number of new patents as an innovation measure).

Balance of payments (BOP) - Record of the transactions of a country with the rest of the world. There are three main accounts in the balance of payments: (I) the current account, (2) the capital account, and (3) gold. The current account records trade in goods and services, as well as transfer payments. Services include freight, royalty payments, and interest payments. Transfer payments consist of remittances, gifts, and grants. The balance of trade simply records trade in goods. The capital account records purchases and sales of investments, such as stocks, bonds and land.

Balance of payments on current account – The balance of trade in goods and services plus net investment income and current transfers.

Balance of trade (BOT) - The difference between the value of visible exports and the value of visible imports.

Balance on trade in goods - Exports of goods minus imports of goods.

Balance on trade in goods and services (or balance of trade) - Exports of goods and services minus imports of goods and services.

Balance on trade in services - Exports of services minus imports of services.

Balance sheet - The Balance Sheet shows the financial position of a business at a point in time. It is a snapshot of the organisation at the date for which it was prepared. It shows all the asset, liabilities and equity of a business.

Balancing charge - This is a charge that is calculated when a fixed asset is sold or disposed of. It may be an income or expense item.

Balancing item - The estimated net value of omissions from all other items recorded on the balance of payments accounts.

Balloon payment - Last loan payment when it is significantly more than the prior payments; also called partially amortized loans. For example, a debt agreement might provide for a balloon payment when future refinancing is anticipated.Bank balance - Amount in a bank deposit account, such as a checking or savings account, as of a certain specified time or date, indicated on a bank statement.

Bank bills - Bills that have been accepted by another institution and hence insured against default.

Bank (or deposits) multiplier - The number of times greater the expansion of bank deposits in that the additional liquidity in banks causes it – 1/L (the inverse of




the liquidity ratio).

Bank notes - Paper money issued by commercial banks.

Bank reconciliation -Term used when settling differences contained in the BANK STATEMENT and the cash account in the books of the bank's customer. Rarely do the ending balances agree. To reflect the reconciling items, a bank reconciliation is required.

Bankrupt - When either an unincorporated business or liabilities are greater than it has in assets. The person can file or have their creditors file for them to be declared bankrupt.

Bankruptcy - 1. (Business) situation in which a business' debt exceeds the fair market value of its assets. It is also a court action under which a debtor may be discharged for unpaid debts, in whole or in part, and in which creditors receive distributions of assets from the debtor's property under the supervision of the court. Or 2. (Personal) legal process that is available for an individual who is overextended financially and is unable to pay his debts. The individual can file for bankruptcy in order to seek to legally eliminate some or all of his debts.

Bank statement - A statement from a financial institution reporting all transactions in the accounts held by the account holder.

Bar chart - A chart where numerical information is represented by blocks or bars.

Barometric firm price leadership - Where the price leader is the one whose prices are believed to reflect market conditions in the most satisfactory way.

Barriers to entry - Barriers that make it difficult for firms to enter an industry and offer competition to existing producers or suppliers.

Barter - A system of exchange in which goods or services are exchanged for goods or services without the use of money.

Barter economy - An economy where people exchange goods and services directly with one another without any payment of money. Workers would be paid with bundles of goods.

Base amount - The amount from which something numerical is begun or developed or calculated or explained, e.g. base year.

Base year - The year which is chosen as the point of reference for comparison.

Basic earnings per share - net income available to common stockholders divided by the weighted-average number of shares outstanding. Net income available to common stockholders is net income less declared preferred dividends for the year. If the preferred stock is non-cumulative, preferred stock dividends are subtracted only if they are declared during the year. If the preferred stock is cumulative, the dividends are deducted even if they are not declared in the current year. The weighted-average number of common stock shares outstanding is determined by multiplying the number of shares issued and outstanding for any time period by a fraction, the numerator being the number of months the shares have been outstanding and the denominator being the number of months in the period




(e.g., 12 months for annual reporting).

Basic economic problem – How scarce resources with different uses are allocated to satisfy wants.

Basic rate of tax - The main marginal rate of tax, applying to most people's incomes.Basis - The starting value or used point in calculating the gain or loss, depreciation, amortisation and depletion,. For example, in an asset sale, gain is proceeds minus basis, where basis is the amount on which depreciation is calculated.

Basis of accounting - Method of recognizing revenues and expenses. Under the accrual basis of accounting, revenues are recognized as goods are sold and services are rendered regardless of the time when cash is received. Expenses are recognized in the period when the related revenue is recognized and the difference is the net income figure for a particular period. Under the cash basis of accounting, revenues are recognized only when money is received and expenses are recognized only when money is paid. Cash basis financial statements, however, distort financial position and operating results of an organization.Basis points - Is given as 0.01% in yield. For example, in increasing from 6.00% to 6.05%, the yield increases by a total of five basis points.

Batch - Refers to a collection of things or items that are to be handled or processed at the same time i.e. batch production.

Batch costing - The identification and assigning of relevant costs incurred in completing the manufacturing process of a specified batch of components or items. From the batch cost is is possible to then calculate the unit cost by dividing it by the number of components in the batch.

Batching (accounting) - The collecting and organising of incoming invoices before processing. 2. (marketing) A form of price discrimination where products are joined or packaged together in order increase sales i.e. a tennis rackets player with tennis balls.

Batch production – A method which involves completing one operation at a time on all units before performing the next.

B/D - Brought Down (T-accounts).

Beggar-my-neighbour policies - Policies designed to increase a country's prosperity (especially by reducing its unemployment) at the expense of reducing prosperity in other countries (especially by increasing their unemployment).

Behavioural accounting - 1. approach to accounting that stresses psychological considerations in decision making; also called human resource. For example, a budget should be participative so departmental managers who are involved with it will internalize the goals. Also profit centres engage a manager's ego because the financial results of the entity are a direct reflection of the manager's performance. In human resource accounting, a valuation is placed on people and reflected as an asset in the balance sheet. Or 2. theory that the management accounting function is essentially behavioural. The theory states that the nature and scope of accounting systems is materially influenced by the view of human behaviour that is held by the accountants who design and operate these systems. Participative budgeting is a simple application of behavioural accounting.




Behavioural theories - Theories which state that business objectives are determined jointly by groups of interested parties.

Below the line - This term is applied to items within a business which would not normally be associated with the everyday running of a business. See above the line .

Benchmark - 1. a standard, norm, or yardstick to judge one's performance as an individual or company. Or 2. a standard measurement or metric used to evaluate the performance of a portfolio. For example, an appropriate stock or bond index can be used to gauge the performance of an investment such as a mutual fund.

Benchmarking (best practices) - the process of searching for new and better procedures by comparing your own procedures to that of the very best. The objective is to measure the key outputs of a business process or function against the best and to analyze the reasons for the performance difference. Benchmarking applies to services and practices as well as to products and is an ongoing systematic process. It entails both quantitative and qualitative measurements that allow both an internal and an external assessment Process benchmarking is the process of assessing the quality of key internal processes by comparing them with those of other firms. In results benchmarking, a firm examines the end product or service of another company, focusing on product/service specifications and performance results.

Beneficial owner - Refers to the individual who enjoys the benefits of ownership even though the title may be in a different name.

Beneficiary - Individual who will receive an inheritance upon the death of another. The proceeds of an insurance policy may be in the form of a lump-sum or annuity.

Benefit period - The estimated useful life period of time that an asset will be productive.

Benefits in kind - Goods or services which the state provides directly to the recipient at no charge or at a subsidised price. Alternatively, the state can subsidise the private sector to provide them.

Benefits principle - The idea that people should pay taxes based on the benefits they receive from government services.

Beta - Measure of systematic or undiversifiable risk of a stock. A beta coefficient of more than 1 means that the company's stock price has shown more volatility than the market index (e.g., Standard & Poor's 500) to which it is being related; usually, that indicates it is a risky security. If the beta is less than I, it is less volatile than the market average. If it equals I, its risk is the same as the market index. High variability in stock price may indicate greater business risk, instability in operations, and low quality of earnings.

Bid and asked - Term in the over-the-counter market for unlisted securities. Bid is the highest price an investor is willing to pay while asked is the lowest price a seller is willing to take. Together, the two prices represent a quotation in that stock. A spread is the difference between the bid and asked prices. Bid and offer are the more common terms in discussing listed securities.

Bilateral monopoly - Where a monopsony buyer faces a monopoly seller.




Bill - A term typically used to describe a purchase invoice (eg. an invoice from a supplier).

Billable - Refers to the costs and/or other expenses that are covered by the contractual agreement between two parties that may be billed.

Billable hours - Normally refers to those hours a professional has worked and then billed to their client.

Bill of exchange - A certificate promising to repay a stated amount on a certain date, typically three months from the issue of the bill. Bills pay no interest as such, but are sold at a discount and redeemed at face value, thereby earning a rate of discount for the purchaser.Bill of lading - Written document issued by a carrier that specifies contractual conditions and terms (such as time, place, person named for receipt) for delivery of goods. It also evidences receipt of goods. Upon transfer of the bill, title is passed to the goods.

Bill of sale - Written document that transfers goods, title, or other interests from a seller to a buyer and specifies the terms and conditions of the transaction.

Bills payable - Are bills which have been accepted, these are called "bills payable," and are entered in a ledger account under that name.

Birth-rate - The number of births per 1000 people in the population per year.

Black economy I parallel economy - Unofficial economic activity. It cannot be precisely measured because it fails to go through official accounts.

Black market I parallel market - An illegal trading arrangement in which buyers and sellers do business at a price higher than the legally imposed price ceiling.

Blanket authorisation - Is the authority to act without having to gain further approval.

Blind trust - Trust where the assets are not disclosed to their owner. Often used when people gain public office to avoid conflict of interest.

Blending - A graphical approach to linear programming which deals with resource allocation subject to constraints.

Blue chip - Common stock of high quality that has a long record of earnings and dividend payments. Blue chip stocks are often viewed as long-term investment instruments. They have low risk and provide modest but dependable return. Examples are International Telephone and Telegraph and Minnesota Mining and Manufacturing. Blue chip may also refer to a high-quality bond that is secure and stable in price and interest payments.

Board of directors - Group of persons elected by a company's stockholders to run the business according to the corporate charter. Senior management is appointed by the Board. Typically, the Board consists of top management executives (inside directors) and representatives external to the company (outside directors). The Board has significant influence over accounting and financial policies of the business entity.

Bond - 1. a written promise by a company, government, or other institution to pay the face amount at the maturity date. Periodic interest payments are usually required. Bonds are typically stated in $1000 denominations. Bonds may be secured by collateral or unsecured (debenture). A registered bond has the name of the




owner on the issuer's records, whereas the holder of a bearer bond presents coupons for interest payments. Sinking fund bonds require the company to make annual deposits to a trustee. At maturity, the amount in the sinking fund (principal plus interest) is sufficient to pay the face of the bond. From the company's perspective, a bond issue has several advantages over a stock issue. Interest expense is tax deductible, whereas dividend payments are not. During inflation, debt is paid back in cheaper dollars. When bonds are issued at face value, the entry is to debit cash and credit bonds payable. When bonds are issued at a discount, such as with zero-coupon bonds, the entry is to debit cash and bond discount and credit bonds payable. The entry to record the interest each period is to debit interest expense and credit cash. Or 2. the cash or property given to assure performance (i.e., contractor depositing a performance bond on a construction project to be completed by a specified date). Or 3. type of insurance compensating employer for employee dishonesty.Bonded warehouse - A warehouse that is authorised by customs department for the storage of items on which payment of duty is not required until the goods are removed.

Bond discount - The amount below face value at which a bond is issued.

Bond premium - The amount in excess of face value (maturity value) at which a bond is issued.

Bonus - Usually an extra payment made in recognition of the contribution a worker has made to the company.

Book/s - In accounting is used to refers to the ledgers or journals (for example: general journal). Used a verb it means to the recording of an entry (e.g to book the sale).

Book cost - This is the cost when asset is purchased or realised, i.e. or in other words the amount paid to get the asset.

Bookkeeping - Accounting support functions performed by the book keeper. Bookkeeping is the most basic of the accounting duties and requires less education and experience.

Books of account - Theses are the financial records of an entity.

Book value - 1. net amount shown for an asset on the balance sheet. It equals the gross cost less the related valuation account. For example, the book value of an auto is its initial cost less the accumulated depreciation. Since book value is based on HISTORICAL COST, it will differ from market value. Book value is a going-concern value. Or 2. carrying value of a liability equal to its face value less unamortised discount.

Boom - The stage when an economy is at the peak

Bottom line - 1. net income after taxes. Or 2. expression as to the end-result of something. An example is the sales generated from an advertising campaign.

Bounced cheque - A cheque which has been written for an amount greater than the account balance and is not paid by the bank because of the insufficient funds.

Branch accounting - Normally means the accounting for regions separated geographically or sections of enterprises. The accounting system which is adopted




depends upon the degree of centralisation of the the branch and how much it is controlled from its central or head office.

Brand - A name given by a business to one or more of its products, as a means of identification by the customer.

Brand image - The view or opinion held by consumers/customers about a particular brand of an item. A stronger the brand image is more likely to have an inelastic the demand curve.

Brand loyalty - This is used to refer to the situation when a consumer is unlikely or reluctant to switch from consumption of this good. The consumer is said to be "loyal" to the brand.

Brand name - Means an identifiable or recognised name given to a product or service often registered as a trademark e.g. Nike.

Breach of contract - Breaking of terms agreed in the contract of employment by the employers and the employees.

Break-even - Where a business sells just enough to cover its costs.

Break-even analysis - Is a method of analysis used to determine the number of units that need to be sold to reach a break-even point in a business i.e. where total revenue is equal to total cost.

Break-even chart - A graph containing the total cost and total revenue functions. illustrating the break-even point.

Break-even point - The level of output where total revenue and total cost are the same.

Break-even price - The price at which a firm is just able to cover all of its costs, including the opportunity cost of capital.

Brentton Woods system - An adjustable peg system whereby currencies were pegged to the US dollar. The USA maintained convertibility of the dollar into gold at the rate of $35 to an ounce.Bridge loan (bridging loan) - short-term loan that is made in expectation of intermediate- or long-term loans; also called a swing loan. The interest rate on the bridge loan is generally higher than on longer term loans. An example would be a temporary loan that is made to permit a closing on a building purchase prior to a closing on long-term mortgage financing.

Broad definitions of money - Items in narrow definitions plus other items that can be readily converted into cash.Broad Money in UK (M4) - Cash in circulation plus retail and wholesale bank and building society deposits.

Brokerage - Cab be either the business of a broker who charges a fee to arrange a contract between two parties, or, the place where a broker carries out their business.




Brought forward - The act of bringing a previously recognised value that was determined in the past, e.g. a balance brought forward from the previous accounting period at the start of a new accounting period.

Brownfield site - Areas of land which were once used for urban development.

Budget - A quantitative economic plan prepared and agreed in advance. It is used for planning and control purposes.

Budget (government) - The annual statement by the government of its financial plan, it itemizes spending programmes and their costs, tax revenues and the proposed deficit or surplus.

Budget surplus (or budget deficit) - The difference between government sector revenue and expenditure in a given period of time. If revenue exceeds expenditure, the government sector has a budget surplus. If expenditure exceeds revenue, the government sector has a budget deficit

Budgetary accounting - Contrary to financial accounting, looks forward: it measures the cost of planned acquisitions and the use of economic resources in the future.

Budgetary accountability - In government accounting, process of recording budgetary amounts in the accounts of a fund. Recording the balances has a dual effect. (1) The control aspect of the budgetary function is stressed, and (2) recognition is given to the legal foundations of the budget. The need for such recording is consistent with the responsibility of fund accounting. It is concerned with performance in terms of authority to act and the action itself.

Budgetary deficit - Occurs when expenditures are greater than revenues.

Budgetary control – A business system which involves making future plans. comparing the actual results with the planned objectives and then investigating causes of any differences.

Budgeting - The planning of intended revenues and expenditures over a specified time period.

Budgeting process - The process of collecting the data and preparing the budget for future activities of an entity or activity. This process may include money or time and is aimed at achieving the desired result.

Buffer - Is something that stands in between two other things e.g. an inventory buffer would be additional inventory kept on hand over and above the committed or planned level of inventory.

Buffer stocks (accounting) - Stocks held as a precaution to cope with unforeseen demand.

Buffer Stock (economics) - An organisation, usually run by producers or the government, that attempts to smooth out fluctuations in prices by the purchase and sale of stocks.




Burn rate - The rate at which a company spends its money. Example: if a company had cash reserves of $120m and it was currently spending $10m a month, then you could say that at the current 'burn rate' the company will run out of cash in 1 year.

Bursary - The treasury of a public institution or religious order.

Business cycle I trade cycle - Fluctuations of national income around its trend value, after seasonal fluctuations have been removed, that follow a wavelike pattern..

Business decisions - These include strategic decisions (very important ones which can affect the overall success of the business), tactical decisions (those which are taken more frequently and which are less important) and operational decisions (day-to-day decisions which will be taken by lower-level managers).

Business entity - The legal form under which a business is conducted. Examples of business entities are sole proprietorship, general partnership, corporation, or, a limited liability company.

Business entity principle - A firm or business is seen as separate from its owner(s) in the presentation of the final accounts and financial statements.

Business ethics - The influence of values and beliefs upon the conduct and operation of the business.

Business plan - A statement made by a business, outlining the way it will attempt to achieve its objectives. A business plan should includes the product(s) and/or service(s), the market situation, an analysis of competitors, the key people involved in the business, financing needs and projections, and the financial rewards/results if the business plan is successful.

Business segment - Is used to refer to a component of a firm that (a) may provides a single product/service or a group of related products/services and/or(b) that is or can be subject to risks and rewards that are different from those of other of the businesses segments.

Business structure – The way in which a business is organized.

Business valuation - The price that a hypothetical buyer (estimate) would pay for a business or entity under a given set of circumstances.

Buyer’s market - Means the quantity or supply of items for sale exceeds the demand or amount consumers are willing and able to buy at the current price. It is often characterised by low prices.

By laws - Can mean the provisions of corporate policies or refer to local council rules and regulations.

By-products - Materials which are produced as a result of a process designed to produce a different material.




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CAP (The Common Agricultural Policy) - of the European Community. It is designed to stabilise EC agricultural markets by fixing minimum prices for agricultural products.

Call - 1. option to buy (or call) an asset at a specified price within a specified period. Or 2. right to buy 100 shares of stock at a specified price that happens within a certain specified period. See also option. Or 3. the act of redeeming a preferred stock or bond issue prior to its maturity. A call provision is often issued on a security when the interest rate greater than one that has no call provision. This is because investors consider yield to call as opposed to yield-to-maturity.

Callable bond - Bond issue with a call (buy back) provision.

Call centre - The section of an organisation that handles phone communications with the firms customers or clients.

Called-up Share capital - The value of unpaid (but issued shares) which a company has requested payment for. See Paid-up Share capital .

Call premium - Amount in excess of par value that a company must pay when it calls a security. It is the difference between the CALL PRICE and the maturity value. The issuer pays the premium to the security holder in order to acquire the outstanding security before the specified maturity date. The call premium is generally equal to one year's interest if the bond is called in the first year, and it declines at a constant rate each year thereafter.

Calorie supply per capita daily – The calories available to the people of a country. This is based on the total food supply produced and imported, divided by the population and the number of days in a year.

Capacity - The level of output that corresponds to the firm's minimum short-run average total cost.

Capital (economics) - Factors of production that themselves have been produced by man e.g. machines, factories, ships.

Capital (Accounting) - 1. the money invested into a business by the owners. Or 2. an amount of money put into the business (often by way of a loan) as opposed to money earned by the business.

Capital account - A term usually applied to the owners equity in the business.

Capital account of the balance of payments - A section of a balance of payments accounts that records payments and receipts arising from the import and export of long-term and shortterm financial capital.Capital asset - Asset purchased for use in production over long periods of time rather than for resale. It includes (a) land, buildings, plant and equipment, mineral





deposits, and timber reserves; (b) patents, goodwill, trademarks, and leaseholds; and (c) investments in affiliated companies.

Capital asset pricing model (CAPM) -Theory of asset pricing used to analyze the relationship between risk and rates of return in securities. The return of an asset or security is the risk-free return plus a risk premium based on the excess of the return on the market over the risk-free rate multiplied by the asset's systematic risk (which cannot be eliminated by diversification). Capital budget - Plan of proposed acquisitions and replacements of long-term assets and their financing. A capital budget is developed using a variety of capital budgeting techniques such as the payback method, the net present value (NPV) method, or the internal rate of return (IRR) method.

Capital charge - Is an amount of money that is normally arrived at by the calculation of the money the firm has invested in capital multiplied by the (WACC) weighted average cost of the capital. The capital charge is normally subtracted from a firms net operating profit minus tax to arrive at the economic profit figure.

Capital consumption - See depreciation another name for the same concept.

Capital employed (CE) - Gross CE=Total assets, Net CE=Fixed assets plus (current assets less current liabilities).

Capital expenditure - Money spent on fixed assets which will last for more than one year.

Capital flight - The movement of financial capital overseas following domestic problems. Capital flight has significantly deepened the problems of Third World debt.

Capital gain - The profit made by selling a share/asset for more it was bought for.

Capital gains tax - When a fixed asset is sold at a profit, the profit may be liable to a tax called Capital Gains Tax. Calculating the tax can be a complicated affair (capital gains allowances, adjustments for inflation and different computations depending on the age of the asset are all considerations you will need to take on board).

Capital goods - Goods that are use of other goods. Examples include and tractors. Consumers do not directly consume capital goods.

Capital intensive - Refers to production processes that require predominately man made resources i.e. machines. This is often contrasted with labour intensive production (mainly labour is used).

Capital-labour ratio - A measure of the amount of capital per worker in an economy.

Capital stock - The aggregate quantity of capital goods.

Capitalisation - 1. total amount of the various securities issued by a corporation. Capitalisation may include bonds, preferred and common stock. Or 2. a




technique used by real estate appraisers to convert the income of a property into a value estimate for that property.

Capitalisation rate (CAP RATE) - A tool used by real estate people to determine a value of an investment. It is calculated by dividing a property's net operating income by its purchase price.

Capitalise - To charge an expenditure to an asset account because it benefits a period in excess of one year. For example, a betterment to a machine would be capitalised to the machinery account.

Capitalised costs - Are those business costs or expenses that are deducted or written off over a period of time via depreciation ond amortisation schedules.

Capitalised earnings - The value of a company determined by multiplying the P/E ratio by maintainable earnings.

Capital intensive - Production methods which employ a large amount of machinery relative to labour.

Capital lease - One in which the lessee obtains significant property rights.

Capital loss - Refers to the higher purchase price above the sale price when the fixed are sold. The loss often given different or a special different treatment for tax purposes.

Capital maintenance - Principle in accounting stating that earnings can be realized only after an organization's capital has been maintained at a predetermined level..

Capitalism - An economic system individuals privately own the productive resources of land and capital.

Capital market - The market of debt or equity securities.

Capital movements - The flow of international boundaries, for investment in plant and machinery, or in response to interest rate changes or expectations of interest rate changes.

Capital rationing - Selecting the mix of acceptable projects that provides the highest overall net present value (NPV) when a company has a limit on the budget for capital spending. The probability index is used widely in ranking projects competing for limited funds

Capital reduction - The reducing of a company's declared or stated capital base.

Capital replacement (economic depreciation) - This refers to repair and maintenance of machinery used in production. Capital replacement is often regarded as an expense which may be discretionary in any given year. Ultimately this money must be spent in order to keep the capital stock of an entity working so that over a




period of time or in the longer term, the firm operations can continue.

Capital reserve - Refers to fund that are set aside for a specific identified purposes, thereby these funds cannot normally be used for other reasons.

Capital stock - Equity shares in a corporation that is authorised by its Articles of Incorporation and issued to stockholders. The two basic types of capital stock are common stock and preferred stock.Capital structure - The way in which funds are raised by a business.

Carry forward (CF) - Refers to items of data that are carry forward into the subsequent transactions.

Carrying value - Amount shown on an entity's books for assets, liabilities, or owner's equity, net of reductions or offsets such as for accumulated depreciation, allowance for bad debts, and bond discount; also called BOOK VALUE. It may refer to the entire firm's excess of total assets over total liabilities.

Cartel - A group of producers who enter into a collusive agreement to restrict output in order to raise prices and profits.

Cash - Money deposited in a bank and items that a bank will accept for immediate deposit (e.g., paper money, coins, checks, money orders). Items not included in the definition of cash are post-dated checks, IOUs, and notes receivable. The cash on hand and cash on deposit in the bank are shown in the balance sheet as one figure. Cash is the most liquid of the current assets and is listed first. Note that restricted cash in a bank account is not considered a current asset. An example is cash held in a foreign country where remission restrictions exist.

Cash accounting - This term describes an accounting method whereby only invoices and bills which have been paid are accounted for

Cash book - A journal where a business's cash sales and purchases are entered. A cash book can also be used to record the transactions of a bank account. The side of the cash book which refers to the cash or bank account can be used as a part of the nominal ledger (rather than posting the entries to cash or bank accounts held directly in the General Ledger - see 'Three column cash book').

Cash and cash equivalents - Means any near cash items including marketable securities and cash.

Cash budget - Budget for cash planning and control that presents expected cash inflow and outflow for a designated time period. The cash budget helps management keep cash balances in reasonable relationship to its needs. It aids in avoiding idle cash and possible cash shortages. The cash budget typically consists of four major sections: (I) receipts section, which is the beginning cash balance, cash collections from customers, and other receipts; (2) disbursement section comprised of all cash payments made by purpose; (3) cash surplus or deficit section showing the difference between cash receipts and cash payments; and (4) financing section providing a detailed account of the borrowings and repayments expected during the period.

Cash cow - A business or the segment of the business that generates tons of money.

Cash cycle - Refers to the period of time, often given days, in between the purchasing of the raw materials and the receipt of payment from accounts receivable




which was generated from the final sale of the finished item.

Cash payments/disbursements journal - The journal that records all payments or disbursements.

Cash discount - A reduction of some portion of the amount to be paid because the buyer is willing to pay in cash, as compared buying on credit. many individuals like cash payments as it can be used as a way of evading tax.

Cash dividend - The payment of a share of earnings to the individual shareholders.

Cash earnings - Refers to the excess of cash revenues over cash expenses. This is different from other earnings as it doesn't include non-cash expenses like depreciation or amortisation.

Cash flow - Cash inflows and outflows over a period of time.

Cash flow analysis - This is a analysis that considers the amount and timing of cash in to a entity with the timing and amount of cash out. A firm’s cash flow position (or liquidity) can have a large effect on the firms ability to keep running. This position is not necessarily shown in a cost-benefit analysis.

Cash flow cycle - Means of showing the stages between paying out cash for labour, materials, etc. And receiving cash from the sale of good.

Cash flow forecast - An estimate of future- cash inflows and outflows of a business, usually on a monthly basis.

Cash flow forecast statement - A prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each

Cash flow statement – A financial statement which shows sources and uses of cash in a trading period.

Cash at bank - Means notes, coin and currency items deposited with the bank. If this is negative it is called overdraft.

Cash inflows - The sums of money received by a business during a period of time.

Cash on hand - Means notes ,coin and currency items on hand. A firm cannot have a negative balance of cash on hand.

Cash outflows - The sums of money, paid out by a business during a period of time.

Cash ratio - A like the quick ratio but it only considers the ratio of cash and other marketable securities as compared to a firms current liabilities. This ratio




is indicative of extent or degree to which liabilities of a firm could be turned into cash immediately. This ratio is also called the liquidity ratio.

Cash receipts journal - Is the journal which records cash receipts.

Cash reserve ratio (CRR) - This is the ratio which individual banks need to keep on hand in the form of cash reserves with the Reserve Central) Bank. The CRR is calculated as a percentage of the banks demand and time deposits from customers. The CRR is to ensure both the liquidity and safety of the depositors money with the banks. This ratio will directly affect the size of the credit multiplier

Cash shortage and overage - Situation in which the physical amount of cash on hand differs from the book recorded amount of cash. When a business is involved with over-the-counter cash receipts, occasional errors may occur in making change. The cash shortage or overage is revealed when the physical cash count at the end of the day does not agree with the cash register tape. Assuming that the count is $600 and the cash register reading shows $620, the cash shortage and overage account would be charged for $20. It is shown in the income statement.

Catchline - A memorable phrase which seeks to strengthen a product's brand identity.

Catch-up effect - The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich.

Caveat - Refers to a warning or prohibition against certain activities; under the law. It may also be a formal document filed with the court to suspend/stop a proceeding for a period of time.

Cellular manufacturing - Involves producing a 'family of products' in a small self-contained unit (a cell) within a factory.

Centering - A method used in the calculation of a moving average where the average is plotted or calculated in relation to the central figure.

Central bank - A bank that acts as banker to the commercial banking system and often to the government as well. In the modern world, usually a government owned-and-operated institution that controls the banking system and is the sole money-issuing authority.

Centralised - A management structure in which most decisions are taken at the centre, or at higher levels of management.

Centrally planned or command economy - An economy where all economic decisions are taken by the central authorities.

Central tendency - A measure of the most likely or common result from a set of data (the average).

CEO - Chief Executive Officer. The CEO is the principle person responsible for day to day running of a company.

Certainty - Situation in which there is absolutely no doubt about which event will occur, and there is only one state of nature with 100% probability attached.




Certificates of deposit (CDs) - Certificates issued by banks for fixed-term interest-bearing deposits. They can be resold by the owner to another party.

Certificate of origin - Refers to a document that tells the place where the items were originally made. The certificate of origin document is often a legal requirement for countries if they wish to import sensitive merchandise i.e. military equipment.

Certified accountant - Title given by the Association of Certified Accountants in the United Kingdom, Canada, Australia, India, and other British Commonwealth countries. They use the initials ACA (for member of the Association of Certified Accountants) or FCCA, which identifies a Fellow of the Association, one who has passed additional requirements. The accountant is authorized to provide an audit opinion on the propriety of a company's financial statements.Certified financial statements - Refers to financial statements which have had a formal audit carried out by by a CPA and contain a statements of certification given by the certified public accountant.

Certified public accountant (CPA) - Refers to an accountant who is licensed and therefore allowed to practice public accounting. The requirements differ in different countries.

Ceteris paribus - Literally, "other things being equal"; usually used in economics to indicate that all variables except the ones specified are assumed not to change.

Chain of command - The structure within an organisation which allows instructions to be passed down from senior management to the lower levels of management.

Chair person of the board - Is the head or in charge of the board of directors of a company, and generally is considered to be the boss of the corporation.

Change in demand - An increase or decrease in the quantity demanded at each possible price of the product, represented by a shift in the whole demand curve.

Change in supply - An increase or decrease in the quantity supplied at each possible price of the commodity, represented by a shift in the whole supply curve.

Change in the quantity demanded - An increase or decrease in the specific quantity bought, represented by a change from one point on a demand curve to another point, either on the original demand curve or on a new one.

Change in the quantity supplied - An increase or decrease in the specific quantity supplied, represented by a change from one point on a supply curve to another point, either on the original supply curve or on a new one..

Changes in demand or supply – These changes cause markets to adjust. Whenever such changes occur, the resulting 'disequilibrium' will bring an automatic change in prices, thereby restoring equilibrium (Le. a balance of demand and supply)

Channel costing - The fulfilment cost information pertaining to distribution channels.




Channel of communication - The route by which a message is communicated from sender to receiver.

Channel of distribution - The means by which the product is passed from the place of production to the customer or retailer.

Charge back - Refers to a credit card order which has been processed and is subsequently cancelled by the cardholder contacting the credit card company directly (rather than through the seller). This results in the amount being 'charged back' to the seller (often incurs a small penalty or administration fee to the seller).

Charted accountant (CA) - A British accountant who is a member of the Institute of Chartered Accountants.

Chart of accounts - A list showing all the accounts held in the nominal ledger. The Chart of Accounts normally consist of and are arranged normally in this following way: Assets, Liabilities, Owners' Equity or Stockholders Equity, Revenue, and Expenses.

Chattel mortgage – Mortgage on personal (as opposed to real) property.

Cheque (check) - A draft or demand drawn or presented against a specific bank, that is payable upon the demand (when presented to) to the bank by the person or entity who is named on the draft.

Cheque (check) book - The journal or source document that records payments by cheque

Churn rate - The proportion of clients/customers (e.g., cable TV subscribers) who cancels the subscription they have each month on average.

Circular flow model - A model of the flows resources, goods, and services, as well as money, receipts, and payments for them in the economy.

Circular flow of income - The flow of money around the economy.

Circulating assets - The opposite to Fixed assets . Circulating assets describe those assets that turn from cash to goods and back again (hence the term circulating). Typically, you buy some raw materials, start to manufacture a product (the asset is called work in progress at this point), produce a product (it is now stock ), sell it (it is now back to cash again).

Claimant unemployment - Those in receipt of unemployment-related benefits.

Classical dichotomy - The theoretical separation of nominal and real variables.

Classical unemployment - See real-wage unemployment.

Classification - The process of separating and distributing items into classes/categories of the same or similar type. In accounting information is often classified




as: assets, liabilities or equity and there may be subsets to these three classifications.

Clearance letter (document) – Documented certification or a letter from a recognised authority that the person or business cleared has met certain specific requirements, actions, payments and such forth.

Clearing account - Usually a temporary account containing costs or amounts that are to be transferred to another account. An example is the income summary account containing revenue and expense amounts to be transferred to retained earnings at the close of a fiscal period.

Clearinghouse - An institution where interbank indebtedness, arising from the transfer of cheques between banks, is computed and offset and net amounts owing are calculated.

Client (customer) – A person or company who purchases goods and/or services from a firm.

Closed economy - An economy that has no foreign trade.

Closed shop - A practice which prevents workers being employed in a business unless they belong to a trade union.

Closing cash (or bank) balance - The amount of cash held by the business at the end of each month. This becomes next month's opening cash balance.

Closely held corporation - Firm that has only a few stockholders. It contrasts with a privately held corporation in that a closely held corporation is public although few of the shares are traded. The so called "corporate pocket-books" may become subject to the additional personal holding company tax on income not distributed. For example, deductions and losses in transactions between a major stockholder and the corporation may be disallowed under certain circumstances.

Closing account - is the process of determining the final balance of an account and then the posting of the entry in order to offset this balance.

Closing-down point - The level of output in the short run where a firm should cease its operations. i.e. where marginal cost is equal to average variable cost.

Closing entry - is a Journal entry used at the end of a particular financial period with the intention of transferring the net of revenue minus expense items from the income (profit and loss) statements to the owners' equity. Entries are for nominal accounts and not real accounts. At the end of the year, expenses are credited so that zero balances are left in them, and the total is debited to the income summary account. Revenue accounts are debited to arrive at zero balances, and the total is credited to the income summary account. The net income or loss that now exists in the income summary account is then transferred to retained earnings. After the closing entries, the new year will start fresh in that no income statement account balances will exist.Closing the books - A term used to describe the journal entries necessary to close the sales and expense accounts of a business at year end by posting their balances to the profit and loss account, and ultimately to close the profit & loss account too by posting its balance to a capital or other account.

Cluster sampling - Method of selecting groups of units. The first unit of each group is selected with the use of a random number table. This allows selection of




more than one item at a time. In cluster sampling, the population is broken into groups of items, and a RANDOM SAMPLE is selected from all the clusters. Each cluster becomes a sampling unit.

Coase theorem - The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.

COD - Cash On Delivery; which is exactly what it means.

Coding of accounts - Assignment of an identification number to each account in the financial statements. A CHART Of ACCOUNTS lists the account titles and account numbers being used by a business. For example, the numbers I to 29 may be used exclusively for asset accounts; numbers from 30 to 49 may be reserved for liabilities; numbers in the 50s may signify OWNERS' EQUITY accounts; numbers in the 60s may represent revenue accounts; and numbers from 70 to 99 may designate expense accounts. In large or complex businesses with many more accounts, a more elaborate coding system would be needed. Some companies use a four-digit coding system. The coding system is especially necessary for computerised accounting.COGS - Cost of goods sold

COGS (Cost of good sold) ratio = COGS / Total Sales.

Collateral - Assets used as security for the extension of a loan.

Collateralise - To pledge assets to secure a debt. These assets will be given up if the borrower defaults on the terms and conditions specified in the debt agreement. An example is pledging inventory to collateralize a bank loan.

Collectables - Art, stamps, coins, antiques, and other related items. They offer capital gains potential, inflation protection, and aesthetic enjoyment. Collectibles are acquired through dealers, at auctions, or directly from previous owners. Among the drawbacks are high security and insurance cost, poor liquidity, lack of income, and possible forgeries. Information about collectibles sometimes appears in magazines like Money and Creditor/Investor, and major categories of collectibles have magazines and newsletters devoted exclusively to them

Collection period - Number of days it takes to collect accounts receivable. The collection period should be or can be compared to the terms of sale. A long collection period may indicate higher risk in collecting the account; it ties up funds that could be invested elsewhere or used to make timely payments. It equals the number of days in a year divided by the Accounts receivable turnover. Assume a 360-day year and turnover rate of 10 times. The collection period is 36 days.

Collective agreements - The agreements reached through the process of collective bargaining.

Collective bargaining - A method of determining conditions of work and terms of employment through negotiations between employers and employee representatives.

Collective consumption goods - Goods or services that, if they provide benefits to anyone, can, at little or no additional cost, provide benefits to a large group of




people. Also called public goods.

Collusion - Price determination by oligopolists which is coordinated and aims to avoid the danger of price wars breaking out or agreements between businesses designed to reduce competition.

Collusive oligopoly - Where oligopolists agree, (formally or informally) to limit competition between themselves. They may set output quotas, fix prices, limit product promotion or development, or agree not to 'poach' each other's markets.

Collusive tendering - Where two or more firms secretly agree on the prices they will tender for a contract. These prices Would be above those which would be put in under a genuinely competitive tendering process.

Combined financial statements - 1. presentation in which the balance sheet accounts or income statement accounts of a related group of entities have been added together so they are considered as one reporting entity. Inter-company transactions are eliminated in a combined statement. Or 2. in governmental accounting, statement in which the balance sheets of all fund and account groups are shown without inter-fund transfers being eliminated

Comfort letters - Term used when underwriters request "comfort" from an auditor about financial information in SEC registration statements not covered by the auditor's opinion and on subsequent events after the opinion date.

Command economy - An economy in which the decisions of the government (as distinct from households and firms) exert the major influence over the allocation of resources.

Commercial bank - A financial institution that provides commercial banking services. A commercial bank accepts deposits, gives business loans and provides other services to businesses.

Commercial bills - Bills of exchange issued by firms. .

Commercial loan - Short-term business loan usually issued for a term of up to six months.

Commercial paper - Short-term unsecured loan of a financially strong company having a maturity up to 270 days. It is typically issued on a discount basis meaning that the interest is subtracted immediately from the face of the debt to obtain the cash proceeds.

Commercial policy - A government's policy involving restrictions placed on international trade. Also called trade policy.

Commission - A payment system where employees are paid a percentage of the value of each good or service that is sold.

Commitment - Expected expenditure backed by an agreement. A commitment may be disclosed in a footnote but generally is not given accounting recognition.




Disclosure includes its nature and amount. However, a commitment can be recorded in the case of a loss commitment on a purchase contract where the market price has significantly declined below the agreed-upon delivery contract price. The entry for the difference is to debit loss on purchase commitment and credit estimated liability. But a gain on a purchase contract is not recognized because it violates conservatism.

Committed costs - Costs, usually fixed costs, which the management of an organization has a long-term responsibility to pay. Examples include rent on a long-term lease and depreciation on an asset with an extended life.

Commodity - An article of commerce or product that can be used for commerce. In a narrower sense, commodity is product traded on an authorised commodity exchange. Some types of commodities: agricultural products, metals, petroleum, foreign currencies, financial instruments and indices, etc.

Commodity money - Money that takes the form of a commodity with intrinsic value common resources goods that are rival but not excludable.

Commodities futures - Contracts in which sellers promise to deliver a given commodity by a certain date at a predetermined price. Price is agreed to by open outcry on the floor of the commodity exchange. The contract specifies the item, the price, the expiration date, and a standardised unit to be traded.

Common currency - An agreement between countries to use the same currency for all business and other transactions, such as the euro in the European Union.

Common law (case law) - an unwritten body of law based on general custom in England.

Common market - A customs union where the member countries act as a single market with free movement of labour and capital, common taxes and common trade laws. Common stock - Share in a public company or privately held firm. Common stockholders have voting and dividend rights. The issuing company shows common stock at its total par value, or no-par value, or stated value in the capital stock section of stockholders' equity. Communication - The transferring of a message from the sender to the receiver, who understands the message.Communication media - The written, oral or methods used to communicate a message.

Communication nets - The ways in which members of a group communicate with each other.

Communist country - A country in which there is limited private ownership of productive capital and of firms, limited reliance placed on the market as a means of allocating resources, and in which government agencies plan and direct the production and distribution of most goods and services.

Company – A form of business ownership where the business has incorporated. This gives the shareholders limited liability.

Comparability - The quality or state of being similar or alike.




Compensating differential - A difference in wages that arises to offset the nonmonetary characteristics of different jobs.

Competitive advantage (business) - the advantage that a business has over rivals who are competitors. It can be gained in a variety of ways.

Comparative advantage (theory of) - A country has a comparative advantage in producing a good over another if the opportunity cost of producing that good is lower. The law of comparative advantage. Provided opportunity costs of various goods differ in two countries/both of them can gain from mutual trade if they specialise in producing :(and exporting) those goods that have relatively low opportunity costs compared within the other country.

Comparative statistics - Short for comparative static equilibrium analysis; the derivation of predictions by analysing the effect of a change in some exogenous variable on the equilibrium position.

Compensating balances - Deposit that a bank can use to offset an unpaid loan. No interest is earned on the compensating balance, which is stated as a percentage of the loan.

Compensating error - A double-entry term applied to a mistake which has cancelled out another mistake.

Competitive pricing - A pricing strategy where the product is priced in line with, or just below, competitors' prices to try to capture more of the market.

Competitor analysis - Identifying the strengths and weaknesses of competitors and their products.

Competition - Rivalry among buyers and sellers of outputs, or among buyers and sellers of inputs (i.e. factors of production).

Competition based pricing - Methods of pricing be upon the prices charged by competitors.

Competition for corporate control - The competition for the control. of companies through takeovers.

Competitive marketing strategies - Marketing strategies directly based upon particular approaches to dealing with competitors.Competitive pricing - Where firms must be able to offer the best price in the market and meet price erosion without compromising quality.

Compilation - The presentation of financial statement information by the entity without the accountant’s assurance as to conformity with Generally Accepted Accounting Principles (GAAP). In performing this accounting service, the accountant must conform to the AICPA Statements on Standards for Accounting and Review Services (SSARS).

Complement - Two goods are considered complements if a change in the price of one causes an opposite shift in the demand for the other. For example, if the price of computers goes up, the demand for computer games will fall; if the price of computers goes down, the demand for computer games will increase. Complementary assets - Assets that a business requires together to be successful




Complementary goods - A pair of goods consumed together. As the price of one goes up, the demand for both goods will fall.Completed contract method of accounting - Profit is recognized only when a long-term construction contract is completed.

Compliance audit - The review of financial records to determine whether the entity is complying with specific procedures or rules.

Component bar chart - A chart where each bar is divided into a number of sections to illustrate the components of a total.

Composite demand - When a good is demanded for two or more distinct uses.

Compounding - The process of adding interest each year to an initial capital sum. .

Compound interest - Apply interest on the capital plus all interest accrued to date. Eg. A loan with an annually applied rate of 10% for 1000 over two years would yield a gross total of 1210 at the end of the period (year 1 interest=100, year two interest=110). The same loan with simple interest applied would yield 1200 (interest on both years is 100 per year).

Compound journal entry - A journal entry that involves more than one debit or more than one credit or both.

Compromise strategy - One whose worst outcome is better than the maximax strategy and whose best outcome is better than the maximin strategy.

Compulsory liquidation - The winding-up of a company by a court.

Computer aided design (CAD) - The use of computers when designing products.

Computer aided manufacture (CAM) - The use of computers in the manufacture of products.

Computer numerically controlled machines - Machines which have their operations controlled by a computer program.

Computer integrated manufacture (CIM) - The use of computers to control the entire production process. Information technology - the recording and use of information by electronic means.

Concentration ratio - The percentage of all sales contributed a small number (4,8) of the largest firms in an industry.

Condorcet paradox - The failure of majority rule to produce transitive preferences for society constant returns to scale the property whereby long-run average total cost stays the same as the quantity of output changes.




Conducive - Tending to bring about or being partly responsible for, e.g. current working conditions may not be conducive to productivity.

Conduit - The primary means by which something is transmitted.

Conglomerate integration - A firm merges with or takes over another firm in a completely different industry. Also known as diversification.

Conglomerate or diversifying merger - The merging of firms involved in completely different business activities.

Confidence level - A statistical calculation which allows a business to gauge the extent of its confidence in the results of research

Conservatism principle - Accounting guideline that understates assets and revenues and overstates liabilities and expenses. Expenses should be recognised earlier than later while revenue should be recognized later than sooner. Thus, net income will result in a lower figure. Conservatism holds that in financial reporting it is preferable to be pessimistic (understate) than optimistic (overstate) since there is less chance of financial readers being hurt by relying on prepared financial statements. One can argue that pessimism is needed to counteract the optimism of management. However, excess conservatism may result in misguided decisions.

Consignment - When goods are offered for sale on behalf of another without the seller actually purchasing or taking title to the goods. Only when there is a subsequent sale does the owner receive any payment.

Consistency principle - 1. uniformity of accounting procedures used by an accounting entity from period to period. Or 2. uniformity of measurement concepts and procedures used for related items within the company's financial statements for one period. It is difficult for financial statement users to make projections when data are not measured and classified in the same manner over time. A change in accounting principle should not be made unless it can be justified as being preferable.

Consolidated entity – A user-defined combination of several consolidation units, grouped together for consolidation and reporting purposes.

Consolidated financial statements - Statement that brings together all assets, liabilities, and operating accounts of a parent company and its subsidiaries. It presents the financial position and results of operations of the parent company and its subsidiaries as if the group were a single company with one or more branches.

Consolidation - Similar to refinancing, but there is no loan fee. It simplifies loan repayment by combining several types of federal education loans into one new loan. (In the case of Direct Loan consolidation, the interest rate may be lower than one or more of the underlying loans.).

Consortium - An association of companies for some definite purpose.

Constant-cost industry - An industry in which costs of the most efficient size firm remain constant as the entire industry expands or contracts in the long run.




Constant dollar - When the dollar amount is adjusted for inflation.

Constant prices - Currency expressed in terms of real purchasing power, using a particular year as the base or standard of comparison. Constant purchasing power accounting - A complete accounting system which replaces money with an index of general purchasing power. Constant returns to scale - Technological conditions under which the percentage change in a firm' s output is equal to the percentage change in its use of inputs.Constraints - Factors which restrict decision making.

Consumable - A resource attribute representing a type of capacity. A resource with consumable capacity can have its capacity value permanently altered as a result of being tasked, e.g. chemicals in a manufacturing process or office supplies.

Consumers - Individuals who use or 'consume' goods and services to satisfy their needs and wants.

Consumer durable - A consumer good that lasts period of time, during which the consumer can continue gaining utility from it.Consumer (or consumption) goods - Goods that are used directly by consumers to generate satisfaction. Compare with capital goods.

Consumer panels - Groups of people who agree to provide information about a specific product or general spending patterns over a period of time.

Consumer price index (CPI) – Is a weighted index that measure of change in consumer prices as determined by a monthly survey. It is used to show the level of inflation. See retail price Index (RPI)Consumer sovereignty - The concept of the consumer as the one who, by his or her spending, ultimately determines which goods and services will be produced in the economy. In principle, competition among producers causes them to adjust their production to the changing desires of consumers.

Consumer surplus - The difference between the total value that consumers place on all units consumed of a product and the payment that they must make to purchase that amount of the product.

Consummate - To bring to completion or fruition; conclude, e.g., consummate a business transaction.

Consumption - The process of using up goods and services.

Consumption expenditure - In macroeconomics, household expenditure on all goods and services. Represented by the symbol C as one of the four components of aggregate expenditure.

Consumption function - The relationship between total desired consumption expenditure and all the variables that determine it; in the simplest cases, the




relationship between consumption expenditure and disposable income and consumption expenditure and national income.

Consumption goods - Goods that are bought by households to use up, such as theatre tickets, food and clothing.

Consumption of domestically produced good and services (Cd) -The direct flow of money payments from households to firms.

Contestable market - A market in which there are no sunk costs of entry or exit so that potential entry may hold profits of existing firms to low levels-zero in the case of perfect contestability.

Contingency plan - A plan that provides an outline of decisions and measures to be taken if defined circumstances, outside the control of the affected organisation, should occur.

Contingent asset - Item that depends on some future happening that mayor may not occur. Its existence or value is not assured. A contingent asset may emanate from a contingent liability. An example of a contingent asset may be a successful lawsuit claiming damages of another party. It cannot be shown as an asset on the balance sheet because it violates conservatism. However, footnote disclosure may be made.

Contingent liability - Potential liability that may exist in the future depending on the outcome of a past event. Examples are an adverse tax court decision, lawsuit, and notes receivable discounted. Footnote disclosure is required of the circumstances for possible losses. Note that an estimated liability can be booked only if there is a probable loss.

Continuity assumption - Accounting assumption that expects a business to continue in life indefinitely; also called going concern. It is the basis for using historical cost to value accounts rather than liquidation value since the company will remain in existence.

Continuous budget - A budget that rolls ahead each month or period without regard to the fiscal year, i.e., a twelve-month or other periodic forecast is always available.

Contra account - Refers to an account which role is to offset another account. i.e. If a purchase is returned the 'purchase returns' account is a contra account - it reduces the value of purchases. For sales it would be the 'sales returns account.

Contract law - That body of law which regulates the enforcement of contracts. Contract law has its origins thousands of years ago as the early civilizations began to trade with each other, a legal system was created to support and to facilitate that trade. The English and French developed similar contract law systems, both referring extensively to old Roman contract law principles such as consensus ad idem or caveat emptor.

Contract of employment - A legal agreement between employer and employee listing the rights and responsibilities of workers.

Contractor - The person or entity who will provide the goods or services under the provisions of the contract..

Contribution - The amount of money left over after a sale when all direct (variable) costs have been covered. i.e., selling price minus direct costs.




Click HereDAC - Development Assistance Committee of the OECD.

Data – A collection of information.

Database - An organised collection of data stored electronically with instant access, searching and sorting facilities.

Date of record - The date at which those who owned/own shares will receive the dividends.

Days’ inventory (inventory turnover) - The average time period goods are in inventory, i.e., the length of time a firm could continue to trade without receiving a new inventory shipment . The firm will try to calculate the Economic Order Quantity (EOQ) by balancing the cost of holding inventory with its ordering costs.

Days payable outstanding (DPO) (creditors turnover) - An estimate of the amount of days the firm takes to pay suppliers after getting the inventory. It is normally calculated with the following equation: Creditors turnover = (creditors x 365) / sales

Deadweight loss of an indirect tax - The loss of consumer plus producer surplus from the imposition of an indirect tax.

Deadweight welfare loss -The loss of consumer plus producer surplus in imperfect markets (when compared with perfect competition).Death-rate - The number of deaths per 1000 people in the population per year.

Death tax - Tax imposed on property upon the death of the owner, such as an inheritance or estate tax.

Debenture - Is used when a limited company receives money on loan, and certificates called debenture certificates are issued to the lender. This loan is secured against the assets of the company

Debit - When an entry is made on the left hand side of a journal or ledger account.

Debit card - A card that has the same use as a cheque. Its use directly debits the person's current account.

Debit and credit conventions - The rules for debit and credit to be followed under double entry bookkeeping.

Debit notes - May be issued to when there is a payment which is short.





Debt - Money or services owed to an outside party. It is a legal obligation of the business arising either from written or oral agreement. Debt may either be short-term or long-term.

Debt collection period - The number of days it takes to collect the average debt.

Debt / equity ratio - Measure used in the analysis of financial statements to show the amount of protection available to creditors. The ratio equals total liabilities divided by total stockholders' equity; also called debt to net worth ratio. A high ratio usually indicates that the business has a lot of risk because it must meet principal and interest on its obligations.

Debt financing - Raising money through selling bonds, notes, or mortgages or borrowing directly from financial institutions.

Debt-servicing - The sum of interest and principal repayments on publicly held or publicly guaranteed external debt.

Debtors - Customers who owe money to the business.

Debtors days - How long on average it takes a company to collect the money owed to it. (debtors x 365) / sales.

Debtors control account - The account in the General Ledger which has the balance from the outstanding amounts owed from the Sales Ledger.

Debt service ratio - The measurement of debt payments to gross income.

Debt to equity (gearing) - Is a measure of the the risk of the capital structure of the firm. It shows amounts of capital contributed by creditors as compared to the amount contributed by owners. A low Debt/Equity ratio may make it easier for a firm to borrow.

Decentralised - A management structure in which many decisions are not taken at the centre of the business but are delegated to lower levels of management.

Decision lag - The period of time between perceiving problem and reaching a decision on what to do about it.Decision making - Purposeful selection from among a set of alternatives in light of a given objective. Decision-making is not a separate function of management. In fact, decision-making is intertwined with the other functions, such as planning, coordinating, and controlling.

Decision theory - Systematic approach to making decisions especially under uncertainty by using analytical techniques of different degrees of formality designed to help a decision maker choose among a set of alternatives in light of their possible consequences.

Decision tree (or game tree) – A technique which shows all possible outcomes of a decision. The name comes from the similarity of the diagram to branches on a tree.Declining (reducing) balance depreciation method - A method of accelerated depreciation by which the asset's book value is multiplied by a fixed depreciation




rate. This method of depreciation gives larger levels of depreciation in beginning years of the asset.

Decreasing returns - A situation in which output is less than in proportion to inputs as the scale of firm's production increases. A firm in this situation with fixed factor prices, is an increasing-cost firm.

Deed of Partnership - A binding legal document which states the formal rights of partners.

Deductions - 1. the itemised deductions, which are deductions from adjusted gross income (AGI). Or 2. the deductions for adjusted gross income, such as employee business expenses and contributions to an IRA pension plan. Or 3. an adjustment to an invoice.

Default – 1. Accounting - The failure of a debtor to meet principal or interest payment on a debt at the due date. In the event of default, creditors may make claims against the assets of the issuer in order to recover their principal. In the area of corporate finance the term default is typically a indication that a bankruptcy may soon follow. 2. Economics - Default can mean a sovereign state fails or refuses to meet it international debt obligations.

Deferred expenditure - The are expenses that have been incurred but do not apply to the current accounting period. They are recorded as a non current asset until they become current where they are transferred to the profit and loss account.

Deferred income - This refers to the income that the company has received cash for but has yet to be "earned". For example, 12 months gym membership being paid in the middle of the financial year. At the end of the year only six months of that income should be recorded in the profit and loss account. The rest would be recorded in the balance sheet as a current liability.

Deficit (accounting) - In accounting this means a debit balance (negative) in the Retained Earnings account which is a direct result of operating losses. losses.

Deficit (economics) - When the government spending is greater than revenue. This is an example of expansionary demand side policy.

Deficit budget - Where the estimated outflows or expenses are greater than estimated inflows or revenue.

Deficit spending - Government spending that is in excess of tax revenues.

Deflate - A government action to lower aggregate demand through fiscal or monetary policy.Deflation – A situation where prices are falling in the economy.

Deflationary gap -The shortfall of national expenditure below national income (and injections below withdrawals) at the full-emp19yment level of national income. Deflationary policy -Fiscal or monetary policy designed to reduce the rate of growth of aggregate demand.De-industrialisation - Occurs when their is a decline in the importance of the secondary ( or manufacturing) sector of an industry in an economy.

Delayering - The removal of managerial layers in the hierarchical structure. Page No. 46A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



Click HereEarliest finish time (EFT) - In program review and evaluation technique (PERT), earliest time at which an activity may be completed.Earned income - Income from personal services. Earned income generally includes wages, salaries, tips, and other employee compensation

Earning power - Discounted present value of future profit of a business.

Earnings - 1. Net income of a business. See also earnings per share (EPS). Or 2. revenues earned by an individual such as compensation and passive income (e.g., interest, dividends).

E.C. (European community) now EU (European Union) - Is a trading block of European countries that have agreed on common tariff barriers and the free flow of labour and capital between themselves. Currently there are 25 member states. The is the highest degree of economic integration a common market.

e-commerce - The use of the internet and electronic communications to carry out business transactions.

Econometrics - The branch of economics that uses the application of statistical tools and methods to the study of economic relationships and theories. It is a combination of statistics, mathematical economics, economic theory and economic statistics .

Economically feasible - The benefit of doing the activity is greater than the cost of doing it.

Economic book value - A book value analysis where the assets are adjusted to their market value.

Economic efficiency - The use of resources that generate the highest possible value of output as determined in the market economy by consumers. Economic efficiency is achieved when each good is produced at the minimum cost and where consumers get maximum benefit from their incomeEconomic entity - Accounting concept that provides a “point of view” or context for different economic events that have been recorded by the financial records.

Economic goods - Any good or service that is scarce.

Economic growth - The increase in an economy's real level of output over time.

Economic life - Estimated period that a fixed asset will provide benefits to the company.

Economic model - A formal presentation of an economic theory.





Economic order quantity (EOQ) - The level of stock order which minimises ordering and stock holding costs.

Economic problem - The fact that there are unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.

Economic profits or losses - The difference between the revenues received from the sale of output and the opportunity cost of the inputs used to make the output. Negative economic profits are economic losses. Also called pure profits or pure losses, or simply profits or losses.

Economic structure - The classification of a country according to the proportion of output produced by the primary, secondary and tertiary sectors.

Economic substance - Relates to income tax laws application, i.e., the substance of the transaction is what is considered to be important not its form, when determining the tax implications.

Economic system - The institutional means through which resources are used to satisfy human wants.

Economic theory - A rule or principle that enables us to understand and predict economic choices.

Economic value (EV) - The asset valued according to its ability to generate revenue.

Economics - The study of how people use their limited resources to try to satisfy unlimited wants.

Economies of scale - Reduction of costs per unit output resulting from an expansion in the scale of a firm's operations so that more of all inputs are being used.

Economies of scope - Economies achieved by a firm that is large enough to engage efficiently in multi-product production and associated large-scale distribution, advertising, and purchasing. Economy - A system which attempts to solve the basic economic problem. A set of interrelated production and consumption activities.ECU (European Currency Unit) - The predecessor to the euro a weighted average of EU currencies. It was used as a reserve currency and for the operation of the exchange rate mechanism (ERM).

Effective interest rate - Real rate of interest on a loan equal to the nominal interest divided by the proceeds of the loan.

Effective rate of tariff - The tax charged on any imported commodity expressed as a percentage of the value added by the exporting industry.

Effective tax rate - Equals the tax divided by taxable income. For example, if the tax is $20,000 on taxable income of $80,000, the effective tax rate of the




business is 25% ($20,000/$80,000).

Efficiency - How well inputs, such as raw materials, labour or capital can be changed into outputs, such as goods or services.

Efficiency variance - Difference between inputs (materials and labor) that were actually used (i.e., actual quantity of inputs used) and inputs that should have been used (i.e., standard quantity of inputs allowed for actual production), multiplied by the standard price per unit. Efficiency (quantity, usage) variance = (actual quantity - standard quantity) x standard price per unit of input.

Efficiency wage rate - The profit-maximising wage rate for the firm after taking into account the effects of wage rates on worker motivation, turnover and recruitment.

Efficiency wages - Above-equilibrium wages paid by firms in order to increase worker productivity.

Efficient markets hypothesis - The theory that asset prices reflect all publicly available information about the value of an asset.

Efficient market theory – The theory that market mechanism via prices does reflect the expectations and knowledge of all the different investors. Investors who subscribe to this theory believe it is unlikely the market can be predicted by using technical analysis.

Efficient scale - the quantity of output that minimizes average total cost.

Elastic demand - The situation in which, for a given percentage change in price, there is a greater percentage change in quantity demanded; elasticity greater than unity.

Elasticity - A measure of the responsiveness of one variable to a change in another. Thus price elasticity of demand is the responsiveness of quantity demanded of a good to a change in its price. Income elasticity of demand is the responsiveness of quantity demanded of a good to a change in incomes. Elasticity. The responsiveness of one variable (e.g. demand) to a change another (e.g. price). This concept is fundamental to understanding how markets work. The more elastic variables are, the more responsive is the mad changing circumstances.

Elasticity of demand - A measure of the responsiveness of quantity of a product demanded to a change in market price.

Elasticity of supply - A measure of the responsiveness of the quantity of a product supplied to a change in the market price.

Electronic funds transfer (EFS) - A payment executed through computers.

Electronic mail (e-mail) - Document transmitted electronically from the user's computer or terminal to an information service. Accountants and their clients can take advantage of electronic mail to transmit essential messages. With electronic mail, each user in the system has a "mailbox," which receives, holds, and sends information to others. The information sent may be spreadsheets, reports, memos, and so forth.




Eliminations - Accounting entries used when preparing consolidated financial statements between parent company and a subsidiary. Examples of eliminations are the elimination of inter-company profit, receivables, payables, sales, and purchases. Thus the consolidated entity reports financial statement figures applicable to outsider transactions.

Embezzlement - Theft of money or property from a business by an individual in whose custody it has been placed. An example is a bookkeeper who steals from the petty cash fund.

Embodied technical change - Technical change that is intrinsic to the particular capital goods in use and hence can be used only when new capital, embodying the new techniques, is built.

Employee - A worker for whom an employer provides and controls work, supplies equipment and pays tax and National Insurance contributions.

Employers' association - A group of employers join together to give benefits to their members. Also called employer federations and trade associations.

Employment - The number of adult workers (16 years of age and older) who hold full-time jobs.

Empowerment - To give official authority to employees to make decisions and control their own activities.

Encumbered - This refers to a situation where an asset which is owned by one individual or entity has a legal claim on it by another. For example a mortgage.

Encumbrance - A liability (e.g.. a mortgage is an encumbrance on a property). Also, any money set aside (i.e.. reserved) for any purpose.

Ending inventory - The value of the inventory at the end of the period often calculated by conducting a stocktake.

Endogenous expenditure - See induced expenditure.

Endogenous variable - A variable that is explained within a theory.

Endogenous money supply - Money supply that is determined (at least in part) by the demand for money

Endorsement - Signature on a draft or cheque by a payee before transfer to a third party.

Endowment - A fund where amounts given to the fund will be held in perpetuity and that the earnings from the fund are used in accordance with the donor’s of the fund's specified instructions.

Energy consumed per capita - The amount of energy consumed divided by the population. This takes account of all sources of energy, oil, gas, coal, hydro etc. (except firewood).




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Face value - Nominal amount of a debt obligation (e.g., note, bond, mortgage) or equity security as stated in the instrument. It excludes interest and dividends.

Factor market - Markets in which the services of factors of production are sold.

Factor mobility - The ease with which factors can be transferred between uses.

Factor services - The services of factors of production that are used to produce outputs.

Factoring - The practice of buying debt at a discount. It is the outright sale of a firm's accounts receivable to another party (the factor) without recourse, which means the factor must bear the risk of collection. Some banks and commercial finance companies factor (buy) accounts receivable. The purchase is made at a discount from the account's value.

Factors of production (or resources) - Resources used to produce goods and services to satisfy wants; frequently divided into the basic categories of land, labour, and capital

Factory overhead - Total of all costs of manufacturing except direct materials and direct labor, also called manufacturing overhead, indirect manufacturing expenses, factory expenses, and factory burden.

Fair market value – The amount that could be received on the sale of an asset when willing and financially capable buyers and sellers exist and there are no unusual circumstances such as liquidation, shortages, and emergencies.

Fairness - A term indicating that an entity's financial condition and operating results are presented in a way that is understandable, appropriate, and comprehensive. Fairly presented financial statements are not slanted to favour one party over another and are not subject to management influence and limitations.

Falling-cost industry - An industry in which the lowest costs attainable by a firm fall as the scale of the industry expands.Family planning - A health service which offers help and advice to couples to help the to decide if and when to have children and how many.

Fast moving consumer goods – Products with high levels of sales which are sold within a short period of time, such as soap powder and tinned foods.

Favourable balance of payments - A credit balance on some part of the international payments accounts (receipts exceed payments); often refers to a favourable balance on current plus capital account (that is, everything except the official settlements account).

Favourable variance - A variance which is the result of by using/spending a lesser amount of any given resource than the amount specified as the standard level





or rate (spending less on labour for any given level of output than was expected), efficiency (less hours than expected for a given level of output), usage (less materials used for a given level of output) or price (less money paid to a supplier for a given level purchases).

Feasibility study - Evaluation of a contemplated project or course of action, according to pre-established criteria. (such net present value, internal rate of return, and payback period) to determine if the proposal meets management requirements.

Federal Reserve (Fed) - The central bank of the United States.

Feedback - Term used to refer to information concerning actual performance, particularly in comparison with the plan. The feedback process is a critical part of a management control system in order to test a given system or model to see if it is performing as planned. Timely feedback enables quick corrective action when things get out of hand.

Fees - Charges billed for services rendered. They are tied into the monetary value of those services. Professional fees apply to accounting, tax, and legal work. They may be on a flat basis or an hourly one.

Fertility rate - The average number of children born to each woman in a country.

Fiat money - Paper money or coinage that is neither backed by nor convertible into anything else but is decreed by the government to be accepted as legal tender and is generally accepted in exchange for goods and services and for the discharge of debts.

Fictitious asset - An asset recorded in the balance sheet that really does not deserve to be classed as an asset. If this is intentional it may be considered fraud.

Fiduciary – An individual or institution responsible for holding or administering property owned by another. An executor, guardian, trustee, and administrator are examples of a fiduciary.

Field research - Primary research.

FIFO (first-in, first-out) - A method of valuing stock. This method is recording inventory and its associated cost flow where the first items that were purchased are then assumed/recorded as to be the first items sold. This means ending inventory holds the most recent purchased items.

File - Collection of information stored as records. For example, the records for all charge customers at the local department store collectively form the accounts receivable file.Final accounts - Accounts produced at the end of the year giving details of the profit or loss made over the year and the worth of the business.

Final demand - Demand for the economy's final output.




Final goods - Goods that are not used as inputs by other firms but are produced to be sold for consumption, investment, government, or exports. during the period under consideration.

Finance - The field that studies how people make decisions regarding the allocation of resources over time and the handling of risk.

Finance charge – Refers to the amount in total $ a loan will cost. It includes all the interest payments over the full life of the specified loan, interest to be paid at closing of the loan, any origination fee or other charges that were paid to the lender/broker.

Finance house – A specialist institution which provides funds for hire purchase agreements.

Financial account of the balance of payments - The record of the flows of money into and out of the country for the purposes of investment or as deposits in banks and other financial institutions.

Financial accounting - Information developed in conformity with generally accepted accounting principles (GAAP). It involves the recording and summarisation of business transactions and events. Financial accounting relates to the preparation of financial statements for external users such as creditors, investors, and suppliers. The financial statements include the balance sheet, income statement, and statement of changes in financial position.

Financial analysis - Use and transformation of financial data into a form that can be used to monitor and evaluate the firm's financial position, to plan future financing, and to designate the size of the firm and its rate of growth.

Financial budget - Is one that embraces the impacts of the financial decisions of the firm. It is a plan including a budgeted balance sheet, which shows the effects of planned operations and capital investments on assets, liabilities, and equities. It also includes a cash budget, which forecasts the flow of cash and other funds in the business.

Financial capital - Money that a firm raises to carryon its business, including both equity capital and debt. Also called money capital.

Financial decisions - Decisions that involve: (1) determining the proper amount of funds to employ in a firm; (2) selecting projects and capital expenditure analysis; (3) raising funds on the most favourable terms possible; and (4) managing working capital such as inventory and accounts receivable.

Financial crowding out - When an increase in government borrowing diverts money away from the private sector.

Financial deregulation -The removal of or reduction in legal rules and regulations governing the activities of financial institutions.

Financial engineering - Application of economic principles to the dynamics of securities markets, especially for the purpose of structuring, pricing, and managing the risk of financial contracts.

Financial flexibility - Where employers can vary their wage costs by changing the composition of their workforce or the terms on which worker are employed.




Financial intermediaries - The general name for financial institutions (banks, building societies etc.) which act as a means of channelling funds from depositors to borrowers.

Financial expense -1. generally refers to a firm's interest expense on its long-term debt. Or 2. it may include interest and other related charges including losses on foreign exchange due to debt; also the net expense for the selling of securities; the amortisation relating to any bond redemption premiums; and any additions or changes to the provisions for financial liabilities and any possible charges and other related impairment losses relating to the firms other investments.

Financial gearing - Reflects the borrowing levels that the firm has undertaken. The operating income of the firm will see increased volatility with higher levels of financial gearing i.e. borrowing.

Financial institution - An institution or organisation which may be public or private that is engaged in the act of collecting funds from the public and/or other organisations with the intention of investing these funds into financial assets.

Financial leverage - The portion of a firm's assets financed with debt instead of equity. It involves contractual interest and principal obligations. Financial leverage benefits common stockholders as long as the borrowed funds generate a return in excess of the cost of borrowing, although the increased risk can offset the general cost of capital.

Financial markets - Markets through which saving passes before it goes either to governments or to business firms for investment purposes.

Financial planner - A professional engaged in providing personal financial planning services to individuals. A financial planner assists a client in the following ways: (1) assesses a client's financial history, such as tax returns, investments, retirement plan, wills, and insurance policies; (2) helps decide on a financial plan, based on personal and financial goals, history, and preferences; (3) identifies financial areas where a client may need help, such as building up retirement income or improving investment return; (4) prepares a financial plan based on the individual situation and discusses it thoroughly; (5) helps implement the financial plan, including referring the client to specialists, such as lawyers or accountants, if necessary; and (6) reviews the situation and financial plan periodically and suggests changes when needed.

Financial position - The status or position of a firm's or other entity assets, liabilities, and owners equity position. This is shown by the financial statements of the entity.

Financial ratio - Mathematical relationship between one quantity and another. There are many categories of ratios such as those that evaluate a business entity's liquidity, solvency, return on investment, operating performance, asset utilization, and market measures. An example of a ratio is the earnings yield that equals dividends per share divided by market price per share.

Financial ratio analysis – Is a method used by interested parties such as investors, creditors, and management to evaluate the past, current, and projected conditions and performance of the firm. Ratio analysis is the most common form of financial analysis. It provides relative measures of the firm's conditions and performance. When using the financial ratios, a financial analyst makes two types of comparisons: (1) Industry comparison. The ratios of a firm are compared with those of similar firms or with industry averages or norms to determine how the company is faring relative to its competitors. Industry average Or (2) Trend analysis. A firm's present ratio is compared with its past and expected future ratios to determine whether the company's financial condition is improving or deteriorating over time.




Financial ratio analysis – List of ratios

Liquidity:

Net working capital

Current assets – current liabilities

Current ratio

Current assets / Current liabilities

Quick ratio

(Current assets – inventory) / Current liabilities

Activity:

Accounts receivable turnover

Net credit sales / Average accounts receivable

Average collection period




365 / Accounts receivable turnover

Inventory turnover

Cost of goods sold / Average inventory

Average age of inventory

365 / Inventory turnover

Total asset turnover

Net sales / Average total assets

Leverage:

Gearing

Long term loan and preference shares / Total capital

Debt/equity ratio

Total liabilities / Stockholder’ equity




Times interest earned

Earnings before interest and taxes / Interest expense

Profitability:

Gross profit margin

Gross profit / Net sales

Profit margin

Net income / Net sales

Return on capital employed

Net income / Capital employed

Return on common equity

Net income / Common equity




Market value:

Earnings per share

Net income – preferred dividends / Number of ordinary shares issued

Price earnings ratio

Market price per share / Earnings per share

Dividend yield

Gross dividend per share / Market price per share

Dividend cover

Net profit after tax and preference dividends / Ordinary dividends paid and proposed

Financial reporting - Presenting financial data of a company's position, operating performance, and funds flow for an accounting period.Financial restructuring - Normally refers to a set of processes and procedure aimed at avoiding the possible liquidation of the firms. It often involves agreement with third parties/entities to help satisfy the creditors' claims under a variety of different terms and possible conditions.

Financial results - Refers to the different financial statements that need to be provided to be in compliance with the GAAP guidelines. They but usually relate to a month, quarter, or year.

Financial statement - Report containing financial information about an organisation. The required financial statements are balance sheet, income statement, and statement of changes in financial position. They may be combined with a supplementary statement to depict the financial status or performance of the organization.

Financial statement analysis - Is a method used by interested parties such as investors, creditors, and management to evaluate the past, current, and projected Page No. 58A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



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GAAP – Generally accepted accounting principles.

Gaia philosophy - The respect for the rights of the environment to remain unharmed by human activity. Humans should live in harmony with the planet and other species. We have a duty to be stewards of the natural environment, so that it can continue to be a self-maintaining and self. regulating system.

Gain - 1. the amount earned on some commercial or business transaction. Or 2. the excess of revenue over the cost of operations. Or 3. to earn on a some business or commercial transaction. Or 3. money earned as wages or salary. Or 4. a rise in rate or price.

Gains from trade - The increased output due to the specialisation according to comparative advantage that is made possible by trade.

Game theory (or the theory, of games) - The theory that studies rational decision making in situations in which one must anticipate the reactions of one's competitors to the moves that one makes.Garbage in, garbage out - Computing term, used in computing industry it is used to mean that if the data being entered into a system is incorrect, the resulting data coming out will also be wrong.

GATT The General Agreement on Tariffs and Trade (now called the WTO or World Trade Organisation) - formed in 1947, headquarters in Geneva, and currently with 105 member countries. An international agreement committed to free multi trade through the reduction of trade barriers.GBP - United Kingdom Pound Sterling (Currency Code).

GDP (gross domestic product at market prices) - The value of output (or income or expenditure) in terms of the prices actually paid. GDP = GVA + taxes on products - subsidies on products.

Gearing (AKA: leverage) – The relationship between funds raised from loans and issuing shares. The comparison of a company's long term fixed interest loans compared to its assets. In general two different methods are used: 1. Balance sheet gearing is calculated by dividing long term loans with the equity (or proprietor's net worth). 2. Profit and Loss gearing: Fixed interest payments for the period divided by the profit for the period.

Gearing ratios - Explore the capital structure of a business by comparing the proportions of capital raised by debt and equity.

General equilibrium - A situation where all millions of markets throughout the economy in a simultaneous state of equilibrium.

General expense - Expense not directly connected with any single department.





General government debt - The combined accumulated debt of central and local government.

General government deficit (or surplus) - combined deficit (or surplus) of central and local government.

General journal - Simplest type of journal. I! is used when no special journal exists to record a transaction, usually when a transaction occurs infrequently. Examples are the declaration of a dividend, correction of an accounting error, and an appropriation of retained earnings. It has only two money columns, one for debits, the other for credits.

General ledger - Record of a business entity's accounts. The general ledger contains the accounts that make up the entity's financial statements. Separate accounts exist for individual assets, liabilities, stockholders' equity, revenue, and expenses. A trial balance is prepared of the general ledger accounts at the end of the accounting period to assure that total debits equal total credits.

Generally accepted accounting principles (GAAP) - Standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. GAAP is the combination of generally accepted methods for keeping accounting information and policy board set standards.

General partner - 1. member of a partnership who is jointly and severally liable for all debts incurred by the partnership that is, a partner who does not have limited liability. Or 2. managing partner of a limited partnership who is in charge of its operations. A general partner has unlimited liability.

General union - A trade union which represents workers (often unskilled but also include semiskilled) from a variety of trades.

Generic strategies - Strategies that can be used by any type of business organisation.

Geographical immobility - The lack of ability willingness of people to move to jobs in other parts of the country.

Geographical mobility - The ease with which workers can move from one occupation to another in a different location.

Geographical segment - A segment or component of an organisation that (1) provides a range of products and/or services within a specific economic environment and (2) that is therefore subject to any risks and possible returns that are varied or different from those risks and returns of the firms components which are operating in other alternative economic environments.

Giffen good - An inferior good for which the negative income effect outweighs the substitution effect so that the demand curve is positively sloped.

Gifts in kind - Non-cash gifts which may be tangible or may be intangible items.




Gilt - A UK government issued bond. Equivalent to a United States Treasury securities.

Globalisation (Globalization) – The integration of the worlds economies brought about by the rapid improvements in communication and transportation. Globalisation involves the spread of economic, social and cultural ideas across the world, and growing uniformity between different places that result from this spread. It has come about as a result of increased integration of national economies through growth of international trade, investment and capital flows, made possible by rapid improvements in technology.

GNP - Gross national product.

GNP deflator - A price index that measures the changes in prices of all goods and services produced by the economy.

GNP per capita - Gross national product (see above) divided by the population. It indicates average economic activity and income and takes no account of income distribution.GNY (gross national income) - GDP plus income from abroad.

Goal – The aim or milestone the organisation tries to achieve that has evolved from either a strategic issues and/or operational planning. Goals can be quantitative or qualitative. Goals are normally more general in their nature, while objectives on the other hand tend to be more specific, often both measurable and possibly time based.

Going concern – It is assumed for accounting purposes a business will continue indefinitely. If the concern is not liquid, the viability and therefore sustainability of that entity being able to continue its operations in the future may be doubt.

Going concern concept (continuity concept) - The assumption that an accountant makes when they are preparing the set of accounts for a firm. That the firm which the statements are being prepared for will remain in existence in the foreseeable future.

Going public (initial public offering IPO) - Refers to those activities and steps that relate to and are needed when offering a private company's shares to the public at large i.e. floating the private company on the stock exchange.

Going rate – The price that goods or services ‘on average’ are sold for.

Golden handcuffs - Contractual agreement almost virtually assuring that the stockbroker will stay with the brokerage firm for a specified time period. The incentive may be in the form of high commission rates, bonuses, participation in a forthcoming initial public offering (IPO) of the brokerage firm itself, or other attractive fringe benefits. The contract may specify a penalty the broker will incur such as forfeiting past commissions if he or she leaves the brokerage firm before a specified date.

Golden handshake - A clause in executive employment contracts that provides the executives with lucrative severance packages in the event of their termination. May include a continuation of salary, bonus, and/or certain benefits and perquisites, as well as accelerated vesting of stock options.




Golden rules of accounting - 1. Debits = Credits; and, 2. Assets = Liabilities + Owner's Equity (The Accounting Equation).

Gold exchange standard - A monetary system in which U.S. currency is directly convertible into gold and other countries' currencies are indirectly convertible by being convertible into the gold-backed U.S. dollar at a fixed rate.

Goodhart's Law - Controlling a symptom of a problem, or only part of the problem, will not cure the problem: it will simply mean that part that is being controlled now becomes a poor indicator of the problem.

Goods – (accounting) Items of merchandise, finished products, supplies, or raw materials. Sometimes the term is extended to cover all inventoriable items or assets such as cash, supplies, and fixed assets. (economics) Real things that can be touched as opposed to services which are things people do for you.

Goods markets - Markets in which outputs of goods and services are sold. Also called product markets.

Goodwill - This is an extra value placed on a business if the owner of a business decides it is worth more than the value of its assets. It is usually included where the business is to be sold as a going concern.

Go-slow – The reduction of output by workers whilst still carrying on tasks in their contract of employment.

Government - All public officials, agencies, and other organisations belonging to or under the control of state, local, or federal governments.

Government accounting - Principles and procedures in accounting for federal, state, and local governmental units. Unlike commercial accounting for corporations, encumbrances and budgets are recorded in the accounts. Assets of a governmental unit are restricted for designated purposes.

Government bonds or 'gilt-edged securities - Government security paying a fixed sum money each year. It is redeemed by the government on its maturity date at its face value.

Government budget – Is a plan of all government revenue and spending. Government budgeting is the financial plan and a basis for evaluating performance and an expression of public policy and a form of control having the force of law. Thus, a governmental budget is a legal document adopted in accordance with procedures specified by applicable laws. A governmental budget must be complied with by the administrators of the governmental unit for which the budget is prepared.

Government intervention - May be able to rectify various failings of the market. Government intervention in the market can be used to achieve various economic objectives which may not be best achieved by the market. Governments, however, are not perfect and their actions may bring adverse as well as beneficial consequences

Government purchases - All government expenditure on currently produced goods and services, exclusive of government transfer payments. Represented by




the symbol G as one of the four components of aggregate expenditure.

Government surplus (from a tax on a good) – The total tax revenue earned by the government from sales of a good.

Grace period - The period or length of time between the date on your statement and the date payment is due.

Grant in aid - A transfer from one level of government to another.

Green belt - Areas designated by government, usually in rural areas, where the development of business is prohibited.

Green field sites - Areas of land, usually on the outskirts of towns and cities, where businesses develop for the first time.

Greenmail - A payoff given to a potential acquirer by a company targeted for a takeover. In most cases, the targeted company buys back its shares at a significantly higher price. In reciprocation for selling the shares back, the suitor agrees to end the attempted takeover.

Green revolution The increase in grain produced in LDCs associated with the development of new high-yielding hybrid strains of rice, corn and wheat.

Green tax - A tax on output designed to charge for the adverse effects of production on the environmen1 The socially efficient level of a green tax is equal to the Gresham's law - The theory that "bad," or debased, money drives "good," or undebased, money out of circulation because people keep the good money for other purposes and use the bad money for transactions.

Gross - 1. the whole of any income before any deductions are subtracted. Or 2. any total before deductions are subtracted e.g. gross labour or gross income.

Gross domestic investment - The creation of capital goods, such as factories and machines, that can yield production and hence consumption in the future. Also included in this definition are changes in business stocks and repairs made to machines or buildings. Gross investment is total investment before depreciation.

Gross domestic product (GDP) - National income as measured by the output approach; equal to the sum of all values added in the economy or, what is the same thing, the values of all final goods produced in the economy. It can be valued at current prices to get nominal GDP, which is also called GDP at current, or market, prices; or it can be valued at base-year prices to get real GDP, which is also called GDP at constant prices.

Gross investment - The total value of all investment goods produced in the economy during a stated period of time.

Gross loss - The trading account balance if it has a debit balance i.e. Cost of sales greater than sales.

Gross margin - Refers to the % or difference between the sales price and the cost of sales.

Gross national product (GNP) - The sum total of all final goods and services produced by a country in a year, plus the value of net property income from abroad.




This is measured in the currency of the country which is then converted to US. dollars to allow inter-country comparisons.

Gross national product (GNP) - The total output of goods and services produced by the country in a year, plus the value of net property income from abroad.

Gross national income (GNY)- GDP plus net income from abroad.

Gross value added at basic prices (GVA) - The sum of all the values added by all industries in the economy over a year. The figures exclude taxes on products (such as VAT) and include subsidies on products.Gross negligence - Any action and/or omission that is in reckless disregard of the possible negative consequences to the safety and/or property of another individual or entity.

Gross pay (salary) - Employee salary prior to the application of taxes and other deductions.

Gross profit - The balance of the trading account assuming it has a credit balance. Sales less cost of goods sold.

Gross profit margin (ratio) - Expresses operating profit before tax and interest (gross profit as a percentage of turnover).

Gross tuning - The use of macroeconomic policy to stabilise the economy such that large deviations from high employment do not occur for extended periods of time.

Gross weight - The total weight of a particular shipment which includes the packing material.

Group - Number of individuals or companies which assemble together in order to achieve a goal.

Group accounts - The financial statements relating to a group of companies. These accounts are normally presented as a consolidated set of accounts.

Group norm - The usual characteristics of the behaviour of a group.

Growth rate – (Accounting) amount of change in some financial characteristic of a company. 1. percentage change in earnings per share, dividends per share, revenue, market price of stock, or total assets compared to a base year amount. (Economics) The increase in real GDP.

Growth stocks – Used to describe shares of young companies with little or no earnings history. They are valued on the basis of anticipated future earnings and thus have high price-earnings ratios. They generally grow faster than the economy as a whole and also faster than the industry of which they are a part. They are risky because capital gains are speculative, especially in the case of young companies in new industries. An example of a growth stock is a high-tech company.




Guarantee – Agreement by the seller of goods or services to satisfy for a stated period of time deficiencies’ in the items quality or performance.

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Hacker - Knowledgeable computer user who attempts to break into and corrupt a computer system.

Hard copy - Computer term for output printed directly on paper. The user types commands, instructions, or data on a keyboard. The computer's responses, as well as the information entered, are printed on paper, which gives the user a permanent copy of the input.

Hard costs - Refers to the price paid to purchase the actual assets. For example, the price paid for a new computer would be considered the hard cost. The soft costs would be any additional fees or charges for services like invoiced installation charges, any extended guarantees or warranties, or extra service and support contracts for the new computer.

Hard disk - The unit that stores information (e.g., data files and programs) within the computer.

Hard loan - A loan with commercial rates of interest and terms of repayment (see soft loan).

Hardware - The name given to all the electronic and mechanical devices that make up a computer, as opposed to software, which refers to programs





Haulage - The transport of bulk goods or products; usually refers to road transport but can also refer to rail transport.

Harmonised system - A internationally recognised and agreed classification system for international trade. It provides the different code numbers that are used to specify every item's classification. By this method customs/tariff duty calculations are more predictable.

Hawthorne effect - The idea that workers are motivated by recognition given to them as a group.

Hedge - 1. the process of protecting oneself against unfavourable changes in prices. Thus one may enter into an offsetting purchase or sale agreement for the express purpose of balancing out any unfavourable changes in an already consummated agreement due to price fluctuations. Hedge transactions are commonly used to protect positions in (I) foreign currency, (2) commodities, and (3) securities. Or 2. financing an asset with a liability of similar maturity.

Hedge fund - 1. a limited partnership of investors that invests in speculative stocks. Or 2. a mutual fund that seeks to make money betting on a particular bond market, currency movements, or directional movements based on certain events such as mergers and acquisitions. It attempts to hedge in order to minimize an exposure to currency risk. In general, international short-term bond funds usually hedge most of the currency risk, while longer-term funds have substantial exposure. Or 3. a mutual fund that hedges its risk by buying or selling options to protect its position against market risk..

Hedging – The strategy which is focused on reducing or lowering exposure to degrees of risk / loss resulting from unexpected fluctuations in foreign exchange rates, interest rates, commodity prices, etc. Hedging in relation to securities is the taking two offsetting positions so that each if prices change, the financial risk has been limited.

Hidden asset - An asset (with value) that has not been included in the reported book value of a firm or organisation. Hidden assets can include things such as customer lists or intellectual property, or other things which are of significant value, but that value has not been reflected in the reported book value of the firm.

Hierarchy – The order or levels of management of a business, from lowest to highest.

High employment (full employment) - Employment that is sufficient to produce the economy's potential output; at high employment, all remaining unemployment is frictional, seasonal and structural.

High income oil producing countries - Countries with very high income levels to oil exports but with the economic structures of developing countries.

High/low method - An algebraic procedure that is used to classify a semi-variable cost into its variable and the fixed parts. The method uses the extreme highest and lowest x - y pairs in the cost volume formula. The formula is then given as y = a + bx. a = fixed cost portion and b = the variable rate.

Hire purchase/credit sale - Methods used to buy goods now and payoff the balance over a period of time. In the case of the former, the goods only belong to the buyer when the final payment is made.

Histogram - A chart which measures continuous data on the horizontal axis and class frequencies on the vertical axis.

Historical Cost - Assets, stock, raw materials etc. can be valued at what they originally cost. or 2) The original amount a firm paid for factors it now owns.Page No. 66A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



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Ideal capacity - The largest volume of output possible if a facility maintained continuous operation at optimum efficiency, allowing for no losses of any kind, even those deemed normal or unavoidable; also called maximum capacity, theoretical capacity, or engineered capacity.Idiosyncratic risk - Risk that affects only a single economic actor.

Idle balances - Money held for speculative purposes: money held in anticipation of a fall in asset prices.

Idle capacity - 1. presence of unused capacity together with insufficient raw materials or skilled labor. When idle capacity exists, a firm can take on an incremental order without increasing the fixed costs. Or 2. economic situation in which the market will not absorb all of the maximum possible output at a price exceeding the variable cost of production. Or 3. capacity that is potentially available but not currently being used, perhaps due to market pressures from competition, distribution constraints, or management policy (such as union contract laws, holidays, overtime rules); also called excess capacity. On the other hand, increased idle capacity may represent the rewards and evidence of improved productivity and efficiencies by operations.

Idle time – The cost of direct labour for employees unable to perform their assigned tasks because of machine breakdowns, shortage of materials, power failure, sloppy production scheduling, and the like. The cost of idle time is treated as part of factory overhead-that is, as part of indirect manufacturing costs that should be spread over all the production of a period.

Illegal act – (Accounting) violation of law or governmental regulations by an audited entity or its management or employees acting on behalf of the entity.Illiquid – 1.when the cash flow in received by the business is no insufficient to cover the debt servicing requirements of the business. Or 2. an asset that can not be easily turned into cash.

Immateriality – Not relevant to the decision, not requiring any further consideration consideration.

Immovable - 1. unable to be changed or moved. Or 2. assets consisting of buildings, land, or other permanent immovable items.

Impact statement - A document that analyses the projected effects of a contemplated project. A primary reference point within this statement concerns probable externalities (e.g., negative implications to the environment). An example would be the proposal of a large industrial corporation located on an upriver site to dump some level of pollutants into the air and streams. The proposal would lead to an environmental impact statement about the effects upon health.Imperfect competition (market) - The collective name for monopolistic competition, oligopoly and monopoly.

Impersonal accounts - Divided between real accoutns and nominal accounts.





Implicit costs - Costs which do not involve a direct payment of money to a third party, but which nevertheless involve a sacrifice of some alternative.

Implicit GDP deflator - An index number derived by dividing GDP, measured in current dollars, by GDP, measured in constant dollars, and multiplying by 100 .In effect, a price index, with current-year quantity weights, measuring the average change in price of all the items in the GDP. Also called GDP deflator.

Import – Goods and services which enter the country are brought from foreigners.

Imported inflation - A rise in prices, as a result of exchange rate changes, which raise the price of materials or components brought into a country.

Import quota - A limit set by the government on the quantity of a foreign product that may be shipped into that country in a given time period.

Import-substituting industrialisation (ISI) - A strategy of restricting imports of manufactured goods and using the foreign exchange saved to build up domestic substitute industries.

Import substitution - The process by which many LDCs have attempted to industrialize, i.e. manufacturing consumer goods themselves rather importing them.

Impound - To take custody of and seize property or money by some legal action (e.g., court mandate).

Imprest System - A reimbursement system whereby the total petty cash payment is reimbursed to the original sum in hand.

Imputed cost - 1. the cost of an service, asset, or business that is implied but not physically reflected in the accounts of the firm. Or 2. the costs of using factors of production already owned by the firm, measured by the earnings they could have received in their best alternative use.

Imputed value - The implicit or underlying value that is not recorded in the accounts of the firm.

Inadequacy - The loss or expense that is incurred by virtue of lost or reduced capacity, technological obsolescence, and/or abnormal wear and tear and that requires premature replacement or abandonment.Incentive - A reward given to employees to encourage them to work harder. People respond to incentives. It is important, therefore, that incentives are appropriate and have the desired effect.

Income - Money received by a business from its commercial activities. See 'Revenue'.

Income-consumption line - 1. a curve showing the relationship for a product between quantity demanded and income, ceteris paribus. Or 2. a curve drawn on an indifference curve diagram and connecting the points of tangency between a set of indifference curves and a set of parallel budget lines, showing how the con




sumption bundle changes as income changes, with relative prices being held constant.

Income deduction – Non operating expenses of an organisation that are listed in the final section of the income statement before arriving at net income.

Income effect (of a price change) - The effect of a change in price on quantity demanded arising from the consumer becoming better or worse off as a result of the price change.

Income effect of a rise in wage rates - Workers get a higher income for a given number of hours worked and may thus feel they need to work fewer hours as wage rates rise.

Income effect of a tax rise - Tax increases reduce people's incomes and thus encourage people to work more. Income elasticity of demand - The percentage change in the quantity demanded divided by the percentage change in money income; the responsiveness of the quantity demanded to changes in income. Income smoothing - the measures taken to reduce the probability or likelihood of sudden income shocks prior to them occurring, strategies used include diversification of income sources; building up or stockpiling human, physical, and social assets; trying to make low-risk employment and production choices; and ensuring good financial control and management procedures are used. Incomes policy - Any direct intervention by the government to influence wage and price formation.Income statement - The statement showing the elements used in arriving at a company's net income for the accounting period; also called profit and loss statement.

For example:

Sales

Less: Cost of sales

Gross profit

Less: Operating expenses (including selling expenses and

general & administrative expenses)

Net profit

Income summary account – A temporary account recorded in the general ledger which is used to summarise the revenue & expenses for the financial period.




Indifference curve – An economic concept, an indifference curve is a graph or diagram which shows the combinations of two different goods at which point an individual or firm is indifferent, that is to say has equal utility, or has no difference in their preference for one combination as compared to the other.

Indifference point - the point which is on an indifference curve where the different compared values cross or intersect.

Indirect cost or overhead – A cost which cannot be identified with a particular unit of output. 2) Is that part or percentage of a cost which indirectly is expensed in providing or producing a product / service for sale (the firm is unable to directly this to a single product). e.g. rent, maintenance, utilities, etc

Indirect tax - A tax imposed on spending.

Indirect taxes - Taxes on expenditure ( e.g. VAT) Paid to the tax authorities, not by the consumer but indirectly by the suppliers of the goods or services.Indivisibilities - The impossibility of dividing factor into smaller units.

Induced investment - Investment that firms make to enable them to meet extra consumer demand

Induced spending - A variable which depends on the level of income is said to be induced.

Inducement - A reward for a specific behaviour, designed to encourage that behaviour; also called incentive.

Induction - The introduction of a new employee to the business.

Induction training - Introduction given to a new employee, explaining the firm's organisational structure, activities and procedures.

Industrial action - Steps taken by the trade unions to decrease or halt production.

Industrial countries - Developed countries or the North. Countries in which most people have a high standard of living with many goods and services. There are 19 such countries representing less than 20% of the world's population.

Industrial inertia - The tendency for firms in the same industry to locate in the same region even when the original locational advantages have disappeared.

Industrial policies - Policies to encourage industrial investment and greater industrial efficiency.




Industrial tribunal - A legal meeting which considers workers complaints of unfair dismissal or discrimination at work.

Industrial union - A trade union which represents all types of workers in a particular industry.

Industry - The people or companies engaged in a particular kind of commercial enterprise. For example the mining industry.

Industry analysis - Is an analysis of various key factors relating to the industry. It may include an analysis of the industry life cycle, the history of the industry, an in-depth ratio analysis of the industries financial performance, a review of how differing trends such as seasonal fluctuations affect the industry, external influences on the industry such as government laws and a review of levels of competition both present and future for the specific industry.

Inelastic demand - The situation in which, for a given percentage change in price, there is a smaller percentage change in quantity demanded; elasticity less than unity.

Infant industry - An industry that has a potential comparative advantage, but which is as yet too underdeveloped to be able to realise this potential. Infant industry argument - The argument that new domestic industries with potential for economies of scale or learning by doing need to be protected from competition from established, low-cost foreign producers so that they can grow large enough to achieve costs as low as those of foreign producers.

Infant mortality rate - The number of live-born infants who die before one year of age per 1000 of the population. This statistic is highly correlated with health care and nutrition standards.Inferior good - A good for which income elasticity is negative.

Inflation - A rise in the average level of all prices.

Inflation accounting - A method of reporting that allows for the financial effects of changes in the price level.

Inflation adjustment - Whenever any figure has an adjustment made for inflation or deflation.

Inflationary gap - A situation in which actual national income exceeds potential income. Inflation tax - The revenue the government raises by creating money. Informal groups - groups made up of individual business with similar interests. They are not part formal business organisation. Informal organisation – The relationship between employees that are based on common interests of employees.




Information asymmetries - Sources of market failure that arise when one party to a transaction has more information relevant to the transaction than the other party. Information and communication technology – The use of technology to deliver messages and data from groups, individuals or businesses to others. Informationally efficient - Reflecting all available information in a rational way.Information system – A system of transforming raw data into useful information for a decision maker.

Information technology - The recording and use of information by electronic means.

Informative advertising - Advertising where the emphasis of advertising or sales promotion is to give full information about the product.

Infrastructure - The basic installations and facilities (especially transportation and communications systems) on which the commerce of a community depends.

Initiate – To get going or start by taking or implementing first step, e.g., initiate wage negotiations.

Injections (J) - Income earned by domestic firms that does not arise out of the spending of domestic households and income earned by domestic households

In kind - The value or worth of goods and/or services that have been provided instead of money would being paid.

Inland revenue - The government department usually responsible for collecting your tax.

Innovation - The introduction of an invention into methods of production.

Innovators - Individuals who tend to solve problems by finding new, exciting and unexpected solutions to problems in a business.

Inputs - Intermediate products and factor services that are used in the process of production.

Input-output analysis - This involves dividing the economy into sectors where each sector is a user of inputs from and a supplier of outputs to other sectors. The technique examines how these inputs and outputs can be matched to the total resources available in the economy.

Inquiry - A request for information or, an investigation.

Insertion order - Marketing, refers to an agreement that specifies or instructs a media outlet about aspects related to a specific advertising campaign.

Inside information - Privileged information obtained regarding material business results and pending security transactions that will not be made public until a




certain date. Taking advantage of inside information for the purpose of making a profit is illegal (called insider trading).

Insiders - Those in employment who can use their privileged position (either as members of unions or because of specific skills) to secure pay rises despite an excess supply of labour (unemployment) or 2) Insiders are all people who get possession or learn of of material (inside information) prior to its public release.Insider trading – Refers to the buying and selling of the company's securities based on material information relating to the company that has not been made public. Insider trading according to this definition is against the law in most countries

Insolvent - A company is insolvent if it has insufficient funds (all of its assets) to pay its debts (all of its liabilities).

Instalment sale – The selling property/items and receiving the sales price via a series of different payments, instead of receiving all the cash at once or at the time the sale was closed.

Insurance - An agreement through an insurance contract, termed a policy, that one party, for an agreed premium, will provide insurance or pay the insured a specified sum of money, contingent upon the specified conditions within the insurance contract, such as loss of life or property of the insured.

Insurance claim - A written letter or form notifying the insurance company of a request for payment of an amount specified and due under the terms of the insurance policy.

Intangible assets - Assets of a non-physical or financial nature. An asset such as a loan or an endowment policy are good examples. Also called intangibles and include trademarks, goodwill, patents, copyrights, catalogs, brands, franchises, formulas, and mailing lists, net of the accumulated amortisation.

Integrated software – A software package that combines many applications in one program. For example MYOB (Mind Your Own Business) software package integrates the accounting software with database software.

Intellectual capital - Intellectual capital is a term which bundles a variety of knowledge resources such as copyright and patent together. Intellectual capital enables a firm to charge users of its knowledge resources.

Intellectual property - An intangible asset of property that is said to be the result of the creativity of an individual or firm, e.g. trademarks, patents or copyrights.

Itemised deductions - Are amounts paid by the individual taxpayer relating to his/her personal and/or quasi-business expenses that under tax law can be legally deducted in the calculation of their tax liability, e.g. medical expenses, charitable contributions, casualty and theft losses, and other certain and other sundry expenses.

Inter-company - Means an event that is occurring between different companies.

Interdependence (under oligopoly) - One of the two key features of oligopoly. Each firm will be affected by its rivals" decisions.' Likewise its decisions will affect its rivals. Firms recognise this interdependence. This recognition will affect their decisions.Interest - 1. the payment for current rather than future command over resources; the cost of obtaining credit. Or 2. the payment for the use of borrowed money. Or 3. the return paid to owners of capital.




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Internalisation - A process that results in a producer or consumer taking account of a previously external effect.

Intermediate areas - Similar to development areas, but not as 'economically deprived'.

Intermediaries - Firms which act as a link between producers and consumers in a channel of distribution. 2) Are the person or institution empowered to be the intermediary in making investment decisions for others. Examples: banks, insurance companies, savings and loan institutions, brokerage firms, credit unions and mutual funds.

Internal audit - is an independent appraisal process established and conducted within a firm or other organisation aimed at examining and subsequently evaluating its the activates under audit. The main objective of internal auditing is normally to provide assistance to the members of the firm or organisation in order to help the effective discharge of their duties and responsibilities.

Internal auditor - An auditor who is employed directly buy a company to audit its activities over the year. They internal auditor normally will report directly to the board of corporation.

Internal controls - These include the policies and various procedures that (a) relate maintaining accurate and reasonably specifically detailed records, (b) aimed at providing a reasonable level of assurance that the transactions the firm has had are properly recorded and properly authorised, and (c) help to ensure that assets are safeguarded.

Internal rate of return (IRR) - The rate of return (x) at which net present value is zero.

International accounting standards (IAS) – A set of international accounting and reporting standards that will help to harmonize company financial information, improve the transparency of accounting, and ensure that investors receive more accurate and consistent reports. Statements of International Accounting Standards issued by the Board of the International accounting standards committee (IASC) between 1973 and 2001 are designated International Accounting Standards.

International accounting standards board (IASB) (www.iasb.org) - An independent regulatory body, based in the United Kingdom, that aims to develop a single set of global accounting standards.International Bank for Reconstruction and Development (I.B.R.D.) - More commonly known as the World Bank. An international financial institution owned by it's member countries responsible for channeling interest bearing loans and technical assistance to poor countries. The World Bank borrows in turn from world markets.

International harmonisation of economic policies - Where countries attempt to co-ordinate their macroeconomic policies so as to achieve common goals.

International liquidity - The supply of currencies in the world acceptable for financing international trade and investment.




International Monetary Fund (IMF) - An international organization that monitors members' balance of payments and exchange rate activities.

International trade multiplier - The effect on national income in country B of a change in exports (or imports) of country A.

Internet - system of linked smaller computer networks, international in scope, that facilitates data communication such as file transfer, electronic mail, and newsgroups between different entities.

Interperiod tax allocation - Refers to the process of apportioning the correct levels of income taxes to the correect accounting periods.

Interquartile range - The range between the central 50 percent of a set of data.

Intervention price (in the CAP) - The price at which the ED is prepared to buy a foodstuff if the market price were to be below it. . Interventionist supply-side policies - Policies to increase aggregate supply by government intervention to counteract the. deficiencies of the market.In the black - Making money, opposite "in the red."

In the red - Losing money, opposite "in the black."

Intracompany - When the action takes place between the different branches or employees of a firm or organisation.

Intranet – The private network used within the company. An intranet serves the internal needs of the business entity. Intranet users are able to access the Internet, but firewalls keep outsiders from accessing confidential data.

Intrinsic value - This is used to mean value of a resource as considered unto itself, regardless of what value it has to people or on the market.

Invention - The creation of something new, such as a production technique or a product.

Inventories - Stocks of raw materials, goods in process, and finished goods held by firms to mitigate the effect of short term fluctuations in production or sales.

Inventory - A subsidiary ledger which is usually used to record the details of individual items of stock. Inventories can also be used to hold the details of other assets of a business. See Perpetual , Periodic .

Inventory accumulation - The build-up of inventory caused often by unplanned or unexpected events, e.g., sales falling due to new competitor.

Inventory control – The monitoring the supplies, raw materials, work-in-process, and finished goods by various accounting and reporting methods. Some controls are the maintenance of detailed stock records showing receipts and issuances; inventory ledger showing quantities and dollars; and written policies regarding




purchasing, receiving, inspection, and handling.

Inventory obsolescence - When inventory is considered to be no longer saleable at normal rates. Possibly due to changes fashion or new technology.

Inventory shrinkage/spoilage/wastage - the reduction of the physical quantity of a firms inventory that is not easy to explain. A common cause of shrinkage may be theft.

Inventory turnover - The ratio that shows the number of times inventory is sold and subsequently replaced over a specific time period.

Inventory valuation - determination of the cost assigned to raw materials inventory, work-in-process, finished goods, and any other inventory item. Various methods are allowed in valuing inventory including last in ,first out (LIFO), first in, first out (FIFO), an weighted average. Inventory is valued at the lower of cost or market value applied on either an item-by-item basis, a category basis, or a total basis.

Inverse relationship -A relationship that is negative;" such that an increase in one variable is associated with a decrease in the other, and a decrease in one variable is associated with an increase in the other.

Investment (Accounting) - Refers to the purchase of stocks, real property, collectible annuities, bonds, etc, with the reason being the firm expects to make a capital gain, income return or both, over the future.

Investment (Economics) - Expenditure on the production of goods not for present consumption.

Investment appraisal - The evaluation of an investment project to determine whether or not it is likely to be worthwhile.

Investment banker - An underwriter who acts as the middleman between a company that is issuing new securities and the general public.

Investment centre - The responsibility centre within an organisation that has control over the revenue, cost, and the investment funds. It is normally a profit centre that performance is bases on and evaluated via the return earned on the amount of invested capital.

Investment goods - Goods that are produced not for present consumption, such as capital goods, inventories, and residential housing.

Investment manager - The responsible person or entity that makes the day-to-day decisions about investments.

Investment turnover - a measure of profitability which is used in the calculate of the number of times per period an individual or collective set of investments and/or assets turnover.

Invisible account - A form of balance-of-payments account that records payments and receipts arising out of trade in services and payments for the use of capital. Also called service account.




Click HereJ-curve - The way in which the trade balance may initially worsen after an exchange rate depreciation.

JIT – Just-in-time manufacturing

Job analysis - A study of what the job entails. such as the skills, tasks and performance expected.

Job costing - The allocation of costs such as time, material and other expenses to an individual job or project; it is a method that provides for the forecasting, budgeting, collecting and subsequent reporting on the various expense and revenues that can be attributed to individual projects or jobs.

Job description - Document which outlines the responsibilities and duties expected to be carried out by someone employed to do a specific job.

Job design (redesign) - Changing the tasks and activities of a job. perhaps in an attempt to motivate workers.

Job enlargement - Giving an employee more work to do of a similar nature.

Job enrichment - An attempt to give employees greater responsibility and recognition by 'vertically' extending their role in the production process.

Job evaluation - A method used by businesses to comp the value of different jobs and perhaps set wages or salaries.

Job order – A customer order for a specific number of specially designed, made-to-order products.

Job production - A single product is made at a time, usually to the customer's exact specifications.

Job rotation - The changing of jobs or tasks from time to time.

Job satisfaction - Enjoyment derived from feeling .that you have done a good job.

Job search - The process by which workers find appropriate jobs given their tastes and skills.

Job specification - A document which outlines the requirements, qualifications and expertise required from a person to do a specific job.





Joint consultation - Discussion between management and employee representatives before a decision is taken.

Joint costs - Common manufacturing costs incurred prior to the point, referred to as the split off point, where joint products are identified as individual products. Joint costs are the costs associated with a single process of production that makes many products at the same time.

Joint float - Where a group of currencies pegged to each other jointly float against other currencies.

Joint product - A single production process that yields multiple products simultaneously.

Joint stock company - A company that has some of the features of a corporation and also has features that are normally found in a partnership.

Joint supply - Where the production of more of one good leads to the production of more of another.

Joint venture – Two firms sharing the cost, responsibility and profits of a business venture.

Journal(s) - A book or set of books where your transactions are first entered.

Journal entries - A term used to describe the transactions recorded in a journal.

Journal Proper - A term used to describe the main or general journal where other journals specific to subsidiary ledgers are also used.

Judgment - 1. accountant's opinion regarding a set of facts or evidence. Besides interpreting the meaning of the situation, the accountant must also determine its perceived implications. For example, the degree of audit testing required in a given situation depends on the auditor's judgment of the quality of the internal control system. Or 2. court order to pay money.Just-in-time manufacturing (JIT) - A production method that involves reducing or virtually eliminating the need to hold stocks of raw materials or unsold stocks of the finished product.

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k percent rule - The proposition that the money supply should be increased at a constant percentage rate year in and year out, irrespective of cyclical changes in national income.

Kaizen - A Japanese term meaning continuous improvement, through the elimination of waste

Kaizen budgeting - incorporates expectations for continuous improvement into budgetary estimates The main point the budget cannot be successfully achieved unless the improvements are carried out.

Kaizen costing - Determines target cost reductions for a period, such as a month or year.

Kanban - A card which acts as a signal to move or provide resources in a factory.

Keynesian - A Keynesians Economist holds the view, derived from the work of John Maynard Keynes, that active use of monetary and fiscal policy can be effective in stabilizing the economy. Often the term encompasses economists who advocate active policy intervention in general.

Keynesian growth models - Growth models by which the long-run path for growth in an economy is determined by the relationship between savings, investment and the level of production or output.

Keynesian macroeconomics - Keynesian theory is used to illustrate how a free market economy can reach equilibrium while still experiencing large scale unemployment and how the government should use expansionist fiscal spending to achieve a new equilibrium at the full-employment level of output.

Keynesian short-run aggregate supply curve - A horizontal aggregate supply curve indicating that when national income is below potential, changes in national income can occur with little or no accompanying changes in pnces.

Kinked demand curve - A model of pricing in an oligopolistic market structure where rivals follow one firm's decision to make a price decease but not a price increase. The demand curve is thus bent or kinked and the associated marginal revenue curve has a discontinuous part in it.

Kiting – 1. In relation to banking, means the depositing and drawing cheques at two or more banks simultaneously and thus taking advantage of the difference in time it takes the second bank to have collected the monies from the original bank. Or 2. Can also mean illegally raising the face value of a cheque by altering the amount written on the cheque. In the context of securities, Kiting is to the manipulate and/or inflate the stock price.

Knowledge management (KM) - The process associated with connecting people to people and people to information to create a competitive advantage.

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Labour - A factor of production consisting of all physical and mental efforts provided by people.

Labour efficiency variance - Difference between the amount of labour time that should have been used and the labour that was actually used, multiplied by the standard rate.

Labour force - The total number of persons employed, plus the number of persons who are unemployed.

Labour force participation rate - The percentage of the population of working age that is actually in the labour force (either working or seeking work).

Labour intensive - production methods which rely on a large workforce relative to the amount of machinery.

Labour rate (price) variance - Any difference from standard in the average hourly rate paid to workers: Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hours of Labour UsedLabour turnover - The number of people that leave a business over a period of time as a percentage of the number of people employed.

Laffer curve - A graphical representation of the relationship between tax rates and total tax revenues raised by taxation.

Lagging indicators - Series of indicators that follow or trail behind aggregate economic activity.

Lag time - The length of time in between two events or phenomena which are closely related. An example of lag time would be the period between the Central Bank increasing interest rates and the economic activity in the economy falling.

Laissez-faire - Literally, "let do"; a policy advocating the minimisation of government intervention in a market economy. Adam Smith's Wealth of Nations represents this doctrine.

Laissez-faire leadership - A leadership style where employees are encouraged to make their own decisions, within limits.

Land (Accounting) - is the value or worth of any real estate assets less the money spent of any improvements, e.g. buildings.

Land (Economics) - The natural resources that are available without alteration or effort on the part of labour. Land as a resource includes only original fertility and mineral deposits, topography, climate, water, and natural vegetation.

Landed costs - The total costs involved when importing goods. They include buying, shipping, insuring and associated taxes.




Landfill - A way of disposing of waste which involves burying it in the ground.

Last in first out (LIFO) - A method of stock valuation which involves issuing more recent deliveries first, so that closing stock is valued at the older and possibly lower purchase price.

Lateral integration – The merging of firms involved in production of similar goods but not in competition with each other.

Latest finish time - in program evaluation and review technique (PERT), latest time at which an activity must be completed without holding up the complete project.

Latest start time - in program evaluation and review technique (PERT), latest time at which an activity must begin without holding up the complete project.Latest time (LT) - in program evaluation and review technique(PERT), latest time at which an activity can be completed without extending the completion time of the project.

Law of comparative advantage - Trade can benefit all countries if they specialise in the goods in which they have a comparative advantage.

Law of demand - The assertion that market price and quantity demanded in the market vary inversely with one an other, that is, that demand curves are negatively sloped. Assuming all other things being equal (ceteris paribus) .

Law of diminishing (marginal) returns - The hypothesis that if increasing quantities of a variable factor are applied to a given quantity of fixed factors, the marginal product and average product of the variable factor will eventually decrease.

LCM Rule (lower-of-cost-or-market rule) - LCM rule requires an asset be reported in the financial statements of a firm at either the lower of purchase cost or its current market value market value (the lowest of the two should be used).

Leadership styles – Approaches to dealing with people when in a position of authority. See also autocratic, laissez-faire and democratic.

Leading indicators - Series of indicators that tend to predict future changes in economic activity.Lead time - The time in between placing the order and the delivery of goods.

Leakages - Those parts of national income not used for consumption i.e. net taxes, saving, and imports.

Lean production - An approach to operations management aimed at reducing the quantity of resources used up in production.

Learning curve – A curve showing how a firm's costs of producing at a given rate of output fall as the total amount produced increases over time as a result of ac




cumulated learning of how to make the product efficiently using given equipment.

Learning organisation - A business which facilitates the learning of its members and benefits competitively as a result.

Lease - Legal agreement whereby the lessee uses real or personal property of the lessor for a rental charge.

Leasehold - An the agreement made between the lessee and the lessor which specifies the lessee's different rights and obligations to make use of the leased asset or property for the specific purpose and/or the given time period at a specified amount rent.

Ledger - A book in which entries posted from the journals are re-organised into accounts. In effect, the ledger is a classification and summarization of financial transactions and the basis for the preparation of the balance sheet and income statement.

Legal entity – An individual or organisation that has the legal recognition or standing to enter/sign a contract and can be legally sued for failure to carry out or perform the obligations entered into as agreed under the contract.

Legal liability - 1. obligation with specified terms and conditions by which a defined payment amount in money, goods, or services is to be paid within a defined time period in return for a current benefit. Or 2. responsibility of the accountant to the client and third parties relying on the accountant's work. Accountants can be sued for fraud and negligence in performance of duties.

Legal monopoly - In the United Kingdom, any business with over 25 per cent of the market.

Legal tender - Anything that by law must be accepted for the purchase of goods and services or in discharge of a debt.

Lender of last resort - The role of the Bank of England as the guarantor of sufficient liquidity in the monetary system.

Less-developed countries (LDCs) - The lower-income countries of the world, most of which are in Asia, Africa, and South and Central America. Also called under developed countries, developing countries.

Lessee - The party or entity to who the possession/occupation of specific property has been legally conveyed for a given period of time in the return for rent payments.

Lessor - The party or entity who conveys/leases a specified piece of property or other asset to another party or entity for a specified period of time in return for receipt of rental payments.

Letter of credit (LOC) - A legal letter or document that is issued by the buyer’s bank which upon the presentation of any specific required documents the payment should be forth coming. It is the Usual practice for the seller's bank to confirmby the seller's the protection to be given to a seller that the agreed payment will be made on time if the items specified in the agreement are shipped as agreed, and also protection is given to a buyer that the specified items will be supplied or




shipped prior to the payment being made.

Leverage – Is a term commonly used in finance and accounting to describe the ability of fixed costs to magnify returns to a firm's owners. Operating leverage, a measure of operating risk, refers to the fixed operating costs found in the firm's income statement. Financial leverage, a measure of financial risk, refers to financing a portion of the firm's assets, bearing fixed financing charges in hopes of increasing the return to its owners. Total leverage is a measure of total risk. The way to measure total leverage is to determine how earnings per share (EPS) is affected by a change in sales.

Leveraged buyout (LBO) – The acquisition of one company by another, typically with borrowed funds. Usually, the acquired company's assets are used as collateral for the loans of the acquiring company. The loans are paid back from the acquired company's cash flow. Another possible form of leveraged buyout occurs when investors borrow from banks, using their own assets as collateral to acquire the other company.

Leverage ratios - Measure the relative different contributions of the stockholders as compared to the creditors, and also the entity's ability to pay its financing charges. It is the value of entity's total debt compared to the total value of the entity.

Levy - To impose and collect a charge.

Liability – The amount payable in dollars (e.g., accounts payable) or future services to be rendered (e.g., warranties payable).

Liabilities - Items owed by the business. .Long term liabilities are long-term borrowings which do not have to be repaid within one year. Current liabilities are amounts owed by the business which must be repaid within one year.

Liberalism - The political philosophy according to which the government should choose policies deemed to be just, as evaluated by an impartial observer behind a "veil of ignorance".

Libertarianism - The political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income

License - A legal document giving official permission to do something. Import licenses are often a from of protection.

Lien - The right of a party, typically a creditor, to hold, keep possession of, or control the property of another to satisfy a debt, duty, or liability.

Life-cycle theory - A hypothesis that relates the household's actual consumption to its expected lifetime income rather than (as in early Keynesian theory) to its current income.

Life expectancy at birth - The average number of years new-born babies can be expected to live if health conditions remain the same. It is a good indicator of health and medical care.

LIFO (last-in, first-out) - A method of valuing inventory using an a cost flow approach where the last goods purchased by the firm are then assumed to be the first goods that will be sold by the firm so that the value ending inventory will consist of the value of the first items purchased.




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Machine hour - Cost allocation base that provides a systematic and contemporaneous method of applying overhead costs to work-inprocess inventory. An overhead rate of cost per hour of work expended by a machine is applied to the work-in-process. Macroeconomic equilibrium - A situation in which the quantity of real GNP demanded equals the quantity of real GNP supplied.Macroeconomics - The study of the determination of economic aggregates, such as total output, total employment, the price level, and the rate of economic growth.

Macros - Technique that allows the user to combine several keystrokes into one.

Maintenance - Periodic expenditures undertaken to preserve or retain an asset's operational status for its originally intended use.

Maintenance of accounts - Accounting, means to ensure that all the transactions and other accounting records are kept or recorded in accordance with the GAAP (generally accepted accounting principles) and any other applicable laws. Further to this the records must be in sufficient detail to allow an effective annual audit to be conducted.

Make or buy (outsource) decision – The determination whether to produce a component part internally or to buy it from an outside supplier. This decision involves both qualitative and quantitative factors. Qualitative considerations include product quality and the necessity for long-run business relationships with subcontractors. Quantitative factors deal with cost.

Maker - 1. the producer of a specific product. Or 2. the person who is the signatory of a cheque/promissory note, which means they are the responsible individual for payment.

Malpractice insurance – Is a from of liability insurance professionals against legal action in connection with professional services rendered.

Managed earnings - Manipulating (raising or lowering) earnings to shed a more favorable light on companies.

Managed exchange rates - A system of exchange rates where governments intervene in the foreign exchange market to fix the value of their national currency in terms of other national currencies.

Managed float - In the context of flexible exchange rates, intervention in the form of buying and selling currency to affect the exchange rate.

Management accounting - Accounts and reports are tailor made for the use of the managers and directors of a business (in any form they see fit - there are no rules) as opposed to financial accounts which are prepared for the Inland Revenue and any other parties not directly connected with the business. See Cost





accounting.

Management audit - The examination and appraisal of the efficiency and effectiveness of management in carrying out its activities.

Management buy-in - The sale of a business to an outside management team.

Management buy-out - The sale of a business to the existing management team.

Management by Objectives (MBO) - A management theory which suggests that managers set goals and communicate them to subordinates.

Management control system - A strategic tool/plan for holding the specific managers accountable and also responsible for their individual performance. It aims to ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation's goals.

Management decision cycle – This cycle involves five steps managers take in making decisions and following up on them. The five steps are: (1) the discovery of a problem or need; (2) alternative courses of action to solve the problem or meet the need are identified; (3) a complete analysis to determine the effects of each alternative on business operations is prepared; (4) with the supporting data, the decision maker chooses the best alternative; and (5) after the decision has been carried out, the accountant conducts a post decision review to see if the decision was correct or if other needs have arisen.

Management information system (MIS) - Is a computer-based or manual system that transforms data into information useful in the support of decision making.

Manager - An individual who is accountable for more work than he or she could undertake alone.

Manipulating or window dressing – Where accounts are presented in such a way that the financial business appears to be different than it really is.

Manufacturing account - An account used to show what it cost to produce the finished goods made by a manufacturing business.

Manufacturing concern – An organisation that gets the products or items it sells, through the direct manufacturing of those specific products or items.

Manufacturing costs - Expenses associated with the manufacturing activities of the company. They consist of three categories: direct materials, direct labour, and factory overhead.

Manufacturing overhead - The total cost of indirect materials, indirect labour, and any other indirect expenses that arise in manufacturing the firms products.

Margin - 1. see gross margin; profit margin. Or 2. partial payment made by an investor to a broker for securities purchased, with the remainder on credit. Or 3. in commodities trading, deposits required by commodities exchanges. Or 4. in accounting, a reference to revenue or profitability. Examples are gross profit margin




(gross profit/sales) and profit margin (net income/sales).

Margin requirement - The fraction of the price of a stock, that must be paid in cash when the stock is posted as security against a loan for the balance.

Marginal – 1. (Accounting) Barely adequate or within a lower limit. Or 2. (Economics) The last unit under consideration.

Marginal benefit - The additional benefit of doing a little bit more (or 1 unit more if a unit can 1 measured) of an activity. Marginal changes - Small incremental adjustments to a plan of action.Marginal consumer surplus - The excess of utili from the consumption of one more unit of good.

Marginal cost (MC) - The increase in total cost resulting from raising the rate of production by one unit. Mathematically, the rate of change of cost with respect to output. Also called incremental cost.

Marginal cost (of an activity) - The additional cost of doing a little bit more (or 1 unit more if a un can be measured) of an activity.

Marginal cost (of production) - The cost of producing one more unit of output.

Marginal costing - The process of costing the production of one more unit of output.

Marginal cost pricing - Setting price equal to marginal cost so that buyers are just willing to pay for the last unit bought the amount that it cost to make that unit.

Marginal efficiency of capital (MEC) - The marginal rate of return on a nation's capital stock; the rate of return on one additional dollar of net investment, that is, an addition of one dollar's worth of new capital to capital stock.

Marginal efficiency of investment (MEI) function - The function that relates the quantity of investment to the rate of interest.

Marginal disutility of work - The extra sacrifice or hardship to a worker of working an extra unit ( time in any given time period (e.g. an extra hour. per day). Marginal physical product - The extra output gained by the employment of one more unit of the variable factor. Marginal private cost - The marginal cost directly incurred by the producer of a good or service.

Marginal product (MP) - The change in quantity of total output that results from using one unit more of a variable factor. Mathematically, the rate of change of output with respect to the quantity of the variable factor. Also called incremental product or marginal product (MPP).

Marginal product of labour - The increase in the amount of output from an additional unit of labour.

Marginal productivity theory of distribution - The theory that factors are paid the value of their marginal product so that the total earnings of each type of factor Page No. 86A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



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NAIRU - Short for ‘nonaccelerating inflationary rate of unemployment’. The rate of unemployment associated with potential national income and at which a steady, non accelerating or non decelerating inflation can be sustained indefinitely. Also called the natural rate of unemployment.

Narrative - A comment appended to an entry in a journal. It can be used to describe the nature of the transaction, and often in particular, where the other side of the entry went to (or came from).

Narrow definitions of money - Items of money that can be spent directly (cash and money in cheque-book/debit-card accounts).

NASDAQ - The computerised system that was established by NASD to help facilitate trading by giving broker or dealers the current bid/ask price quotes on some listed stocks. Differing from the New York Stock exchange (NYSE) , the NASDAQ ( National Association of securities Dealers Automated Quotation system) doesn't have a trading floor.

Nash equilibrium - Short for ‘nonaccelerating inflationary rate of unemployment’. The rate of unemployment associated with potential national income and at which a steady, non accelerating or non decelerating inflation can be sustained indefinitely. Also called the natural rate of unemployment.

National asset formation - The sum of investment and net exports.

National debt - The current volume of outstanding federal government debt.

National expenditure on domestic product (E) - Aggregate demand in the Keynesian model: i.e. Cd +J.

National income - The value of total output and of the income that is generated by the production of that output. (usually in one year).

National income accounting - A measurement system used to estimate national income and its components.

National saving - The sum of public saving and private saving; all national income that is not spent on government purchases or private consumption.

Nationalisation - The act of placing a company under public ownership.

Nationalised industries - Public corporations previously part of the private sector which were taken into state ownership.

Natural business year - The fiscal or financial year based on the business cycle of a given business rather than the calendar year.





Natural level of output - The level of output in monetarist analysis where the vertical long run aggregate supply curve cuts the horizontal axis.

Natural level of unemployment - The level of equilibrium unemployment in monetarist analysis measured as the difference between the (vertical) long-run gross labour supply curve (N) and the (vertical) long-run effective labour supply curve (ASL).

Natural monopoly - An industry characterised by economies of scale sufficiently large that one firm can most efficiently supply the entire market demand.Natural-rate hypothesis - The claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation.

Natural rate of unemployment - The unemployment rate when the economy is at full employment and the labour market clears. Frictional, structural and seasonal unemployment may exist at the natural rate of unemployment.Natural resources - The factors of production that are not man-made, including land, water, air and all the minerals that they contain.

Natural scale - A scale in which equal absolute amounts are represented by equal distances.

Natural wastage - When a firm wishing to reduce its workforce does so by not replacing those who leave or retire.

Near cash assets - Non-cash highly liquid assets which can easily and quickly be exchanged for cash e.g., money market funds short-term CD's.

Near money - Liquid assets that are easily convertible into money without risk of significant loss of value and can be used as short term stores of purchasing power but are not themselves media of exchange.

Needs - Goods or services essential for living.

Negative goodwill - A Term used in a business combination. Negative goodwill is accounted for under the purchase (accounting) method when the fair market value of the net assets of the acquired company exceeds the purchase price paid. The credit difference reduces certain assets acquired. If any remaining credit exists, it is accounted for as an extraordinary gain.

Negative income tax - A combined system of tax and benefits. As people earn more, they gradually lose their benefits until beyond a certain level they begin paying taxes.

Negative working capital - Is when the current liabilities of an organisation are greater than its current assets.

Negligence - 1. refers to the act or omission of something that a reasonable and prudent man, who is responding to ordinary considerations would or would not do. Or 2. accountant's failure to conduct an audit with "due care." Ordinary negligence applies to judgment errors resulting from a lack of experience, training, or




oversight: it is unintentional. Gross negligence results when the accountant recklessly disregards established accounting, reporting, and auditing standards.

Negotiable instrument - A cheque, bill of exchange, promissory note, security or any other document which represents money that is payable and can be transferred by on entity to another.

Negotiation - Another name for collective bargaining - joint decision-making involving bargaining between representatives of the management and of the workforce within a firm. Net - 1. gross amount reduced by applicable reductions. For example, net sales equals gross sales less sales returns and allowances and sales discounts. Another example is net purchases that equal gross purchases less purchase returns and allowances and purchase discounts. Or 2. (informal) net profit after taxes.

Net accounts receivable - Total accounts receivable, minus an estimate (provision for doubtful debts) for amounts the entity believes it will be unable to collect.

Net assets - The value of total assets minus current liabilities minus long term liabilities. The value is equal to capital and reserves on the balance sheet

Net book value - Is the historical cost of an asset less provision for depreciation (accumulated depreciation).

Net capital outflow - The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.

Net cash flow - Is equal to cash receipts less cash payments over a period of time.

Net current assets - Current assets minus current liabilities. Also known as working capital.

Net debt – Long term debt + short term loans minus cash on hand.

Net domestic product - Gross domestic product less capital consumed (depreciation) in the production of GDP.

Net errors and omissions - A statistical adjustment to ensure that the two sides of the balance of payments account balance. It is necessary because of errors in compiling the statistics.

Net exports (NX) - The value of total exports minus the value of total imports. Represented by the expression X - M as a component of aggregate expenditure, where X is total exports and M is total imports.

Net income - Revenue less all expenses; also called net profit.




Net investment - Net additions to the capital stock Gross investment minus replacement investment (depreciation).

Net loss - When total expenses are greater than total revenues for a business.

Net of tax - The price of something less any tax. i.e. minus VAT or GST from the selling price.

Net migration - The difference between the number of people entering a country (or region) and the number leaving it.

Net national product (NNP) - GNP minus depreciation.

Net operating income (NOI) - Income after the deduction of operating expenses but before income taxes and interest are deducted.

Net present value (NPV) – The present value from future income from an investment project, less the cost. This method is used to evaluate investments, where the NPV of all cash outflows (such as the cost of the investment) and cash inflows (returns) is calculated by using a predetermined discount rate.

Net profit - When total revenues of a business are greater then total expenses of a business. It is normally calculated as gross profit minus other expenses

Net profit margin (NPM) – Shows a firms ability to control overheads and expresses net profit before tax as a percentage of turnover. Net purchases - Total purchases minus purchase returns and any other discounts and/or allowances on the purchases.

Net realisable value (NRV) - The value of an asset when sold. i.e. the amount received.

Net receivables - Accounts receivable less provisions for bad or doubtful debts.

Net sales - Gross sales minus discounts, sales returns, allowances and freight out.

Net tax revenue - Total tax revenue minus transfer payments.

Network analysis or Critical path analysis - A technique used to find the cheapest or fastest way to complete an operation.

Net worth - Total assets less total liabilities. Net worth, for an individual, is equal to his or her personal equity. In a business, net worth represents the stockholders' equityNeutrality – 1. Economics. Money is neutral in an economic model in there is a change in the model and the level of the nominal money has no effect on the real level of equilibrium. Or 2. Accounting. Absence of bias. For example, financial information should be neutral and is not intended to favour an investor over a creditor. Neutrality is one of the ingredients of reliability.




Neutrality of money - The doctrine that the money supply affects only the absolute level of prices and has no effect on relative prices and hence no effect on the allocation of resources or the distribution of income.

New classical economics - An approach to explaining macroeconomic fluctuations under the maintained hypothesis that cyclical unemployment is always zero. Fluctuations in economic activity are explained by shocks to technology and tastes rather than to markets that fail to clear.

New Keynesians - Economists who seek to explain the downward stickiness of real wages and the resulting persistence of unemployment.

Newly industrialising countries (NICs) - A small group of countries with advanced industrial or financial sectors involved in international trade and in advanced stage of development. (Argentina, Brazil, Greece, Hong Kong, South Korea, Mexico, Portugal, Singapore. Spain, Taiwan and former Yugoslavia).

Next in, first out (NIFO) - Inventory valuation method whereby the cost of sale of the item is based on the cost to replace it rather than on historical cost.

NICs (Newly industrialised countries) – These are countries such as Singapore, Malaysia and Mexico which have recently gone through the process of industrialisation.

Node - in program evaluation and review technique (PERT), circle in a network representing the beginning and ending of activities. A node symbolizes an event.Nominal - Refers to small payments or value. The distinction between nominal and real figures. Nominal figures are those using current prices, interest rates, etc. Real figures are figures corrected for inflation.

Nominal accounts - Accounts in which expenses, income and capital are recoreded.

Nominal capital - The total face value of authorised issuable capital.

Nominal dollars - Dollars that have not had the effects of inflation taken into account.

Nominal exchange rate - The rate at which a person can trade the currency of one country for the currency of another.

Nominal GNP - The output off all goods and services valued at current prices.

Nominal interest rate - The stated interest rate on the face of a debt security or loan. the nominal interest rate may differ from the true or effective and/or real interest rate.

Nominal ledger (also called general ledger) - A ledger in which impersonal accounts are kept.

Nominal national income - Total national income measured in dollars; the money value of national income. Also called money national income, current-dollar




national income. Nominal rate of tariff - The tax charged on any imported commodity.Nominal value (accounting) - Refers to the face, or par value of an item e.g. a bond issue.

Nominal values (economics) - The values of variables expressed in current prices.

Nominal variables - Variables measured in monetary units

Non accelerating-inflation rate of unemployment (NAIRU) - The rate of unemployment associated with potential national income and at which a steady, non accelerating or non decelerating inflation can be sustained indefinitely. Also called the natural rate of unemployment.Non-cooperation - A form of industrial action when employees refuse to comply with new working practices.

Non cooperative equilibrium - An equilibrium reached when firms calculate their own best policy without considering competitor's reactions.Non cash expense - An expense that is recognised in the financial records of a company without actual cash having being paid for it e.g. depreciation, or amortisation.

Non current assets – Assets which are expected to owned by the business for more than twelve months e.g. property, plant and equipment. This is different from current assets which a business expects to turn into cash in under twelve months i.e. inventory and accounts receivable.

Non collusive oligopoly - Where oligopolists have no agreement between themselves, either formal, informal or tacit.Non co-operation - A form of industrial action when employees refuse to comply with new working practices.

Non discretionary – 1. Accounting, means it is mandatory, not up to the individual or company. Or 2. Economics, effects that happen to government revenue and spending with changes in the business cycle.

Non excludability - Where it is not possible to provide a good or service to one person without it thereby being available for others to enjoy.

Non interest bearing bond - A bond that has been issued at a discount from the par par value stated on the bond but does not pay any interest. The interest earned is the difference between the purchase price and the redemption price. United States treasury bills for example are a non-interest bearing bond.

Non market sector - The portion of the economy in which goods are provided freely so that producers must cover their costs from sources other than sales revenue.

Non performing asset - An asset which has no effect in the earning of income.

Non price competition - The means by which firms strive to increase sales and increase market share other than by undercutting rivals e.g. branding and




Click HereObject code - Is used to designate or list the type of revenue or expense that is to be charged to the account.

Object cost - The sum or total cost involved in the production an item. It consists of the direct cost (labour and material) + the overhead cost = the total object cost.

Objective - This normally refers to statement of specific and measurable time period or other outcomes which are verifiable that tries to get the business to respond better to the circumstances of its environment in order achieve the firms goals. Dependent upon how it is used, goals tend to general in their nature, while objectives tend to be more specific.

Objective probability - Characteristic obtained as a result of repeated experiments or repeated trials rather than on the basis of subjective estimates. It is useful in estimating dollar value, quantity, or other characteristics of a given universe for purposes of making statistical decisions.

Objectives of financial statements – The goals of financial statements are supposed to accomplish. The intent of financial statements is to provide information useful in economic decision making. In particular, the data should be useful in making investment and credit decisions. Financial statements should provide a reliable indication of a company's financial position, operating results, and changes in financial position. Also, statement components and categories should aid in decisions.

Objectivity - Freedom from subjective valuation and bias in making an accounting decision. Objectivity applies to a measurement having supporting evidence. Verifiability exists in that two accountants working independently of each other will come up with similar answers. An example of objectivity is recognizing revenue at time of sale because it emanates from an independent external transaction.

Objectivity principle – This principle states that the accounts should be recorded using objective rather than subjective evidence. Objective evidence is taken to mean, evidence that a different individual looking at the same data would arrive at the same conclusion. The principle means accounting entries should be based on the facts and not based on personal individual opinions or their feelings.

Obligation - In business, an obligation refers to a legal duty that requires an entity pay or possibly do something.

Obsolete - An asset that is no longer any use to a company.

Obsolescence – A major factor in depreciation, resulting from technological or market changes. Wear and tear from use and natural deterioration through interaction of the elements are other factors that cause depreciation in assets. It is also a big factor in inventory risk.Occupancy cost - Any costs incurred by tenants relating to their lease, such as rent, parking charges, operating expense increases, moving expenses, renovations etc.





Occupational mobility - The ease with which workers can switch from one type of job, with particular skills, to another requiring different skills.

Occupational immobility - The lack of ability or willingness of people to move to other jobs irrespective of location.

Odd-lot - Any exception to the standard trading unit of a security.

OECD - Organization for Economic Co-operation and Development - (Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States).

Official interest rate - The rate of interest that the Central Bank or government charges to banks or the rate charged to money market traders e.g., federal funds rate and or base rate).

Official reserves - The central government's holdings of foreign currencies.

Off peak - Not in the period of most frequented or getting the heaviest levels of use. This period normally has lower rates e.g. Airfares taken not winter are often off-peak fares.

Offset account - An account that reduces the gross amount of another account to derive a net balance. Accumulated depreciation, which is a contra account to fixed assets to obtain book value, is an example of an offset account. Discount on note payable, which is a reduction of notes payable to derive the carrying value, is another example.

Offsetting error - An error that cancels out another error; also called counterbalancing error.

Off-the-job training - Being trained away from the workplace, usually by specialist trainers.Oligopoly - A market type in which small numbers of producers compete with each other.

Oligopsony - A market with just a few buyers or employers.

Omitted - To leave out or not done, such as to prevent from being included or considered or accepted.

On account - 1. purchase or sale on credit. For example, the journal entry for a sale on account is to debit accounts receivable and credit sales. Or 2. partial payment on an obligation.

On line - 1. computer equipment under the control of the central processing unit (CPU). Examples are disk drives and printers. Or 2. linking up one computer to another computer that is in a remote location. This connection is made possible by using the telephone lines. The computers transmit data to each other.




On line data base - The information transmitted by telephone, microwaves, and so on, that may be accessed with a decoding device (called a MODEM) and displayed on a monitor or as a printout. A data base for accountants may consist of information such as tax laws and regulations, accounting practices and footnote references, industry data, financial information on companies, investment information, or economic and political statistics. On line searching - Is using a computer retrieval system to obtain information from a database such as on the Internet. Now sometimes referred to as Googleing.One off – An event that occurs only once and is not expected to be repeated, e.g. a one-off sale to a specific customer.

Onerous contract – A contract where the unavoidable costs associated with the meeting the requirements under the contract is greater than the economic benefits or income to be received from completing the contract.

One stop shopping – The opportunity to purchase a variety of products from a single location.

One-way communication - Transmission of a message which does not call for or require a response.

On-the-job training - Watching a more experienced worker doing the job and learning skills while under their supervision.

Open account - 1. account that has a nonzero credit or debit balance. Or 2. credit or charge account-that is, an account initiated by a creditor on the basis of credit standing. It may also refer to a balance currently owing due to a credit sale, under mutually agreed-upon terms (such as method of payment, trade discounts, delivery date, and quantities).

Open economy - An economy that engages in international trade.

Open book management - A management philosophy that gets all employees involved in increasing financial performance and ensures that all workers have access to operational and financial information necessary to accomplishing performance improvements.

Opening cash (or bank) balance - The amount of cash held by the business at the start of the month operational decisions see business decisions.

Open item - A contracted or scheduled commitment that has not yet been reflected in the accounts but will lead to expenditures at some future date.

Open market operations - The purchase and sale of securities (usually short-term government securities) on the open market by the central bank.

Open market value (OMV) - An opinion of what the best price that the sale of an asset or interest in an asset would have been received for cash on the date given for valuation of that item.

Opening balance - The balance of an account at the start of an accounting period.

Opening entry – An entry or a series of entries usually undertaken upon forming a new enterprise, or new accounts, or a new accounting period. A new enterprise requires opening entries with respect to the owner's interests, assets, and liabilities on the books.




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Pac Ioli, Luca – The author of the first statement and commentary on double-entry bookkeeping. This treatise, published in Venice in 1494, was part of a work Summa de Arithmetica, Geometria Proportioni et Proportionalita.

Packaging - The physical container or wrapping for a product, also used for promotional purposes.

Packing list (slip) - The statement of what is included in the contents of a specific container, usually the packing slip is put into the container so that it is possible that the quantity and specifications of actual merchandise may then be counted by the individual who opens the specific container concerned.

Paid in capital – Is that section of stockholders' equity that shows: (1) amount of stock a corporation has issued; (2) the premiums or discounts that have resulted from selling stock (paid-in capital in excess of par or stated value); (3) stock received from donations; and (4) the resale of Treasury stock. Stockholders' equity consists of paid-in or contributed capital and retained earnings.

Paid in surplus – That part of paid in capital in excess of par or stated value.

Paid-up share capital - The value of issued shares which have been paid for. See Called-up Share capital.

Paper profit – Is the unrealised gain from holding an item while its market value has increased.

Paradox of thrift - An increased desire to save (an increase in the MPS) will lead to 'a reduction in the equilibrium level of saving.

P&L - Profit and loss statement.

Parent company - 1. owner of a subsidiary company. Or 2. a holding company that is not engaged in a trade or business.

Pareto principle/law – An analysis used to differentiate between the vital few and the trial many. It is based on the concept that about 80 percent of the problems come from 20 percent of the items. Pareto analysis can be used to identify cost drivers or activity drivers that are responsible for the majority of cost incurred by ranking the cost drivers in order of value.

Parity - 1. economics, term designating a constant spread between prices; for example, having a constant relationship between domestic and world sugar prices. Or 2. labour law, salary equality among workers such as policemen and firemen.

Parity price - The measuring device for price levels in terms of an index number of 100.

Participation rate - The percentage of the working age population that is part of the workforce.





Participative budgeting – A budgeting system enabling key employees in a department to provide input into the budgetary process.Partnership - Refers to an unincorporated form of business ownership (unlimited liability) that has between two to twenty owners. Each of whom takes part in the management of the firm and is personally responsible for all of the firm's actions and debts. It is different from a sole trader in that a sole trader has only one single owner.

Partnership agreement - The written and legal agreement between business partners.

Par value - 1. is the maturity value or in other words the face value, i.e., the amount that the issuer has agreed to pay on maturity. Or 2. the official rate of exchange between two different countries' currencies. Or 3. the value of an individual security that has been set by the firm issuing it and is not related to current market value.

Patent - Is a legal form of intellectual property protection (or licence) that provides an entity or individual with the exclusive rights to stop other firms from using, making, or selling a the concept or specific invention for the length of time of the patent.

Paternalism - Intervention in the free choices of individuals by others (including governments) to protect them against their own ignorance or folly.

Payable – Refers to the amount of monies waiting a payment to be completed, e.g. taxes payable or accounts payable.

Payables turnover - Purchases / Average Payables.

Payback period – The amount of time it takes to recover the cost of an investment. In capital budgeting the payback period refers to the specific time period needed by the firm in order to recoup the initial plus and subsequent costs of the capital investment. The payback period includes all initial investment to the annual predicted cash inflows for the recovery time period. The major problem of this ratio is that it does not take into account cash flows which the firm receives after the payback period has been met and thus can not be considered a measure of the profitability of any particular investment undertaking.

Pay cycle - The criteria by which scheduled payments are selected for payment creation, e.g., payroll may be on a weekly, bi-weekly, or monthly pay cycle.

Payment - The satisfaction of a debt or claim; primarily money paid to fulfill an obligation.

Payment by results – Payment methods that reward workers for the quantity and quality of work they produce.

Payment due date - The date on which a payment is due and payable.

Payment in kind - The settlement of a charge for goods or services or satisfaction of liabilities with similar or identical mediums of exchange and value (e.g.,




money for money, goods for goods, and services for services). It also connotes a transaction where one medium of exchange is satisfied with another.

Payout ratio - The ratio of cash dividends declared to earnings for the period. It equals dividends per share divided by earnings per share.

Payroll costs – Refers to employer costs incurred for employees' services. Payroll costs consist of the actual cash paid to the employees and the withheld amounts.

Payroll tax – Are taxes levied on employee's salaries or net income of self-employed individuals.P.A.Y.E (Pay as you earn) - This is an income tax system where the tax of an employee is deducted before their wages are paid.

Pareto optimum - The situation (economic theory) where it is not possible to change the combination of output of goods and services produced by a society without making the net happiness of society fall.

Pay on delivery (COD) - The purchaser must pay for the goods (to the carrier) when they receive them.

Peak – The time period where the maximum use/demand occurs. For example, at peak traffic hours congestion can be severe.

Pending - 1. Not as yet decided. or 2. Being in the state of continuance.

Penetration pricing – A method of pricing a standard product. It sets a low initial price for a product in order to gain quick acceptance in a broad portion of the market. It calls for a sacrifice of short-term profits in order to establish a certain amount of market share.

Penny stock - A low priced, highly speculative stock.

Pension fund (MPF) - A fund reserved to pay workers' pensions when they retire from service. Also known as SUPERANNUATION FUND.

PE ratio - The quoted price of an ordinary share divided by the most recent years earnings.

Per capita Income – A measure of the mean income averaged for the entire population of a particular group. It is arrived at dividing the total income by the total population of the group.

Per capita output - GDP divided by total population.

Perceived demand - The demand which the managers owners of a business believe exists for their products in a particular market

Perfect competition - A market structure in which all firms in an industry are price takers and in which there is freedom of entry into and exit from the industry.




Perfect complements - Two goods with right-angle indifference curves.

Perfect market - A market structure characterized by a very large number of buyers and sellers of a homogeneous (non-differentiated) product. Entry and exit from the industry is costless, or nearly so. Information is freely available to all market participants, and there is no collusion among firms in the industry.

Perfect substitutes - Two goods with straight-line indifference curves.Perfectly contestable market - A market where there is free and costless entry and exit.Perfectly elastic demand - Demand with an elasticity of infinity; the quantity demanded becomes zero if the price rises by the smallest amount and the quantity demanded becomes infinite if the price falls by the smallest amount.

Perfectly elastic supply - Elasticity of supply is infinite; the quantity supplied becomes zero if the price falls by the slightest amount, and the quantity supplied becomes infinite if the price rises by the slightest amount.

Perfectly inelastic demand - Demand with an elasticity of zero; the quantity demanded does not change as the price rises.

Perfectly inelastic supply - Elasticity of supply is zero; the quantity supplied does not change as the price changes.Performance audit – Is an appraisal of how a particular activity is carrying out the company's policies and procedures. Such review may cover any activity within a department, division, or local area.

Performance budget - 1. a budget format that relates to both the input of resources into something and the output of services of that thing for each unit within an organisation. Sometimes this may be called a program budget. Or 2. a medium- to short-range budget used in governmental accounting.Performance indicators – Refer to those pieces of empirical data that are indicative of how well, or maybe poorly, an firm is performing against its preset objectives and goals. Normally, a firm will set specific targets over a specific period of time, that the firm does believe are both attainable and realistic and then track its performance over the time period to see if those targets and/or objectives are being met.

Performance related pay – Management’s attempts to increase worker productivity by linking pay with performance.

Performance report - A statement that displays measurements of actual results of some person or entity's activity over some time period.

Performing asset - An asset that generates an annual financial positive return. Examples could include a piece of production machinery or, in transportation, an truck.

Period cost – Refers to an expense that can not be directly attributed to a item that has been produced e.g. rent. Period costs are charged against sales revenues for period from which the revenue was earned. Period costs may also be called period expense.

Periodicity Concept - The concept that each individual accounting period has some level of economic activity that is directly associated with that period, and further to this that the specified activities can be measured, recorded, and then reported upon.

Periodic audit - 1. audit for an intermediate period (e.g., one month, three months). Or 2. audit carried out at specified intervals within the year.Page No. 99A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



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Q Ratio - Refers to the market value of all securities (not just equity) divided by the replacement cost (not book value) of all assets. This ratio reflects the market value of a new investment.

Qualification - 1. reference in the audit report to a material limitation placed on the auditor's examination or to uncertainty regarding a specific item in the financial statements. Or 2. reservation in a proposed agreement making the agreement unenforceable unless a specified condition is met. Or 3. technical competence to perform a particular job, such as passing the CPA examination and meeting experience requirements in order to be licensed as a certified public accountant.

Qualified opinion – Refers to the auditor’s opinion accompanying a financial statement that calls attention to limitations in the audit or exceptions the auditor has taken with the audit of the statements.

Qualitative information – Different from quantitative which relates to numerical amount qualitative information is that which is descriptive in nature, relating to, or involving quality or kind.

Quality – Features of a product that allow it to satisfy customers’ needs. It may refer to some standard of excellence.

Quality assurance – A method of working for businesses that takes into account customers’ want when standardising quality. It often involves guaranteeing that quality standards are met.

Quality chains – when employees from a series of links between customers and suppliers in business, both internally and externally.

Quality control - 1. procedures to establish an optimal level of audit performance by practitioners. Included are proper supervision over field work, evaluation of internal control, and employment of generally accepted auditing standards. The monitoring of a CPA firm's system of quality control by a peer reviewer involves consideration of the adequacy and relevance of the CPA firm's procedures, practices, and compliance thereto, effectiveness of professional development, and quality of the CPA firm's practice aids. Or 2. policies and techniques used to assure that some level of performance has been achieved. Included are controls in design and inspection. Variances from established norms are identified and rectified. Or 3. in manufacturing, procedures to achieve a desired level of satisfaction of the operation or product being produced. A number of tests and measurements may be required to determine that a part meets required specifications.

Quality control circles – Small groups of workers in the same area of production which meet regularly to study and solve all types of production problems.

Quality review - The evaluation by one accounting firm or accountant of the soundness of the practices of another accounting firm or accountant.

Quality training – The process of familiarizing all employees with the means for preventing, detecting, and eliminating non-quality. The educational processes are tailored to the appropriate groups.





QUANGOs - Quasi Autonomous Non-Governmental Organisations.

Quantitative factors - Are considerations relevant to a decision that can be measured in terms of money or quantitative units.

Quantitative information – Different from qualitative. Quantitative is information relating to, or expressible in, terms of quantity.

Quantitative models (methods) - collection of mathematical and statistical methods used in the solution of managerial and decision-making problems, also called operations research (OR) and management science.

Quantity demanded - The amount of a product that consumers wish to purchase in some time period.

Quantity equation - The equation M X V = P X Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services.

Quantity of labour demanded - The number of labour hours hired by all the firms in an economy.

Quantity of labour supplied - The number of of labour services that households supply to firms.

Quantity supplied - The amount of a product that producers wish to sell in some time period.

Quantity theory of money - The proposition the increase in the quantity of money leads to an equal percentage increase in the price level.

Quarterly reports - Are financial report issued every three months between annual reports.

Quasi business expenses – Is used to refer to those range of tax deductible expenses which may qualify as a business or personal expense. This is dependent upon the specific individual situation, e.g. company car, golf club dues or travel expenses.

Questionnaires - A set of questions to be answered as a means of collecting data for market research.

Quick assets - This is current assets minus inventories.

Quick ratio (or Acid Test Ratio) – This ratio is a more rigorous and informative test than just the current ratio in measuring a firms short-run liquidity. This refers to a firms current ability to pay its current debts when they become due. This ratio takes into account cash, marketable securities (cash equivalents) and accounts receivable only, this is because these are considered very liquid forms of current assets.




Quota - A restriction on the quantity of a good a firm is permitted to sell or that a country is allowed to import.

Quota (set by a cartel) - The output that a given member of a cartel is allowed, to produce (production quota) or sell (sales quota).

Quota sample - People selected on the basis of certain characteristics (e.g. age, gender, income) as a source of information for market research.

Quotation - 1. a statement of the market price (current) of a security or specified commodity. Or 2. an offer to sell items at a specified price and under specific set of conditions.

Quote - To state the specific price of a service or asset, e.g. a specific stock price or fee for a specific service.

Quoted price – Is the price of the last transaction of a listed security or an estimate of how much a particular job or item will cost.




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Random sample – A sampling method allowing for the equal probability that each item will be chosen

Random variances – Refers to differences that are due to chance, also called chance variances.

Random walk - The path of a variable whose changes are impossible to predict.

Rate base - The total allowable investment to which the rate of return allowed by a regulatory commission is applied.

Rate of economic growth - The percentage increase , in output over a 12-month period.

Rate of exchange – Is the term used for the rate at which one currency (or commodity) can be exchanged for another.

Rate of inflation - The percentage increase in the level of prices over a 12-month period.

Rate of profit Total profit – Profit as a proportion of the capital employed

Rate of return – The ratio of net profits earned by a firm to total invested capital. This gain or loss could consist of income or capital gain/loss. It is most often given as a percentage. The real rate of return means that the annual return which means received has been adjusted for the effects of inflation.

Rate of return on investment - The annual percentage return after taxes that actually occurs or is anticipated on an investment.

Ratio/s – Refer to relationship of one amount to another. Ratios give the relative or differing sizes, often expressed as the number of times one variable is contained or related to another. The following is a table of some of the more common ratios used in most entry level business and accounting courses.

Liquidity:

Net working capital





Current assets – current liabilities

Current ratio

Current assets / Current liabilities

Quick ratio

(Current assets – inventory) / Current liabilities

Activity:

Accounts receivable turnover

Net credit sales / Average accounts receivable

Average collection period

365 / Accounts receivable turnover

Inventory turnover

Cost of goods sold / Average inventory




Average age of inventory

365 / Inventory turnover

Total asset turnover

Net sales / Average total assets

Leverage:

Gearing

Long term loan and preference shares / Total capital

Debt/equity ratio

Total liabilities / Stockholder’ equity

Times interest earned

Earnings before interest and taxes / Interest expense

Profitability:




Gross profit margin

Gross profit / Net sales

Profit margin

Net income / Net sales

Return on capital employed

Net income / Capital employed

Return on common equity

Net income / Common equity

Market value:

Earnings per share

Net income – preferred dividends / Number of ordinary shares issued




Price earnings ratio

Market price per share / Earnings per share

Dividend yield

Gross dividend per share / Market price per share

Dividend cover

Net profit after tax and preference dividends / Ordinary dividends paid and proposed

Ratio analysis - A numerical approach to investigating accounts by comparing two related figures. The process involves the process of converting of financial information for a entity into ratios. Ratio analysis allows comparison of an entity or time period to another entity or time period. Since the ratios look at specific relationships inside the entity, a entity of one specific size can be easily compared to a second entity. These firms may even be in different industry.

Rational choices - Choices that involve weighing up the benefit of any activity against its opportunity cost.

Rational consumer - A person who weighs up the costs and benefits to him or her of each additional unit of a good purchased.

Rational consumer behaviour - The attempt to maximise total consumer surplus.

Rational decision making - This involves weighing up the marginal benefit and marginal cost of any activity. If the marginal benefit exceeds the marginal cost, it is rational to do the activity (or to do more of it). If the marginal costRational economic behaviour - Doing more of activities whose marginal benefit exceeds their marginal cost and doing less of those activities whose marginal cost exceeds their marginal benefit.

Rational expectations - The theory that people understand how the economy works and learn quickly from their mistakes so that even though random errors may be made, systematic and persistent errors are not.




Rational producer behaviour - When a firm weighs up the costs and benefits of alternative courses of action and then seeks to maximise its net benefit

Rationalisation - The reorganising of production (often after a merger) so as to cut out waste and duplication and generally to reduce costs.

Rationing - Where the government restricts the amount of a good that people are allowed to buy.

Range - The difference between the highest and lowest values in a set of data.

Range of survey results - The highest and lowest results from market research surveys.

Raw materials - The material or components used by a manufacturer to make the finished goods they sell.

Reach – When used in relation to marketing or advertising refers to the total amount of individuals within a specific target market that will see or hear via the specific advertising campaign being undertaken.

Real - 1. in economics, refers to economic statistics which have been adjusted for for inflation so a comparison of actual purchasing power can be made. may also be called 'constant prices' Or 2. may also mean the actual cost and not the nominal one.

Real accounts - Accounts in which property is recorded. Examples are buildings, machinery, fixtures and invetory.

Real business cycle theory - The new classical theory that explains cyclical fluctuations in terms of shifts in aggregate supply, rather than aggregate demand.

Real capital - The physical assets that a firm uses to conduct its business, composed of plant, equipment, and inventories. Also called physical capital.Real disposable income - The income with which consumers are left after taxes (other than VAT) have been deducted and any state benefits added on. Any changes in the rate of inflation are also taken into account.

Real growth values - Values of the rate of growth of GDP or any other variable after taking inflation into account. The real value of the growth in a variable equals its growth in money (or ‘nominal’) value minus the rate of inflation

Real GNP - The output official goods and services valued at the prices of the base period.

Real income - Income expressed in terms of the purchasing power of money income, that is, the quantity of goods and services that can be purchased with the money income; it can be calculated as money income deflated by a price index.

Real interest rate - The nominal interest rate adjusted for inflation, e.g. if the market interest rate of interest is 10% and inflation is running at 5% the real interest




rate is 5%.

Real national income - National income allowing for inflation: i.e. national income measured in constant prices: i.e. in terms of the prices ruling in some base year.

Real product wage - The proportion of each sales dollar accounted for by labour costs (including the pre-tax nominal wage rate, benefits, and payroll taxes).

Real value - Any value which takes into account the rate of inflation.

Real values - Money values corrected for inflation

Real wage unemployment – Disequilibrium employment caused by real wages being driven up above the market clearing level.

Realisation principle - An accounting principle where the assets value should only be determined when the asset is sold or disposed of in some other form.

Realised gain or loss – Is the difference between the amount received from the sale or disposal of an asset and its carrying value.

Reasonable certainty- The means that degree of certainty which could be expected to be found to be in existence by a hypothetical reasonable person.

Reasonableness test – Is a procedure to examine the logic of accounting information. It is where the expected value is going to be determined by data at least in part independent of the entity's accounting system, evidence that is obtained through the use of this approach may be in some circumstances more reliable than evidence gathered using methods.

Reasonable person - A hypothetical individual who uses qualities of knowledge, attention, intelligence, and judgment in making decisions. This individual is also considered to behave rationally.

Rebate - Is the term given when a service is paid for and then cancelled and some of the payers money is refunded. It may also be given by an organisation/government agency that has reduced it charges.

Recapitalisation – Is the process of changing a firm's capital structure by altering the mix of debt and equity financing without changing the total amount of capital.

Receipt - A source document given when money (or some other form of payment) has been made to an organisation.

Receivables - Are claims held against customers and others for money, goods, or services.

Receiver - An individual person appointed by the court who then takes the possession of, but does not take the title to, the assets and other affairs of a firm or




estate that is in a legal form of bankruptcy that is called called receivership.

Receivership - The liquidation (selling) of a firm's assets by an independent body following its collapse.

Recession - 1. a contraction in the level of economic activity in which real GDP declines in two successive quarters. Or 2. when income and output begins to fall in an economy. Recessionary gap - A positive output gap; that is, a situation in which actual national income is less than potential income. Also called a deflationary gap.Recognition - 1. recording a business occurrence in the accounting records. An example is recognising an unrealized loss on an investment portfolio at year-end, when aggregate market value is below cost. In this case, the transaction is recognised even though realization (sale) has not occurred. Or 2. ascertaining the particulars of an item (i.e., amount, timing) before accepting and recording it.

Reconciling - This is the process of ensuring accounts are accurate by comparing a businesses records with documents sent by a third party i.e. a bank stataement.

Reconciliation – Refers to the changing, altering or adjusting of difference that exist between two or more items so that the data agrees. e.g. a bank reconciliation is conducted to ensure a businesses records agree with the banks records of the business activities.

Record – 1. a collection of related data items. Or 2. To write something down.

Recourse – Refers to the right to demand or seek payment from the endorser or maker of a negotiable instrument such as a cheque.

Recovery - 1. can mean the absorption of the cost of an asset via the allocation of depreciation. Or 2. the residual cost or possibly the salvage value of a specific fixed asset after all the allowable depreciation has been expensed. Or 3.the collection of an accounts receivable that had at a previous time been written of as bad debts.

Recurring entry – Refers to a scheduled and repeetative entry in the accounts that occurs consistently in both date and amount. e.g. rent.

Redeemable - This means the item is cashable, i.e. able to be converted/changed into cash or its equivalent, e.g. cashable cheque.

Redemption - 1. right to call or redeem a firm's outstanding preferred stock by paying the preferred stockholders the par value of the stock plus a premium. Or 2. repayment of bonds by a CALL before maturity, usually involving a call premium. Or 3. repayment of mutual funds at net asset value when a shareholder's holdings are liquidated.

Red herring – Is a slang term for a preliminary prospectus that outlines the important features of a new issue. This prospectus contains no selling price information or offering date.




Rediscounting bills of exchange - Buyil1g bills before they reach maturity.

Reducing balance method - A method used to calculate the annual depreciation allowance which involves writing off the same percentage rate each year.

Redundancy - When an employee loses their job because they are no longer needed, rather than due to any aspect of their work being unsatisfactory. Also called retrenchment.

Reengineering - Redesigning business processes. such as product design, to improve efficiency in the organisation.

Referendum - When a piece of legislation is referred to the electorate for a popular vote prior to final approval.

Reflation - The use of tax cuts and increased government and possibly easier monetary policy to increase aggregate demand and employment.Reflationary policy - Fiscal or monetary policy designed to increase the rate of growth of aggregate demand.

Refund - If you return some goods you have just bought (for whatever reason), the company you bought them from may give you your money back. This is called a 'refund'.

Refurbish - Means to renovate or clean up.

Regional multiplier effects - When a change in injections into or withdrawals from a particular region causes a multiplied change in income in that region.Regional policy - Measures used by central and local government to attract businesses to 'depressed' areas.

Regional unemployment - Structural unemployment occurring in specific regions of the country.Register - The official or formal recording of an item within a specific book/register, e.g., the Fixed Asset Register.

Registration - 1. act or fact of making an entry of any class of transactions or statements for the purpose of documentation for future reference. Such documentation may be in the form of financial information noted in registers, such as a cash register. Or 2. process that requires publicly issued securities to be reviewed by the SEC. 3. recording of stocks or bonds in the owner's name as opposed to bearer's name.

Regression analysis - A statistical procedure for estimating the average relationship between the dependent variable (sales, for example) and one or more independent variables (price and advertising, for example).Regressive income tax - An income tax where the portion of income paid in tax is lower for people on high incomes than for people on low incomes. The marginal rate of tax is lower than the average rate of tax.

Regressive tax - A tax that takes a lower percentage of income the higher the level of income.

Regulation – Refers to the act of controlling or directing according to rule i.e. it is the act of bringing to uniformity.

Regulations – Refers to the authoritative body of rules specifying details of procedure and conduct to be followed in accordance with such criteria as uniformity, Page No. 111A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



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Sacrifice ratio - The number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point.

Safe harbour rule – A legal concept whereby a person who has meet the required listed rules and requirements is protected from any adverse legal proceedings. Frequently, safe harbours tend to be applied where any legal restrictions and/or requirement are ambiguous and therefore carry a risk of being punished for a violation which was unintended.

Safety margin – Refers to the excess of actual sales over break-even sales. If the break-even point is 4000 units and actual sales volume is 4400 units, a safety margin of 400 units exists.

Safety stock – Refers to the extra units of inventory carried as protection against possible stock outs.

Salary - The scheduled remuneration an employer pays to an employee. It is normally paid on a monthly or year basis as different from wages which are paid on a hourly basis.

Sale and repurchase agreement (repos) - An agreement between two financial institutions whereby one in effect borrows from another by selling it assets, agreeing to buy them back (repurchase them) at a fixed price and on a fixed date.

Sales - Income received from selling goods or a service.

Sales allowance - The reduction in the selling price of goods because of a particular problem (e.g., breakage, quality deficiency, incorrect quantity).

Sales budget - Is a budget of the expected sales in both dollars and units.

Sales discount - A cash given by the seller to the purchaser for early payment of the account due.

Sales forecast - The projection or prediction of future sales. This is the starting point of the budgeting process.

Sales invoice – The source document which records the sale of an item on credit from a firm to the customer.

Sales journal (sales day-book) – The book of first entry in which credit sales are recorded.

Sales ledger - A subsidiary ledger which holds the accounts of a business's customers. A control account is held in the general ledger (usually called a debtors' control account) which shows the total balance of all the accounts in the sales ledger.





Sales / receivables (Receivables Turnover) - The ratio that is a measure of the number of times accounts receivables (debtors) turn over during any given year. The higher the ratio of receivables turnover, the shorter the period of time between sale and the collection of cash. It is indication of the speed that a firm is getting paid for its sales.

Sales mix – Refers to relative proportions of the product sold i.e. the combination and percentage of each different item sold as a percentage of the whole.

Sales mix variance – Refers to the effect on profit of selling a different proportionate mix of products than had been budgeted.

Sales price variance – Refers to the difference between actual selling price per unit and the budgeted selling price per unit, multiplied by the actual number of units sold.

Sales order (contract) - The contract by which buyer and seller agree to the terms and conditions of a sale.

Sales return (return inwards) - The merchandise given back to the seller because of defects.Sales revenue - The income during a period of time from the sale of goods and services.

Sales revenue maximisation - Producing a level of output where sales revenue is greatest, where average revenue is equal to average cost.

Sales tax – A tax based on a percentage of the selling price of the goods or service that the buyer must pay.

Salvage (scrap) value – 1. the scrap value or the amount of money a dealer of junk will pay. Or 2. the amount the asset is expected to sell for after all the depreciation has been removed/deducted from the historical cost of a fixed asset. Or 3. the realisable value of a fixed asset after deducting costs associated with its sale.

Sales volume variance - The difference between the actual number of units sold and the budgeted number, multiplied by the budgeted selling price per unit

Sample - A group of consumers selected from the population.

Sampling – Refers to the process of selecting items from a population to reach a conclusion about the population.

S&P 500 - Standard and Poors (S&P) 500.

Satisficing - A hypothesised objective of firms to achieve levels of performance deemed satisfactory rather than to maximize some objective.

Saving - Income minus consumption. Saving is measured in the national income accounts as disposable income minus consumers' expenditure.

Saving function - The relationship between saving and disposable income.




Savings accounts – On demand accounts maintained by banks, savings & loan associations, credit unions, and mutual savings banks that pay interest but can not be used directly as money.

Scan – Is to read through a document rather hastily.

Scarce good - A commodity for which the quantity demanded exceeds the quantity supplied at a price of zero; therefore, a good that commands a positive price in a market economy.

Scarcity - The state in which wants exceed the amount that available resources can produce. Scarcity is the excess of human wants over what can actually be produced. "Because of scarcity, various choices have to be made between alternatives.

Scatter graph - A graph showing the performance of or variable against another independent variable on a variety of occasions. It is used to show whether a correlation exists between the variables.

Schedule - 1. to prioritize, arrange, or position with respect to a finite time period. Or 2. supporting set of calculations, data, information, or analysis that shows or amplifies how figures in primary statements are derived. An example is a schedule for an aging of accounts. Or 3. assignment of work to a facility and the specification of the sequence and timing of the work. Or 4. auditor's set of working papers for an audit.

Scientific management - A theory that suggests that there is a 'best' way to perform work tasks.

Scope – Refers to the aspects of an audit concerning the procedures employed , the extent of what was done, and the financial items examined.

Scrap – Refers to the sales value of scrap. Scrap is residue from manufacturing operations that has relatively minor recovery value.

Scrap value – Salvage value.

Screening - An action taken by an uninformed party to induce an informed party to reveal information.

Search theory - This examines people's behaviour under conditions of ignorance where it takes time to search for information. Search unemployment - Unemployment caused by people continuing to search for a good job rather than accepting the first job that they come across after they become unemployed (also called frictional unemployment). Seasonality – Refers to seasonal variation in business or economic activity that takes place on a recurring basis. Seasonality may be caused by various factors, such as weather, vacation, and holidays.Seasonal unemployment - Unemployment due to seasonality in demand or supply of a particular good or service.




SEC - Securities and Exchange Commission.

Secondary action - Industrial action taken against a company not directly involved in a dispute (e.g. a supplier of raw materials to a firm whose employees are on strike).Secondary data - Data which is already in existence. It is normally used for a purpose other than that for which it was collected.

Secondary labour market - The market for peripheral workers, usually employed on a temporary or part-time basis, or a less secure 'permanent' basis.

Secondary picketing - Where union members from one place of work picket an unrelated place of work.

Secondary production - Activities such as manufacturing which transform raw materials into finished goods.

Secondary research - The use of information that has already been collected and is available for use by others. Also called desk research.

Secondary school enrolment rate - The number of children of secondary school age, usually 12 to 17 years, who are enrolled at school as a percentage of the age group.

Secondary sector - Industry which manufactures goods using the raw materials provided by the primary sector.

Secured - An obligation that is backed by a commitment of collateral. This is the opposite of being unsecured.

Secured liability – Is a liability or obligation secured by a pledge of assets that can be sold, if necessary, to ensure payment

Security - 1. collateral in support of debt. An example is real estate that serves as security for a bank loan. Or 2. financial instrument that shows ownership, such as an equity item (e.g., stock), debt instrument (e.g., bond, note), or right (e.g., option).

Seed money – Usually refers to funds put up by venture capitalists to finance a new business.

Segment - A functional or responsibility area within a business that can be reported upon separately.

Segmented reporting - The process of reporting activities of various segments of an organization such as divisions, product lines, or sales territories.

Segment revenue - The revenue, which is reasonably allocable or directly attributable to a specific segment.

Selective credit controls - Controls on credit imposed through such means as margin requirements, restrictions on instalment buying, and minimum down




payments on mortgages.

Sellers' preferences - Allocation of commodities in excess demand by decisions of the sellers.

Self-actualisation - A level on Maslow's hierarchy where an employee realises his or her full potential.

Self constructed asset – Refers to the process whereby an entity makes it own assets.

Self-employed - A worker who makes his or her own decisions about accepting work and conditions of work, and pays his or her own tax and National Insurance contributions

Self-fulfilling speculation - The actions of speculators tend to cause the very effect that they had anticipated.

Self-sufficiency - A state that occurs when each individual consumes only what he or she produces.

Selling, general & administrative expense (SG & A) - The expenses involved in running a business..

Selling short – Refers to the selling of securities (or commodities futures contracts) not owned by the seller. The investor (seller) earns a profit when the market price of the security declines, and loses money when the purchase price is higher than the original selling price.

Semi-variable cost - A cost which consists of both fixed and variable elements. It does vary with volume changes, but, different to a variable cost, it does not vary in any direct or proportional way. This cost contains both variable and fixed elements, e.g., a rented car may have a fixed fee for rent rental, but contains a variable fee for kilometres travelled.

Separable costs – Refers to all costs incurred after or beyond the split-off point that are the assigned to the individual products.

Sequentially – The recognition that activity costs are governed by a logical order that mirrors how work is performed.

Service - This is normally used to describe the sale of an activity that someone does for you rather than the sale of a good i.e. a haircut.

Service business - Is a type of business entity which provides services of labour in a wide variety of different sectors, e.g., education, health care and hair care.

Service contract – Refers to a contract offered by a firm for the maintenance and/or repair of a particular a product after its manufacturer's warranty expires.

Services - Things purchased by consumers that do not have physical characteristics. Examples of services are those obtained from doctors, teachers, actresses and shop assistants. Set-aside - A system in the EU (European Union) of paying farmers not to use a certain proportion of their land.




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T Account - A particular method of displaying an account where the debits and associated information are shown on the left, and credits and associated information on the right. There are five types of basic accounts are assets, liabilities, equity, revenue and expenses.

Tacit collusion - Where oligopolists take care not to engage in price cutting, excessive advertising or other forms of competition. There may be unwritten 'rules' of collusive behaviour such as price leadership.Tactical decisions - Calculated, medium term decisions. May be used to implement strategic decisions.

Takeover - The purchase of one firm by another. Also called acquisition..

Tally sheet – Refers to is a form used for counting, i.e. a form on which the actual quantities can be recorded on, especially helpful when conditions make the likelihood of counting errors possible such as counting inventory.

Tangible assets - Assets which are physical in nature. Examples include buildings, motor vehicles, plant and equipment, fixtures and fittings. See Intangible assets .

Tangible book value – This is different from the actual book value as it deducts from the assets book value the intangible assets e.g. goodwill and patents etc.

Target – Refers to the goal that the entity or individual intendeds to achieve and which they believed is attainable, e.g. sales target, profit target or completeion date.

Target audience - People who are potential buyers of a product or service.

Target costing – Refers to the method used in the analysis of product design that involves estimating a target cost, via a desired profit and sales price, and then designing the product/service to meet that cost.

Target income – Refers to the amount of income an organisation is trying to achieve during a particular period. The specification of target income may be based upon a desired rate of return on invested money (for example, 20% return on investment) or a growth in earnings per share (EPS).

Target market - The group of people for whom a particular product is designed.

Target price – Refers to the expected market price for a product, given the company's knowledge of its customers and competitors.Tariff - A tax applied on imports..

Tariff escalation - The system whereby tariff rates increase the closer a product is to the finished stage of production.





Tax – Is a charge imposed by a governmental body on personal income, corporate income, estates, gifts, or other sources to obtain revenue for the public good. Tax filing and payment are legally enforceable.Taxable - Is when goods or funds subject to taxation.

Taxable income – Is used to refer to that income which has to be reported to the relevant government for the calculating income taxes payable.

Tax allowance - An amount of income that can be earned tax-free. Tax allowances vary according to a person's circumstances.

Tax avoidance – Is the payment of the least tax possible by using legal tax planning opportunities such as estate planning. Tax evasion in contrast, utilises illegal methods to achieve this end. Tax effect - 1. the impact on taxes of a taxable revenue or expense item. For instance, an interest expense itemized deduction of $2000 will result in tax savings of $560 at the 28% tax bracket. OR 2. general term describing the consequences of a specific tax scenario with respect to a particular tax-paying entity. Many factors are considered such as time elements, projections and estimates of revenues, expenses, deductions, acquisitions, disposals, and the like and their relationship upon present and future tax liability.

Tax evasion – Refers to the failure to pay taxes legally due a governmental agency. There is a penalty for tax fraud based on the underpayment of tax. Criminal prosecution also may apply.

Tax expenditures - Tax provisions, such as exemptions and deductions from taxable income and tax credits, that are designed to induce market responses considered to be desirable. They are called expenditures because they have the same effect as directly spending money to induce the desired behaviour.

Tax haven (low tax jurisdiction) – Refers to a foreign country providing significant, permanent tax breaks to individuals and companies operating within it. In a tax haven country, foreigners may receive income or own assets and pay very low taxes.

Tax incidence - The location of the burden of a tax; that is, the identity of the ultimate bearer of the tax.

Tax indexing – Is a method using a form of Indexation to decrease the overall impact of the erosion of purchasing power in periods of inflation and subsequent "bracket creep."Tax loss carried forward or backwards – Is used to refer to a tax benefit that allows a firm or individual to subtract any losses in order to be able to reduce any tax liability they have.

Tax planning - The systematic analysis of differing tax options aimed at the minimization of tax liability in current and future tax periods.

Tax rate - The percentage rate at which a tax is levied on a particular activity.




Tax-related incomes policy (TIP) - Tax incentives for labor and management to encourage them to conform to wage and price guidelines.

Tax return – Is the general name of the form used to file taxes payable to a federal or local government.

Tax shelter - Refers to legal methods that a taxpayer is allowed to use in order to lower a tax liability. An example of this the use of amortisation or depreciation of assets.

Tax (financial) year – Is the period that a tax return covers. i.e. In Hong Kong it is from 1st April to 31st March.

Taylor rule - A rule adopted by a central bank for setting the rate of interest. It will raise the interest rate if (a) inflation is above target or (b) real, national income is above the sustainable level (or unemployment is below the equilibrium rate). The rule states how much interest rates will be changed in each case. .

T-Bill - Treasury bill.

Team building - The process designed to improve the effectiveness and motivation of people working together in groups.

Team working - Employees working in small groups with a common aim.

Technical analysis – refers to a method of predicting stock prices based on historical price and trading patterns; it is not concerned with the financial statistics. It uses charts (e.g., head and shoulders, rising bottoms) to identify trends in the market or individual securities.

Technological change - Any change in the available techniques of production.

Technological knowledge - Society's understanding of the best ways to produce goods and services.

Technological unemployment – Unemployment caused by technological changes reducing the demand for labour in some specific tasks.Technology - The method for converting resources into goods and services. Or 2) A creative process which uses human, scientific and material resources to solve problems and improve efficiency.

Technology costs – Are the category of costs associated with the development, acquisition, implementation, and maintenance of technology assets.

Temporary account – Is an account that does not appear on the balance sheet; also called nominal account.

Temporary employment - Employment for a limited or finite period of time.

Tender offer - A time limited offer to buy some or all of the outstanding common stock of a corporation from its stockholders at a specified price per share in an




attempt to gain control of the corporation. Also called takeover bid.

Term bonds - The principal of the bond is payable at maturity.

Term loan – Usually refers to an intermediate -to long -term (typically, two- to ten-year) business loans with provisions for systematic repayments (amortisation during the life of the loan).

Terms of trade - The ratio of the average price of a country's exports to the average price of its imports, both averages usually being measured by index numbers; it is the quantity of imported goods that can be obtained per unit of goods exported.

Term to maturity - The period of time from the present to the redemption date of a bond. Also called simply the term.

Tertiary sector - Industry which provides services to consumers and the other sectors of industry.

Testimony – Refers to evidence that is given by a witness who is under oath.

Test marketing - Testing a product out on a small section of a market prior to its full launch

Theory of constraints – Refers to a management approach or theory that main focuses is on the identification and subsequent and relaxation of the constraints that may limit a firm's ability to achieve a higher level of their goal attainment.

Theory of demand - Quantity demanded and price are inversely related - more is brought at a lower price, less at a higher price (other things being equal). Theory of liquidity preference - Keynes's theory that the interest rate adjusts to bring money supply and money demand into balance. Theory of the firm - A theory of how suppliers of commodities behave - how they make choices - in the face of changing constraints.Tertiary production - Activities which involve the provision of services.

Third-degree price discrimination - When a firm divides consumers into different groups al charges a different price to consumers in different groups, but the same price to all the consumers within a group.

Third party – Refers to someone other than the individual person or entity directly involved in the transaction or agreement under consideration.

Third world debt - The total external deficit of LDCs. This became extremely large in the 1980s due to events emanating from the oil price increases of the 1970s.




Till roll (cash register roll) – Refers to the roll of paper where individual payments of money are recorded in cash register. It is a source document of cash receipt.

Time-based-management - Involves setting strict time limits in which tasks must be completed.

Time deposits - Deposits that require notice of withdrawal or where a penalty is charged for withdrawals on demand. Time lag – The difference between when an action is taken and when it has its effect. The problem of time lags. Many economic actions can take a long time to take effect. This can cause problems of instability and an inability of the economy to achieve social-efficiency Time rates - A payment system that rewards workers for the amount of time they spend at work.

Time series – When there is an ordered sequence of different values of a specific variable or set of variables, recorded at equally spaced different time intervals.

Time series analysis - A method which allows a business to predict future levels from past figures.

Time sharing - In real estate, division of ownership or use of a resort unit or apartment on the basis of time periods.

Time standard (standard time) – Is the amount of time required to perform a task by a trained operator working at a normal pace and using a prescribed method.

Times interest earned (TIE) – This ratio measures the amount by which a firm's operating income can fall before the business is no longer able to meet its annual interest costs. The TIE ratio is used by banks to help assess an entity’s ability to meet their liability obligations. TIE is a measure of how many times during a specific year that the firm has earned their annual cost of interest associated with servicing the firms debt.

Time to market (TTM) – Refers to the length or period of time it takes to completely develop a new item or product from the original initial idea to product to market sales of the product.

Time value of money – This relates to the concept that one $ a person has today is worth more than a $ that a person has tomorrow. It is based on the idea that a dollar can earn interest by putting it into a savings account or placing it in an alternative investment.To date – The time period that is before the current date.

Tolerable - 1. In auditing, degree of acceptable misstatement in substantive testing without materially misstating the financial statements. A tolerable rate is the maximum deviation rate in tests of controls that is acceptable by the auditor in his or her assessment of control risk. Or 2. In cost accounting, acceptable variance between actual and standard cost or revenue.

Top down – Refers to the practice or method of analysing a subject, such as costs or revenue, starting from the highest level working towards the bottom.




Total assets – Is calculated as the total of all assets, both fixed and current.

Total asset turnover – This ratio is used as a measure of the management's efficiency in the way they manage the entity’s total assets - specifically relating to the generation of revenue flows from the entity's total investments in its assets.

Total consumer expenditure on a product (TE) (per period of time) - The price of the product multiplied by the quantity purchased: TE

Total consumer surplus - The excess of a persons total utility from the consumption of a good over the amount that person spends on it.Total cost - The total cost to the firm of producing any given level of output; it can be divided into total fixed costs and total variable costs.

Total cost of ownership (TCO) - The real amount an asset will cost. Example: An accounting application retails at $1000. Support - which is mandatory, costs a further $200 per annum. Assuming the software will be in use for 5 years, TCO will be $2000 (1000+5x200=2000).

Total current assets – Is a measure of total of cash and cash equivalents, inventory, trade receivables, and any other current assets.

Total current liabilities – Is a measure of the total of trade payables, notes payable-short term, income taxes payable, current maturities-LTD, and any other current liabilities.

Total fixed cost - All costs of production that do not vary with level of output.

Total physical product - The total output product per period of time that is obtained from a given amount of inputs.

Total product (TP) - Total amount produced by a firm during some time period.

Total quality management (TQM) - A managerial approach which focuses on quality and aims to improve the effectiveness, flexibility, and competitiveness of the business.

Total revenue - The amount received from the sale of a good or service. It equals the price of the good or service multiplied by the quantity.

Total utility - The total satisfaction resulting from the consumption of a given product or group of products by a consumer in a period of time.

Total variable cost - Total costs of production that vary directly with level of output. Also called direct cost or avoidable cost.

Total (private) surplus -Total consumer surplus plus total producer surplus.Total producer surplus - Total revenue minus total variable cost.




Total revenue (TR) (per period of time) - The amount received by firms from the sale product, before the deduction of taxes or any other costs. Total social surplus - Total benefits to society from consuming a good minus total costs to society from producing it. In the absence of externalities, total social surplus is the same a (private) surplus.Total utility - The total satisfaction a consumer from the consumption of all the units of consumed within a given time period.

TQM – Total quality management.

Trace – Refers to the process whereby an auditor tries to determine if a financial statement item has been handled according to proper corporate or accounting policy. For example, if the auditor wants to trace the balance in the travel expense account, he will trace account post stings from the ledger to the journal they came from. The auditor will then trace from the journal transaction to the source document to assure that proper backup exists.

Traceable – (accounting) Is to discover by looking backover past transactions for evidence. It is done step by step establishing the paper-trail of a transaction. Non-traceable is used to describe the situation where no paper-trail of a transaction can be established.

Tragedy of the Commons - A parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole.

Tradable emission permits - Government-granted rights to emit specific amounts of specified pollutants that private firms may buy and sell among themselves.

Trade creation - A consequence of reduced trade barriers among a set of countries (typically signatories to a free trade agreement) whereby trade within the group is increased and trade with the rest of the world remains roughly constant. Thus the increase in trade among group members is an increase in total world trade.

Trade credit – Refers to a type of credit extended by one business to another business, allowing the latter to buy goods from the former without making immediate full payment by check or with cash.

Trade cycle - The fluctuation of national income around its long term trend.

Trade debtors – Refer to amounts of money that is owed by customers/clients who have purchased something (goods&services) from the firm.

Trade deficit – Refers to when there is excess of imports of goods (raw materials, agricultural and manufactured products, and capital and consumer products) over the exports of goods, resulting in a negative balance of trade.

Trade discount – The producer gives a discount to retail trades people to in order to help them to increase the sales of the firm's product.




Trade diversion - A consequence of reduced trade barriers among a set of countries whereby trade with the group replaces trade that used to take place with countries outside the group.

Trade in goods (balance of trade) - The difference between imports and exports of physical products.

Trade in services (net invisibles) - The difference between the import and export of services.

Trademark – Is a legal protection afforded names, symbols, and other specific identities assigned to a product.

Trade (brand) name – Refers to the distinctive and identifiable name that is used to identify a company or product and build up brand recognition. Many large companies; e.g. Nike, Ford, Coca Cola, etc. Often a trade name is protected by copyright law.

Trade payable – This term is more commonly known as an account payable, is an amount owed to a creditor for goods and services received.

Trade receivables - This term is more commonly known as an account receivable, is an amount owed from a debtor for goods and services supplied.

Trade spending – Is generally used to refer to that marketing expense which is directed towards to process of brand building, e.g. slotting, and advertisements.

Trade union / labour union - A group of workers organized principally for the purpose of increasing wages and improving condition:

Trading account - An account which shows the gross profit or loss of a manufacturing or retail business, i.e. sales less the cost of sales. Or in other words subtracting cost of sales from turnover.

Trading blocs - Countries that join together to restrict trade

Trading concern - Means an firm that derives its business from selling products> The firm buys from one source and sells to another.

Traditional theory of the firm - The analysis of pricing and output decisions of the firm various market conditions, assuming the firm wishes to maximise profit.

Traits - Words used in identifying an individual's personality.Transaction - Two or more entries made in a journal which when looked at together reflect an original document such as a sales invoice or purchase receipt.

Transactions balances - Money balances held to finance payments because payments and receipts are not perfectly synchronized.




Transactions costs - Costs incurred in effecting market transactions (such as negotiation costs, billing costs, and bad debts).

Transaction date - The date on which an specified transaction occurred.

Transfer payments - A payment to a private person or institution that does not arise out of current productive activity; typically made by governments, as in welfare payments, but also made by businesses and private individuals in the form of charitable contributions.Transfer price – Refers to the charge made when one division of a company provides goods or services to another division of the company.

Transfer pricing (accounting) – Is the deciding on the price of goods or services that are exchanged between various divisions of a decentralized organisation.

Transfer pricing (economics) - A system operated by multinationals. It is an attempt to avoid relatively high tax rates through the prices which one subsidiary charges another for components and finished products.

Transmission mechanism - The channels by which a change in the demand or supply of money leads to a shift of the aggregate demand curve.

Transmitter - The sender of a message, the person starting the process off by sending the message.

Transnational corporation - Firms that have operations in more than one country. Also called multinational corporation

Transparency - (1) Principle that was adopted in the GATT (General Agreement on Tariffs and Trade) which said that governments must make their trading rules, regulations, and practices open and accessible both to the public and also to other governments.

Transportation - a method designed to solve problems where there are a number of different points of supply and demand, such as a number of manufacturers distributing their products to a number of different wholesalers.

Transportation (freight) in – Refers to the freight costs which must be paid by the buyer of the goods and therefore added to the costs of the merchandise, i.e. they are part of the inventory cost.

Transportation (freight) out – Refers to that part of cost of the selling of the product and therefore are included as a selling expense.

Treasury bills - Bills of exchange issued by the Central bank on behalf of the government. They are a means whereby the government raises short term finance.Trend – Normally refers to the general direction in which something tends to move.

Trend analysis – Is a forecasting technique that relies primarily on historical time series data to predict the future.

Trial balance - A statement which lists all the balances on all the accounts in the double entry system.




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Ultra vires – Refers to an action outside the proper authority or power of a corporation or corporate officer as established in the corporate charter (Latin for "beyond the power").

Unabsorbed costs – The costs that occurs when the specific cost structure that is being used does not fully reflect all fixed and/or variable costs.

Unallocated costs – These costs represent the entity's costs that are not associated either in a direct or indirect way in providing a item or service for sale.

Unanticipated inflation – Inflation that catches people by surprise.

Unaudited opinion – Refers to the giving of a qualified opinion by a person who is a CPA but who has not conducted an audited of the relevant financial statements.

Unavoidable costs – These costs will need to be incurred regardless of the decision to make or buy a certain part or keep or drop a certain product line; these costs cannot be recovered or saved. Much or all of fixed costs in those cases are unavoidable costs, e.g. property taxes and rent.Unbudgeted – Refers to any items and/or different amounts of monies that are not currently in the budget.

Uncertainty - When an outcome mayor may not occur and its probability of occurring is not known.

Uncollectible account (bad debt) – This refers to account receivable, note receivable, or other type of receivable that is unlikely to be paid.

Under applied/over applied factory overhead – This is the any residual or not allocated factory overhead that still remains once all other known overhead costs have been assigned to the different applicable items.

Underemployment - Where people who want full time work are only able to find part-time work.

Understandability - The term indicating that financial information is stated in terms that enable users to perceive its significance.Undeposited funds account - Is an account that shows money received but not yet banked. It may include cash, cheques, credit card payments, etc. Also referred to as a 'cash in hand' account.

Underbudgeted - Refers to an item within a specific budget where the amount that has been budgeted is not sufficient in order to cover the actual amount that is needed.

Underrecorded – This term is normally referring to an understatement of the amount of the total which would of have been recorded if all accurate data had been





included and/or considered; e.g. revenues, underrecorded costs, population, an such like.

Underwriting – Is the acceptance of risk in return for payment.

Undistributed profits - Earnings of a firm that are not distributed to shareholders as dividends but are retained by the firm. Also called retained earnings.

Unearned revenue - 1. The payment received prior to providing a good or service. Since an obligation exists on the part of the company to provide goods or services for which the advance payment was received, unearned revenue is recorded as a liability. An example is a retainer received by an attorney. When the services are performed, revenue is then earned. Or 2. in taxation, revenue obtained other than from personal services.

Unemployment - Those members of the labour force who are willing and able to work cannot find a job.

Unemployment equilibrium – A situation where macroeconomic equilibrium occurs at a level of real GDP below long-run aggregate supply.

Unemployment rate – Unemployment expressed as a percentage of the labour force.

Unexpired - This means it has not come to an end or been terminated yet.

Unexpired cost – This refers to all costs, including inventory costs and miscellaneous prepaid or deferred costs, that are associated with the revenue of future periods. Unexpired costs are carried to future periods as assets because they represent future benefits.Unfavorable balance of payments - A debit balance on some part of the international payments accounts (payments exceed receipts); often refers to the balance on current plus capital account (that is, everything except the official settlements account).

Unfavorable variance – Is when there is an excess of actual costs over standard costs. Unfavorable variances typically require further investigation for possible causes

Unfunded – This means no funds have been provided for a specified obligation or liability.

Uniformity – Is the term describing the presentation of financial statements by different companies using the same accounting procedures, measurement concepts, classifications, and methods of disclosure.

Unincorporated business - One which does not have a separate legal identity. See also sole traders and partnerships.

Union density - The actual membership of a trade union as a percentage of the total possible membership

Unissued stock – Refers to shares that have been authorised but have not been issued. Assume authorized shares of 500,000 and issued shares of 200,000.




The unissued shares are 300,000.Unit cost – Cost per unit of output, equal to total variable cost divided by total output. Also called average variable cost. For example, if total manufacturing costs are $100,000 and the production volume for a given period is 10,000 units, the unit production cost is $10 per unit ($100,000/10,000 units).

Unit elastic demand - An elasticity of demand of 1; quantity demanded and price change in equal proportions.

Universal benefits - Benefits paid to everyone in a certain category irrespective of their income or assets.Unlimited liability - Where the owner of a business is personally liable for all business debts.

Urban population - The number of people living in urban areas as a percentage of the total population

Uruguay round - The most recent talks of GATT concluded in January 1994. They tackled the enormous increase in non tariff restrictions imposed in the 1980s, agricultural protection and the trade in services. They were concluded several years later after several serious breakdowns, ultimately between the USA and the EU over agricultural protection.Unrealised – Normally refers to an action or event that has occurred but is not yet been reflected in a recorded transaction. Unrealised gains and losses are those that would happen if the investor sold the asset or security that they currently holds.

Unrealised gain or loss - The change in value of an asset that is still being held. It is distinguished from a realised gain or loss on the sale of the asset.

Unsecured loan - Is borrowing that is not secured by a mortgage on a specific property. It is backed only by the borrower's credit rating. Unsecured loans are typically short term.

Unusual losses or gains – These are material losses and gains that are either occur infrequently or are unusual in nature, but not both. The items are normally excluded from being placed in the extraordinary item classification.

Usage variance – This variance relates to the difference between the actual quantity of materials used and the budgeted quantity of materials used.

Useful life – Refers to the expected length of time, normally given in years, during which a depreciating asset will continue to be productive.

Utility - 1. economic and highly subjective term describing satisfaction of a specified want. Utility and usefulness are not necessarily synonymous terms. Artwork may be functionally useless but yet provide great utility to an art lover. Or 2. value of a certain outcome or payoff to someone; the pleasure or displeasure that person would derive from that outcome.

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Validate -1. to attest to the correctness and reliability of a financial item. A validity review or test is required by the ACCOUNTANT to satisfy the legitimacy of the item. An example of validation is the examination and approval of an employee's expense request form by a supervisor. Another example is the counting of petty cash to see that it conforms to the amount in the financial records. Or 2. to make something legal or effective. An example is signing one's name to a bill of sale, which closes the deal.

Validity test – Is an audit procedure that ascertains whether a recorded financial statement item is accurately stated.

Valuation date - This is the day when the evaluation has been made or the date when the evaluation applies.

Value - 1.the amounts at which items are stated in financial records and statements. Value is expenditures or amounts deemed to benefit future periods. Or 2. highly subjective term, usually an expression of monetary worth applied to a particular asset, group of assets, business entity, or services rendered. It should not be confused with the term cost even though it is frequently measured, equated, and identified by it. Thus the term should be used with an appropriate modifying adjective. Or 3. represented by the amount of goods, services, or money necessary to complete an exchange for a specific commodity. In economic terms, value of goods equals price multiplied by quantity.

Value (of a business) - The amount a business is worth to a stakeholder or any other interested party.

Value added - The value of a firms output minus the value of inputs bought from other firms. Value added tax (VAT - applies to many countries) - A general tax applied at each point of exchange of goods or services from primary production to final consumption. It is levied on the difference between the sale price of the goods or services to which the tax is applied, and the cost of the goods or services brought into use in production.Value analysis - A procedure to evaluate a product after manufacture to see how costs may be reduced.

Value chain – Refers to a linked set of all value-creating processes or activities that convert basic input materials into products or services for the final consumer.

Value engineering - A procedure designed to reduce and avoid unnecessary costs before production begins. ~

Value for money – Refers to the perception of the buyer or receiver of goods and/or services. Proof of good value for money is in believing or concluding that the goods/services received was worth the price paid.

Value in use – Refers to the discounted value of net cash receipts to be obtained from the corporate asset.

Value of the marginal product - The marginal product of an input times the price of the output.

Variable - Any well-defined item, such as the price of a good or its quantity, that can take on various specific values.

Variable cost - A cost that varies with output levels.Page No. 129

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Wage - A payment for work, usually weekly. See also salary.Wage and price controls - Direct government intervention into wage and price formation with legal power to enforce the government's decisions on wages and prices.

Wage-cost push inflation - An increase in the price level caused by increases in labour costs that are not themselves associated with excess aggregate demand for labour. also called the wage price spiral. Wages and prices chasing each other as the aggregate demand curve continually shifts to the right and the aggregate supply curve continually shifts upwards.

Wages - Payments made to the employees of a business for their work on behalf of the business. These are classed as expense items and must not be confused with 'drawings' taken by sole-proprietors and partnerships (see Drawings ). Walk – The theory that stock prices behave in an unpredictable fashion because the stock market is efficient. The market price of a company's stock goes randomly around real (intrinsic) value. Wants - The unlimited desires or wishes that people have for goods and services.Warrant - 1. see stock warrant. Or 2. government accounting, order drawn authorising the payment to a particular designated payee. Or 3. guarantee of the occurrence of something, such as warranting the performance of another party.

Warranty - A guarantee that faulty products will be repaired or replaced within a period of time.

Waste - Any material which is no longer of use to the system that produced it and which has to be disposed of.

Waste management - The way in which businesses deal with the problem of waste materials.

Wasting asset - 1. a natural resource such as oil, coal, and timber, having a limited useful life and subject to depletion. Such assets decrease in worth primarily due to the extraction of the valued commodity held by these assets. Or 2. a fixed asset with limited life and subject to depreciation. It there fore excludes land. Or 3. security whose value expires at a specified time in the future.

Wealth - The total assets of a household, firm or government minus its total liabilities.

Web browser – Refers to browsers for the World Wide Web (WWW) enabling one to hook up with network servers to obtain HTML documents and Web pages





Web page – Refers to on-line advertisement or information on the world wide web encouraging business or getting information.

Weight – Is the relative importance given to an individual item included in forecasting.

Weighted average - The average of several items, where each item is ascribed a weight. according to its importance. The weights must add up to 1.

Weighted average costing – Is the procedure for computing the unit cost of a process. Beginning work-in-process inventory costs are added to the costs of the current period, then a weighted average is obtained by dividing the combined costs by equivalent units.

Weighted average cost of capital (WACC) – This method weights the percentage cost of each component by the percentage of that component in the financial structure.Weighted average inventory method – This is an inventory valuation method in calculation in which the weighted average cost per unit for the period is the cost of the goods available for sale divided by the number of units available for sale.

Weighting – A process which adjusts and index number to take into account the relative importance of a variable.

Welfare - Government programs that supplement the incomes of the needy.

Welfare economics - The study of how the allocation of resources affects economic well-being.White-collar union - A union which represents non manual workers (office workers, management and professional staff).

White knight – Refers to an firm or individual that comes to the aid of a company facing a hostile takeover bid.

White paper - 1. is a government report; bound in white; also called a white book. Or 2. a short treatise whose purpose is to educate industry customers. Or 3. an authoritative report on a major issue, as by a team of journalists.

Wholly owned subsidiary – This is used to refer to the situation where the parent company owns 100% of the stock of the subsidiary company.

Wholesale – Refers to the selling of items to retailers usually in large quantities which are then broken up into smaller quantities to be on sold to consumers.

Wholesale banks - Banks specializing in large-scale deposits, and loans and dealing mainly with companies.

Wholesale deposits - and loans Large-scale deposits and loans made by and to firms at negotiated interest rates.

Wholesaler - A wholesaler buys in bulk (large quantities) from the manufacturer and sells on smaller quantities either to retailers or, occasionally, direct to




customers

Wide area network (WAN) – Is a network comprising a large geographic area.

Wide monetary base (MO) - Notes and coin outside the central bank plus banks' operational deposits with the central bank.

Wi-Fi (wireless fidelity) - Is the popular term for a high-frequency wireless local area network.

Willingness to pay - The maximum amount that a buyer will pay for a good.

Windfall profits – Refers to a profit or gain that occurs as a result of a specific event that was not controlled by the firm or person that realised the gain from that event.

Window dressing – Is the process of making a company look better financially than it really is.

WIP (Work in Process/Progress) - This is used to refer to items part way through the manufacturing process e.g. they are not yet finished goods.

Withdrawals (W) (or leakages) - Income earned by households and not passed on to firms in return for goods and services purchased, and income earned by firms and not passed on to households in return for factor services purchased. Withdrawals equal net saving (S) plus net taxes (T) plus expenditure on imports (M): W= S + T + M.

Withholding - 1. an income tax that is being withheld from the employees' wages and the firm is paying directly to the government. Or 2. a tax which is deducted from the dividends payable on investments which are to paid people residing in other countries.

Withholding tax – Refers to deductions by an employer from employee salaries for the payment of federal and state income taxes.

Work cell – Refers to a physical or logical grouping of resources that performs a defined job or task.Worker co-operative - A business organisation owned by employees who contribute to production and share in profit.

Works councils - Committees, made up of workers, who are consulted or informed on matters that affect employees.

Worker participation - The employees contribute to decision-making in the business. See also works councils and democratic leadership.

Working capital - The funds left over to meet day to day expenses after current debts have been paid. It is calculated by current assets minus current liabilities.

Working capital cycle - The flow of liquid resources into and out of a business.

Working capital ratio – This ratio shows working capital as a proportion of sales. Page No. 132A B C D E F G H I J K L M N O P Q R S T U V W X Y Z



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X - Exports; the value of all domestic production sold abroad.

XBRL - eXtensible Business Reporting Language. It is one of a family of "XML" languages which is a means of communicating information between businesses and on the internet.

X-inefficiency - The use of resources at a lower level of productivity than is possible, even if they are allocated efficiently, so that the economy is at a point inside its production possibility boundary.

X-M - See net exports.

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Year end adjustments – Is the process of adjusting the entry to an account at the end of the calendar or fiscal year in order to properly state it for financial statement preparation purposes. Types of required adjustments include accrual or deferral of a revenue or expense item, reclassification, adjustments to conform book figures to physical counts (i.e., inventory), and reflecting unusual transactions.

Yield - 1. the return from an asset or service provided. Or 2. real rate of return to the investor or effective cost to the issuer of a security for a specified time period. It differs from the nominal interest rate. Or 3. conceding a point to another party.

Yield to maturity (YTM) - Refers to the effective rate on a bond; also called the effective interest rate.

Yield variance – Is the effect of varying the total input of a factor of production (e.g., direct materials or labor) while holding constant the input mix (the proportions of the types of materials or labor used) and the weighted average unit price of the factor of production.

YTD - Year to date.

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Zero Based Account (ZBA) - Is often used in relation to a checking account. This is where a person/business may only transfer money from a savings account to the checking account when a cheque has been written

Zero Based Budget (ZBB) - This is a budgeting method where the budget starts at zero and each item must be justified before it is included in the budget.

Zero-based budgeting - A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder (the items are given a 'zero' value).

Zero rated - This is the term given to goods on which the buyer does not have to pay value-added tax (VAT) even though the seller is able to claim tax that they paid.




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