Accounting, Business Studies and Economics Dictionary

A 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 can be applied to many aspects of accounting. It means transactions, assets etc., that are associated with the everyday running of a business. See below the line.

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 Costing1. Required for outside reporting 2. Includes fixed overhead as an inventoriable cost3. Stresses gross profit4. Has a higher net income when production exceeds sales 

 Variable Costing1. Not accepted for outside reporting 2. Does not include fixed overhead as an inventoriable cost3. Stresses contribution margin4. 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 - A section in a ledger devoted to a single aspect of a business (eg. a Bank account, Wages account, Office expenses 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 - This covers everything from opening the books at the start of the year to closing them at the end. In other words, everything you need to do in one accounting year accounting wise.

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 formula used to prepare a 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.

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 - An account in the General Ledger which contains the overall balance of the Purchase Ledger.

Accounts payable ledger - A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is held in the General Ledger which shows the total balance of all the accounts in the purchase 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 overall balance of the Sales Ledger.

Accounts receivable ledger - A subsidiary ledger which holds the accounts of a business's customers. A single control account is held in the General Ledger which shows the total balance of all the accounts in the sales 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.

Accretive - If a company acquires another and says the deal is 'accretive to earnings', it means that the resulting PE ratio (price/earnings) of the acquired company is less than the acquiring company.

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

Accrual method of accounting - Most businesses use the accrual method of accounting (because it is usually required by law). When you issue an invoice on credit (i.e.. regardless of whether it is paid or not), it is treated as a taxable supply on the date it was issued for income tax purposes (or corporation tax for limited companies). The same applies to bills received from suppliers. (This does not mean you pay income tax immediately, just that it must be included in that year's profit and loss account).

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 held in the General Ledger which holds the depreciation of a fixed asset until the end of the asset's useful life (either because it has been scrapped or sold). Each fixed asset will have its own accumulated depreciation account.

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. A 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.

Agglomeration (economics) - Economies of agglomeration is used in urban economics to describe the benefits that firms obtain when locating near each other. It is related to the idea of economies of scale and network effects, in that the more related firms that are clustered together, the lower the cost of production (firms have competing multiple suppliers, greater specialization and division of labour result) and the greater the market that the firm can sell into. Even when multiple firms in the same sector (competitors) cluster, there may be advantages because that cluster attracts more suppliers and customers than a single firm could alone. Cities form and grow to exploit economies of agglomeration.

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.Aid (Foreign) - Administered transfer of resources from a donor country or international agency or NGO organisation to an LDC to encourage economic growth.

AIDA model - Simple way of planning an adverts' 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. Or2. 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) of an (usually) intangible asset (e.g.. loan, mortgage) over a fixed period of time. Example: if a loan of 12,000 is amortized over 1 year with no interest, the monthly payments would be 1000 a month.

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 occasion.

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 preferences

Articles 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. 

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 - A summary of all the accounts of a business. Usually prepared at the end of each financial year. The term 'balance sheet' implies that the combined balances of assets exactly equals the liabilities and equity (aka net worth).

Balancing charge - When a fixed asset is sold or disposed of, any loss or gain on the asset can be reclaimed against (or added to) any profits for income tax purposes. This is called a balancing charge.

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 - If an individual or unincorporated company has greater liabilities than it has assets, the person or business can petition for, or be declared by its creditors, bankrupt. In the case of a limited company or corporation in the same position, the term used is insolvent .

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.

CAC - The government body responsible for union recognition.

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 specifiedat a specified price that happens within a certain specified period. See also option. Orstock 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 ofWorld 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 dividoperating 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 accudepreciation, 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.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 ReserveThe 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 courtsuspend/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.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)

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 specdebt 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 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 trans

Comfort letters - Term used when underwriters request "comfort" from an auditor about financial information in SEC registration stateby the auditor's opinion and on subsequent events after the opinion date.

Command-and-control (CAC) systems - The use of laws or regulations backed up by inspections and penalties (such as fines) for non-compliance.

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 difpurchase 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.

Compound Annual Growth Rate (CAGR) - The year on year growth rate required to show the change in value (of an investment) from its initial value to its final value. If a $1 investment was worth $1.52 over three years, the CAGR would be 15% [(1 x 1.15) x 1.15 x 1.15]

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.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 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. 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 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 - An account created to offset another account. Eg: a Sales contra account would be Sales Discounts. They are accounts included in the same section of a set of books, which when compared together, give the net balance. Example: Sales=10,000 Sales Discounts=1,000 therefore Net Sales=9,000. This example, affecting the revenue side of a business, is also referred to as Contra revenue . The tell-tale sign of a contra account is that it has the opposite balance to that expected for an account in that section (in the above example, the Sales Discounts balance would be shown in brackets - eg. it has a debit balance where Sales has a credit balance).

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.

Contribution margin (CM) - The difference between sales and the variable costs of the product or service, also called marginal income. It is the amount of money available to cover fixed costs and generate profits.

Contribution margin analysis - A technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio. The manager asks what will happen to profits if a new product is added or an existing product is discontinued. Calculations take into account additional revenues, additional costs, effects on other products in the portfolio (referred to as cannibalization), and competitors' reactions.

Contribution margin ratio - The calculation showing CONTRIBUTION MARGIN as a percentage of sales.

Contribution sales ratio (C/S Ratio) - A tool used in profit management. It is important to establish the C/S RATIO: C/S ratio = (Sales revenue – Variable cost of sales)/Sales revenue x 100. If a company achieves a high average marginal profit ratio of say, 40%, it does not mean that it will achieve high profits. The eventual profit will be dependent on the level of fixed costs within the organization.

Control Account -  An account held in a ledger which summarises the balance of all the accounts in the same or another ledger. Typically each subsidiary ledger will have a control account which will be mirrored by another control account in the General Ledger (see 'Self-balancing ledgers').

Controller - Usually an experienced accountant who directs internal accounting processes and procedures, including cost accounting.

Convention - is an agreement, principle or statement expressed or implied that is used to solve given types of problems. Conventions allow a standardised approach to problem solving and behaviour in certain situations. An example of a convention is placing debits on the right and credits on the left of an account is termed an accounting convention.

Convergence of economies - When countries achieve similar levels of growth, inflation, budget deficits as a percentage of GDP, balance payments, etc.

Conversion costs -  Direct Labour + Manufacturing Overhead.

Convertible currency - Any national currency that can be easily exchanged for that of another country.

Cook the books - Falsify a set of accounts. See also creative accounting .

Cooperative - 1. non-taxable entity that is formed to eliminate the middleman and gain profits or savings that would have been paid to it. Profit or savings is periodically distributed by the proportion of transactions and not in proportion to each member's investment. Or 2. an entity owned by members. For example, in terms of real estate, ownership shares in the apartment building are held by the occupants. They make decisions regarding the property.

Cooperative advertising - A joint advertising strategy under which costs are shared; e.g. by a manufacturer and another firm that distributes its products.

Cooperative solution - A situation in which existing firms cooperate to maximize their joint profits.

Copyright - Protection given by law to authors of literary, musical, artistic, and similar works. The copyright holder enjoys the following exclusive rights: (1) to print, reprint, and copy the work; (2) to sell, assign, or distribute copies; and (3) to perform the work. A copyright is recorded at its acquisition price. The legal life of a copyright is the life of the author plus 70 years. Rarely will the economic life of a copyright exceed its legal life. For example, some textbooks become obsolete in five years. As other limited life intangible assets, copyrights are amortized over the period benefited.

Core business - The sector(s) of business activity that is the reason or purpose for being, e.g. providing meals within a restaurant would be considered core, while sales of art works on the wall may be non core.

Core workers -Workers, normally with specific skills, who are employed on a permanent long-term basis.

Corporate advertising - Advertising which is meant to promote a whole company rather than a particular product or product line.

Corporate culture - The values. beliefs and norms that are shared by people and groups in an organisation.

Corporate governance - The system of checks and balances designed to ensure that corporate managers are just as vigilant on behalf of long-term shareholder value as they would be if it was their own money at risk. It is also the process whereby shareholders-the actual owners of any publicly traded firm-assert their ownership rights, through an elected board of directors and the CEO and other officers and managers they appoint and oversee. In the heels of corporate scandals including the Enron debacle in 2002, a series of sweeping changes are being sought, such as forcing boards to have a majority of independent directors, granting audit committees power to hire and fire accountants, banning sweetheart loans to officers and directors, and requiring shareholder's approval for stock option plans. More specifically, the following principles constitute good governance:

1. To avoid conflicts of interest, a company's board of directors should include a substantial majority of independent directors-independirectors don't have financial or close personal ties to the company or its executives.

2. A company's audit, nominating, and compensation committees should consist entirely of independent directors.

3. A board should obtain shareholder approval for any actions that could significantly affect the relationship between the board and shareholders,

including the adoption of anti-takeover measures such as "poison pills."

4. Companies should base executive compensation plans on pay for performance and should provide full disclosure of these plans.

5. To avoid abuse in the use of stock options (and executive perquisites), all employee stock option plans should be submitted to shareholders for approval.

Corporate responsibility – The willingness of a business to accept responsibility  for its actions and their impact on a range of stakeholders.

Corporation - Business organised as a separate legal entity with ownership evidenced by shares of stock.  The corporation is a from its owners. Advantages of a corporation are the ability to obtain large amounts of financing through a public issuance, ease of transferring shares, limited liability of owners, unlimited life, and professional management.

Corporation (company) tax - The tax payable by corporations.  Often it is a flat rate or proportional tax.

Correcting entry -  An  adjusting entry, is required at the end of an accounting period if a mistake was made in the accounting records during the period.

Correlation - The relationship between two sets of variables.

Correlation coefficient - A measure of the extent of the relationship between two sets of variables.

Cost - 1. the sacrifice, measured by the price paid, to acquire, produce, or maintain goods or services. Prices paid for materials, labour, and factory overhead in the manufacture of goods are costs. Or 2. an asset. The term cost is often used when referring to the valuation of a good or service acquired. When it is used in this sense, a cost is an asset. The concepts of cost and expense are often used interchangeably. When the benefits of the acquisition of the goods or services expire, the cost becomes an expense or loss. An expense is a cost with expired benefits. A loss is an expense (expired cost) with no related benefit.

Cost accounting - An area of management accounting which deals with the costs of a business in terms of enabling the management to manage the business more effectively.

Cost accumulation - Collection of costs in an organized fashion by means of a cost accounting system. There are two primary approaches to cost accumulation: JOB ORDER and PROCESS COSTING. Under a job order system, the three basic elements of manufacturing costs-direct materials, direct labour, and factory overhead-are accumulated according to assigned job numbers. Under a process cost system, manufacturing costs are accumulated according to processing department or cost centre.

Cost allocation - The assignment to each of several particular cost-centres of an equitable proportion of the costs of activities that serve all of them, i.e. shared cost pools.

Cost-based pricing - Where a company bases its pricing policy solely on the costs of manufacturing rather than current market conditions.

Cost-benefit analysis - A technique which involves taking into account all social costs and benefits. when deciding on a course of action.

Cost centre - A point where costs occur and can be easily recorded. Splitting up your expenses by department. e.g. rather than having one account to handle all power costs for a company, a power account would be opened for each department. You can then analyse which department is using the most power, and hopefully find of way of reducing those costs.

Cost driver - Any activity or series of activities that takes place within an organization and causes costs to be incurred. Cost drivers are used in a system of activity-based costing to charge costs to products or services. Cost drivers are applied to cost pools, which relate to common activities. Cost drivers are not restricted to departments or sections, as more than one activity may be identified within a department.

Cost effective - When a judgment is made that something is economical in terms of the goods or services received for the money spent.

Cost-effectiveness analysis - Analysis of program costs with the purpose of finding the least-cost way to achieve a given result.

Costing - The process of measuring the likely economic consequences of a particular business activity or operation.

Cost minimization - An implication of profit maximization that the firm will choose the method that produces specific output at the lowest attainable cost.

Cost object - Anything for which cost data is desired, e.g., products, product lines, customers, jobs, and organizational sub-units such as departments or divisions of a company.

Cost of capital – 1. rate of return that is necessary to maintain the market value (or stock price) of a firm also called hurdle rate. Or 2. is the rate of return that a business could earn if it so chose other investments with the equivalent risks. Also can be stated as opportunity costto the investment decision.

Cost of debt - The interest rate times 1 minus the marginal tax rate (because interest is a tax deduction). An increase in the tax rate decreases the cost of debt.

Cost of equity (COE) - The minimum desired rate of return on invested capital that is determined by calculating net income as a percentage of invested capital

Cost of finished goods - The value (at cost) of newly manufactured goods shown in a business's manufacturing account. The valuation is based on the opening raw materials balance, less direct costs involved in manufacturing, less the closing raw materials balance, and less any other overheads. This balance is subsequently transferred to the trading account.

Cost of Goods Sold (COGS) - A formula for working out the direct costs of your stock sold over a particular period. The result represents the gross profit. The formula is: Opening stock + purchases - closing stock.

Cost-plus pricing (full-cost pricing)  - When firms price their product by adding a certain profit or mark-up to average cost of the item. 

Cost-push inflation - Inflation that has its origin in cost increases.

Cost of Sales - A formula for working out the direct costs of your sales (including stock) over a particular period. The result represents the gross profit. The formula is: Opening stock + purchases + direct expenses - closing stock. Also, see Cost of Goods Sold .

Cost plus pricing – A method of determining payment based on the actual cost of production or service provisioning plus an agreed-upon fee or rate of profit; for example, a cost-plus government contract.

Cost principle (historical cost - The principle where a company is obliged to record its fixed assets at their actual purchase price or production cost.

Cost-push inflation - Inflation which occurs as a result of , businesses facing increased costs, which are then passed on to consumers in the form of higher prices.

Cost synergy - The savings in operating costs expected after two companies, who compliment each other's strengths, join.

Cost unit - A functional cost unit which establishes standard cost per workload element of activity, based on calculated activity ratios converted to cost ratios.

Cost volume profit analysis (break even analysis) (CVPA) - Examines the behaviour of total revenue, total costs and profit as changes occur in the

output level, selling price and variable costs per unit or fixed costs.

Counter-cyclical policy - The use of fiscal and monetary policy to offset, booms and slumps by concretionary and expansionary policies respectively.

Countervailing power - When the power ( monopolistic/oligopolistic seller is offset powerful buyers who can prevent the price from being pushed up.

Coupon rte - The annual interest rate of a bond.

Covenant -  A clause in a contract that requires one party to do, or refrain from doing, certain things. It is usually a restriction on a borrower imposed by a lender.

C.P.A. - Certified Public Accountant.

CPI - Consumer price index.

Craft union - A trade union which represents a particular, type of skilled worker.

Credible threat (or promise) - One that is believable to rivals because it is in the threatener’s interests to carry it out.

Creative accounting - A questionable! means of making a companies figures appear more (or less) appealing to shareholders etc. An example is 'branding' where the 'value' of a brand name is added to intangible assets which increases shareholders funds (and therefore decreases the gearing ). Capitalising expenses is another method (ie. moving them to the assets section rather than declaring them in the Profit & Loss account).

Credit - A column in a journal or ledger to record the 'From' side of a transaction (e.g.. if you buy some petrol using a cheque then the money is paid from the bank to the petrol account, you would therefore credit the bank when making the journal entry).

Credit card - A card authorising purchases on credit at a predetermined interest rate and/or payment conditions.

Credit card receipts - Sales revenue where payment has been made through the use of recognized/authorised credit cards versus cash or check receipts/payments.

Credit control - The process of monitoring and collecting the money owed to a business.

Credit line - The maximum credit that a customer is allowed.

Credit Note - A sales invoice in reverse. A typical example is where you issue an invoice for 100, the customer then returns 25 worth of the goods, so you issue the customer with a credit note to say that you owe the customer 25.

Creditors - A list of suppliers to whom the business owes money.

Creditors (control account) - An account in the General Ledger which contains the overall balance of the Purchase Ledger.

Creditors days (creditors turnover) - The number of days it takes the company to pay trade creditors. This ratio provides an indication of the amount of credit given to the business by its suppliers. The formula is trade creditors divided by sales multiplied by 365 days.

Credit sales - Merchandise or services sold on the promise to pay later.

Crises - Unstable situations which arise. often in unforeseen circumstances.

Critical path - In an operation which consists of a sequence of activities, this is the one sequence which cannot afford any delays without prolonging the operation.

Critical path analysis - A technique used to find the cheapest or fastest way to complete an  operation.

Cross elasticity of demand - The responsiveness of the demand of one product to a change in the price of another.

Cross-price elasticity of demand – The percentage change in the demand for one good divided by the percentage change in the price of a related good. Cross-price elasticity of demand is a measure of the responsiveness of one good's quantity demanded to changes in a related good's price.

Cross-subsidise - To use profits in one market to subsidise prices in another.

Crowding in - The tendency for an expansionary fiscal policy to increase investment

Crowding out - The tendency for an increase in government purchases of goods and services to increase interest rates, thereby reducing - or crowding out - investment expenditure.

Crowding-out effect - The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending.

Crude (birth/death rate) - Crude rates do not take a . country's age structure into account. Thus, for example, the crude death rate of a developed country may be higher than a developing one due to the higher proportion of old people.

Crude birth rate - The number of births in a y one thousand population e.g. 30 per 1000, the as a 3% birth rate.

Crude death rate - The number of deaths in a year per one thousand population e.g. 10 per 1000, the same as a 1 % death rate.

Culture gap – A difference between the culture that a business has and what it would like it to be.

Cumulative Causation – The principle that an initial event can cause an ultimate effect that is much larger.

Cumulative earnings - The sum of all earnings over the time periods in question.

Cumulative frequency - The total frequency up to a particular item or class boundary.

Cumulative preferred stock - Preferred stock which gives holder a right to dividends if they have not been paid in a given year.

Currency - The paper bills and coins in the hands of the public.

Currency appreciation - Occurs when the value of a currency rises - it buys more of another currency.

Currency depreciation - Occurs when the value of a currency falls - it buys less of another currency than before.

Currency union A group of countries (or regions) using a common currency.

Current account - A part of the balance-of-payments accounts that records payments and receipts arising from trade in goods and services and from interest and dividends that are earned by capital owned in one country and invested in another.

Current account balance of payments - Exports of goods and services minus imports of goods and services plus net incomes and current transfers

from abroad. If inflows of money (from the sale of exports, etc.) exceed outflows of money (from the purchase of imports, etc.), there is a 'current account surplus' (a positive figure). If outflows exceed inflows, there is a 'current account deficit' (a negative figure).

Current assets - Assets such as cash, stocks and debtors which are only held for short periods of time ( expected to be turned into cash in under a year).

Current balance - The difference between the value of money entering and leaving a country for trade in goods and services income from abroad and transfers.

Current cash / debt ratio - Measures ability to pay current liabilities in given year with cash derived from operating activities. Calculated using net cash from operating activities divided by average current liabilities.

Current cost - The cost which would be incurred for replacement of an asset.

Current cost accounting - A method of accounting which replaces all historic cost values with current valuations.

Current liabilities - Debts that have to be repaid within a year:

Current ratio (working capital ratio) - Measure of liquidity. Current assets are divided by current liabilities. It is a commonly used measure of short-run solvency, i.e., the immediate ability of a firm to pay its current debts as they come due. Current Ratio is particularly important to a company thinking of borrowing money or getting credit from their suppliers. Potential creditors use this ratio to measure a company's liquidity or ability to pay off short-term debts. Though acceptable ratios may vary from industry to industry below 1.00 is not atypical for high quality companies with easy access to capital markets to finance unexpected cash requirements. Smaller companies, however, should have higher current ratios to meet unexpected cash requirements. The rule of thumb Current Ratio for small companies is 2:1, indicating the need for a level of safety in the ability to cover unforeseen cash needs from current assets. Current Ratio is best compared to the industry.

Curriculum vitae (resume) - A list of the applicant's personal details, experience and qualifications. .

Custodian - An entity entrusted with guarding and keeping property or records.

Customers - Individuals who buy goods and services supplied by businesses.

Customs - The authorities charged with collecting duty and controlling the entry of merchandise into a country.

Customs and excise - The government department usually responsible for collecting sales tax (e.g.. VAT in the UK).

Customs union/Common market - A group of countries with free trade between them and a common external tariff.

Cut off rate - The predetermined maximum rate and/or minimum rate at which the subject is still acceptable, but where a rate above the proscribed higher or below the proscribed lower rate is no longer acceptable.

Cyclical unemployment (Demand-deficient) - Unemployment resulting from business recessions that occur when total demand is insufficient to create full employment.

Cyclically adjusted deficit (CAD )- An estimate of the government budget deficit (expenditure minus tax revenue), not as it actually is but as it would be if national income were at its potential level.

Cyclically adjusted surplus (CAS) - The negative of cyclically adjust deficit.

[A ] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K] [L] [M] [N] [O] [P] [Q] [R] [S] [T] [U] [V] 

"If you are failing to plan, you are planning to fail."  Tariq Siddique

DAC - 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.is normally calculated with the following equation: Creditors turnover  = (creditors x 365) / sales

Days Sales Outstanding (DSO) (debtors turnover) - How long on average it takes a company to collect the money owed to it. (debtors 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 - This is a type of share issued by a limited company. It is the safest type of share in that it is really a loan to the company and is usually tied to some of the firm's assets so should the company fail, the debenture holder will have first call on any assets left after the company has been wound up.

Debit - A column in a journal or ledger to record the 'To' side of a transaction (e.g.. if you are paying money into your bank account you would debit the bank when making the journal entry).

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 - A list of 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 - An account in the General Ledger which contains the overall balance of 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 - Expenses incurred which do not apply to the current accounting period. Instead, they are debited to a 'Deferred expenditure' account in the non-current assets area of your chart of accounts . When they become current, they can then be transferred to the profit and loss account as normal.

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.

Delegation - Authority (and sometimes responsibility) passed down from superior to subordinate.

Delinquency ratio - Is a ratio of the overdue debts/loans to total number of loans being repayed.

Delivery note - This is a source document given by a supplier when goods are delivered stating the type and amount of goods.

Demand  - The entire relationship between the quantity of product that buyers wish to purchase per period time and the price of that product.

Demand curve - A graph showing the relationship between the quantity demanded of a good or service and its price, holding everything else constant.

Demand deposit - Bank deposit from which withdrawals can be carried out without advance notice.

Demand for money - The total amount of money balances that the public wishes to hold for all purposes.

Demand inflation - Inflation arising from excess aggregate demand, that is, when national income exceeds potential income.

Demand management policies - Demand-side policies (fiscal and/or monetary) designed to smooth out the fluctuations in the business cycle.

Demand note - A note which is considered to be payable on demand from the individual to whom the money is owed.

Demand schedule -  A table showing for selected values relationship between the quantity of a product, buyers wish to purchase per period of time and the price of that product, other things being equal. Demand schedule for an individual - A table showing the different quantities of a good that a person is willing and able to buy at various prices over a given period of time.

 Demand schedule (market) - A table showing the different total quantities of a good that consumers are willing and able to buy at various prices over a given period of time.

 Demand-deficient or cyclical unemployment - Disequilibrium unemployment caused by a fall in aggregate demand with no corresponding fall in the real wage rate. Demand-pull inflation - Inflation that results from an increase in aggregate demand.

Demand-side policies - Policies designed to affect aggregate demand: fiscal policy and monetary policy.

Demerger - Where a business splits into two .separate organizations.

Demerit good - The opposite of a merit good; one which the political process had decided is socially undesirable.

Democratic leadership - A leadership style where the leader encourages others to participate in decision making.

Demographic factors - Features of the size, location and distribution of the population.

Demographics - Are the attributes such as income, age, and occupation that best describe your target market.

Denomination - Refers to the series of currency notes or weights i.e. is denominated is US $ or in Kilograms etc.

Departmental accounting (cost and profit centres) - Where the different departments in a firm  have a variety of different degrees of autonomy, these departments are still probably in the same business location. For example a department store. Departmental accounts willtrading account and possibly also a profit and loss (income) account.

Dependent - Person who derives primary support from another party. In order for a person to qualify as a dependent for federal income tax exemption purposes, five tests must be met: support test, gross income test, joint return test, citizenship or residency test, and relationship or member of household test.

Dependency - Where the development of a developing country is hampered by its relationships with the industrialised world.

Dependency ratio - The percentage of the population in the combined age groups aged under 15 and 65 plus.

Depletion - Physical exhaustion of a natural resource (e.g., oil, coal). The entry for recording annual depletion is to debit depletion expense and credit accumulated depletion. Accumulated depletion is a contra account to the natural resource.

Deposit - 1. May refer to when a payment is given in a commitment or guarantee that a future obligation will be completed. Or 2. the act of putting money into a bank account. Or 3. a partial or percentage of the total payment made with or at the same time as the original purchase with the promise or commitment to pay the balance later. Or 4. may also refer to when money is given or offered as a form of security for an item gained to be used only on a temporary basis.

Deposit money - Money held by the public in the form demand deposits with commercial banks.

Depreciation (Accounting) - Reduction in the value of capital goods over a one-year period due to physical wear and tear and also to obsolescence. Depreciation is when the value of assets usually decreases as time goes by. The amount or percentage it decreases by is called depreciation. This is normally calculated at the end of every accounting period (usually a year) at a typical rate of 25% of its last value. It is shown in both the profit & loss account and balance sheet of a business. See straight-line depreciation .

Depreciation (currency) - A lessening of the value of a domestic currency in terms of foreign currencies.

Depression - A persistent period of very low economic with very high unemployment and high excess capacity.

Deregulation - Where the government removes official barriers to competition (e.g. licences and minimum quality standards).

Derivative - Is when the transaction or in some cases the contract's value is dependent on or, derives its worth from the value ofbehind or underlying it.  Examples include such as  mortgages, stock, bonds, foreign currencies or market indices.

Derived demand - The demand for a factor of product that results from the demand for the products that it used to make.

Derived demand for labour - When the demand for workers by businesses is the result of demand for the product or service produced by businesses.

Designated - Something or someone who has/is selected for a job, e.g., designated payments.

Desk research - Secondary research.

Destabilising speculation - Where the actions of speculators tend to make price movements larger.

Devaluation - Depreciation under a regime of fixed exchange rates.

Devalue - To lower the par or fixed value of a managed exchange rate. The action makes exports cheaper and imports dearer.

Developed countries - The higher-income countries of the world, including the United States, Canada, most of Western Europe, Japan, Australia, and South Africa.

Developing countries - The lower-income countries of the world, most of which are in Africa, Asia, and Latin America. Also called underdeveloped countries, less developed countries.

Development (accounting) - The changing of new ideas into commercial  propositions.

Development (economics) - A process to improve the lives of all people in a country. This involves not only raising living standards i.e. goods and services but the promotion of self esteem, dignity and respect, and the enlarging of peoples freedom to choose and to take control of their own lives.

Development areas - Regions with high unemployment which qualify for government help aimed at attracting business. .

Devolution -  This is used to refer to when authority is delegated from a higher to a lower level.

Devolve - This is the act of passing on or delegating to another person or entity, e.g. a more junior level of management.

Differentiated product - A group of products that are similar enough to be called the same product but dissimilar enough so that all of them do not have to be sold at the same price.

Dilution - The reduction, weakening, or decrease in a item. For example, share values are diluted with the issue of more common shares.

Diminishing marginal product - The property whereby the marginal product of an input declines as the quantity of the input increases.

Diminishing marginal rate of substitution - The hypothesis that the marginal rate of substitution changes systemproducts being consumed vary.

Diminishing marginal utility – 1. as more units of a good are consumed, additional units will provide less additional satisfaction than previous units. Or 2. where each additional dollar of income  earned yields less additional utility. -  The principle of diminishing marginal utility. The more of a product a person consumes over a given period of time, the less will be the additional utility gained from one more unit.

Diminishing returns - The eventual decline in output each extra worker adds to total output when the opportunity to specialise is used up.

Direct allocation method - Method allocating costs of each service department directly to production departments; also called Under this method, no consideration is given to services performed by one service department for another.

Direct burden - Amount of money for a tax that is collected from taxpayers.

Direct  cost or prime cost - A cost which can be clearly identified with a particular unit of output.

Direct expense - That part or percentage of  an expense that was directly spent in the provision of a product/service for its sale. It is part of cost of goods sold, e.g.  direct labour or direct materials.

Direct investment -  In balance-of-payments accounting, nonresident investment in the form of a takeover or capital investment in a domestic branch plant or subsidiary corporation in which the investor has voting control.

Direct labour -  Work directly involved in making the product. Examples of direct labour costs are the wages of assembly workers on an assembly line and the wages of a machine tool operator in a machine shop. Direct labour is an inventoriable cost.

Direct labour variance - Refers to the difference between the 'standard rate' and 'actual rate' for the actual labour hours worked.following equation [(standard rate - actual rate) X actual hours].

Direct marketing - A method of distributing products directly to consumers, without the use of intermediaries such as wholesalers and retailers.

Direct material - The cost of raw materials and other components that can be identified with individual units of production or a responsibility centre.

Direct materials variances - Refers to the difference between the actual costs of materials and the standard costs of materials.

Directors - People elected by shareholders to run companies.

Director’s report - Financial report prepared for company directors. The report is typically prepared on a quarterly and annual basis. It includes detailed items such as the accountant's financial analyses and management recommendations.

Direct tax - Tax liability targeted at one person on the basis of income.

Direct write-off method – A method of recognition of uncollectible accounts only when known to be such.

Dirty or managed float - A freely floating exchange system that involves governments intervening to stabilize the value of their currencies. To be compared with a 'clean' float, where there is no government intervention in the foreign exchange market.

Disbursement - Is used to mean the paying  of money in order satisfy an expense or debt.

Disclosure principle - This principle says that all relevant information that may or does affects the full understanding and ability to interpret a firm's financial statements must be included with final statements. This means some information should be given as accompanying notes. Examples of such items are outstanding lawsuits or other known factors that could affect the business.

Discount - 1. difference between the face value (i.e., future value) and the present value of a payment. Or 2. reduction in price given for prompt payment. Or 3. excess of the par value (face value) of a financial instrument over the price paid for it.

Discount allowed - A reduction of the invoice amount for early payment of the invoice value.

Discounted cash flow (DCF) - A method of investment appraisal which takes interest rates into account by calculating the present value of future income.  

Discounting - The process of reducing future flows to give them a present valuation.

Discount rate - 1. the interest rate the (Fed) Federal Reserve of the United States charges a bank to borrow money from when the bank is temporarily unable to meet its current liquidity requirements. Or 2. in banking, the rate at which the central bank is prepared to lend reserves to commercial banks. Or 3 3. more generally, the rate of interest used to discount a stream of future payments to arrive at their present value

Discouraged workers - People who would like to work but have ceased looking for a job and hence have withdrawn from the labour force because they believe that no jobs are available for them.

Discrepancy - Refers to when there is a difference between two sources of data.

Discretionary - Refers to when something is not mandatory or compulsory, it is up to the firm or individual to decide.

Discretionary cost - can be changed at the discretion of the individual decision maker.

Discretionary fiscal policy – Deliberate changes in tax rates or the level of government expenditure in order to influence the level of aggregate demand.

Discrimination - To make a. selection or choice from alternatives, such as an applicant for a job. The term is often used to meanunreasonable selection in the context of equal opportunities.

Diseconomies of scale - 1. when increases in output lead to increases in long-run average costs. Or 2.  rising long run average costs as a industry expands beyond its minimum efficient scale.

Disembodied technical change - Technical change that raises output without the necessity of building new capital to embody the new knowledge.

Disequilibrium - The situation of a market in which there is excess demand or excess supply.

Disequilibrium price - A price at which quantity demanded does not equal quantity supplied.

Disequilibrium unemployment - Unemployment resulting from real wage rates in the economy being above the equilibrium level.

Disguised unemployment - Where the same work could be done by fewer people.

Disinflation - A fall in the rate of inflation.  This means a slower increase in prices but not a fall in prices, which is known as deflation.

Disinvestment - Opposite of capital budgeting decisions, because they concern whether to terminate rather than start an operation. In general, if the marginal cost of a project is greater than the marginal revenue, the firm should disinvest.

Dispersion - A measure of the spread of data.

Disposable income - Household income after the deduction of taxes and the addition of benefits.

Dissolution - The act or process of terminating, ending,  or in other ways winding-up a business and closing of its affairs.

Distributed profits - Profits paid out to owners of a firm. For incorporated firms, the distributed profits are called dividends.

Distribution cost - Is the costs that are incurred to fill an order or sale for an item.

Distribution of income - The amount of income and wealth different groups have in a particular country.  Inequality of income can be illustrated with the Lorenz curve.

Diversification - Where a firm expands into new types of business.

Divesture - is often used to refer to the process of selling by a firm of a a subsidiary, division or product line.

Dividend - A proportion of a company's profits paid to owners of shares in that company.

Dividend cover - How many times the dividend could have been paid from the year's earnings.

Dividend payout ratio - Simply measure of the percentage or proportion of a company's earnings paid out in dividends.

Dividends - These are payments to the shareholders of a limited company. It is the shareholders portion of distributable profits.

Dividends per share - The amount of money a shareholder will actually receive for each share owned.

Dividend yield - The amount received by the shareholder as a percentage of the share price.

Division - A unit which may to some degree be self sufficient within a company. A division usually is considered to contains all theto function in an independent way from the parent company.

Division of labour - When the production process is split up into different tasks and each worker performs one of these tasks. Also known as specialisation.

Dollar standard - A system under which countries hold reserves in, and settle debts with, U.S. dollars, but the dollar is not backed by gold or any other physical source of monetary value.

Dominant firm price leadership - When firms (the followers) choose the same price as that set by the dominant firm in the industry (the leader). Dominant price leader - The leading firm in an industry which is the first to change prices. Dominant strategy - A strategy that is best for a player in a game regardless of the strategies chosen by the other players. Dominant strategy game - Where the same policy is suggested by different strategies.

Double counting - Counting the expenditure on both the final good or service and the intermediate goods and services used in its production.

Double declining balance method – accelerated depreciation method in which a constant percentage factor of twice the straight-line rate is multiplied each year by the declining balance of the asset's book value.

Double-entry book-keeping - A system which accounts for every aspect of a transaction - where it came from and where it went to. This aspect of a transaction (called crediting and debiting) is what the term double-entry means. Modern double-entry was first mentioned by G Cotrugli, then expanded upon by L Paccioli in the 15th century.

Doubtful debt - This is used to refer to a debt that is now considered to have uncertain collectability.  It is often given as a percentage of the total e.g. on average 5% of debts are doubtful.  This may be based on past experience. These doubtful debts are recorded as an expense in the profit and loss account  credited to a provision for doubtful debts account.

Dow Jones industrial average - The index which tracks the daily value of shares in 30 large US companies listed on the New York Stock Exchange.

Down payment - A Part payment made at the time of the purchase of the item with a promise to pay the balance at a later date.

Downsizing - The process of reducing capacity. usually by laying off staff.

Dr - The ancient Italian word ‘debare’; meaning ‘debit’ this is different from DR.

DR - Debit Record.

Drawdown - The size of the decline in the value of the account.

Drawee - The person or entity that buys a draft instrument.

Drawings - The money taken out of a business by its owner(s) for personal use. This is entirely different to wages paid to a business's employees or the

wages or remuneration of a limited company's directors (see 'Wages').

Duality concept - This is the fundamental concept underlying double entry accounting.  This means that any transaction will allows affect at least two accounts.  For example paying wages with cash affects both the cash account and the wages account.  In double entry accounting the two accounts affected will be either debited or credited.  The total amount of debits must always be equal to the total amount of credits.

Dual economy - The existence of two distinct types of economy in one country, modern and traditional, side by side.

Due diligence – A qualitative assessment of management’s character and capability. Comprehensive due diligence may also include an examination of the books and records, asset appraisals, reviews of the company's other debt obligations, legal and accounting affairs, internal controls, planned capital expenditures, and other matters that bear on the company's future success and profitability. Due diligence is a legal requirement before public offerings.

Dumping - In international trade, the practice of selling a commodity at a lower price in the export market than in the domestic market for reasons unrelated to differences in costs of servicing the two markets.

Duopoly - A market structure in which there are only two sellers of a commodity and thus the matter of interdependence is critical for price determination.

Durable Consumer Goods - Goods used by consumers that have a life-span of more than one year.

Duty - Is when a tax is imposed by a customs authority on goods which are imported. Also it is often referred to as a "tariff."

Dynamic efficiency - Occurs when resources are allocated efficiently over time.  It focuses on changes in the degree of consumer choices available in the market together with the quality of goods and services in the market.  Can also be used to refer to the state of technological advancement in a particular market or industry.

 

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"Sometimes, the hardest decision made is the right thing to do...." Yanny Natashah

Earliest 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 income

Economic 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, turnrecruitment.

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 sysreceives, 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 booksteals 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.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).

Entrepreneurship - The initiating and organising of the production of new goods, or the introduction of new techniques, and the risk taking assowith it.

Enterprise (Accounting) - is an organization created for business ventures.

Enterprise / Entrepreneur (Economics) - The factor of production involving human resources that perform the functions of raising capital, organizing, managing, assembling other factors of production, and making basic business policy-decisions. The risk taker.

Enterprise value (EV) - Is a measure of a company's worth or value. It is normally calculated by the following method EV = market capitalisation + debt and preferred shares - (cash + cash equivalents).

Enterprise zones - Small inner city areas designated by the government which qualify for financial assistance.

Entity – 1. Accounting: separate economic unit subject to financial measurement for accounting purposes. Examples are a corporation, partnership, sole-proprietor, and trust. Or 2. Legal: individual, partnership, corporation, and so on, permitted by law to own property and engage in business. Affiliated legal entities such as those consolidated for financial reporting may exist. Here, two or more companies operate under common control.

Entity assumption / concept- That the firm or business is separate from the owner in preparing financial statements.

Entity theory - View in which a business or other organization has a separate accountability of its own. It is based on the equation: Assets = Liabilities + Stockholders' Equity.  The entity theory considers liabilities as equities with different rights and legal standing in the business. Under the theory, assets, obligations, revenues, and expenses and other financial aspects of the business entity are accounted for separately from its owners. In other words, the company has an identity distinct from its owners or managers. The firm is viewed as an economic and legal unit

Entrepreneur – 1. Accounting is the individual who takes the financial risk of the management and operation of a business or venture.Economics an economic agent who perceives market opportunities and assembles factors of production to exploit them in a firm.

Entry - Part of a transaction recorded in a journal or posted to a ledger.

Entry barrier - Any natural barrier to the entry of new firms into an industry, such as a large minimum efficient scale for firms, or any firm-created barrier, such as a patent.

Envelope curve -  Any curve that encloses, by being tangent to, a series of other curves. In particular, the envelope cost curve which encloses the SRAC curves by being tangent to each without cutting any of them.

Environmental charges - Charges for using natural resources (e.g. water or national parks), or for using the environment as a dump for waste (e. factory emissions or sewage).

Equal opportunities - Where everyone has the same chance in business.  This can mean the same chance of promotion etc.

Equation of exchange - The number of monetary units multiplied by the number of times each unit is spent on final goods and services is identical to the prices multiplied by output (or national income). Formally written as M x V = P x Q.

Equilibrium - A situation in which the plans of buyers and sellers exactly coincide so that there is neither excess supply nor excess demand.Equilibrium is the point where conflicting interests are balanced. Only at this point is the amount that demanders are willing to purchase the same as the amount that suppliers are willing to supply. It is a point that will be automatically reached in a free market through the operation of the price mechanism.

Equilibrium differential - A difference in factor prices that would persist in equilibrium, without any tendency for it to be removed.

Equilibrium price -The price where the quantity demanded equals the quantity supplied - the price where there is no shortage or surplus.

Equilibrium unemployment ('natural') unemployment - The difference between those who would like employment at the current wage rate and those willing and able to take a job.

Equipment loan - A loan used for the buying of capital equipment.

Equities – Another name for an ordinary share.

Equities company shares - Holders of equities, owners of the company and share in its profits by receiving dividends.

Equity – (Accounting) The value of the business to the owner of the business (which is the difference between the business's assets and liabilities).

Equity – (Economics)  Is where income is distributed in a way that is considered to be fair or just. Note that an equitable distribution is not the same as a totally equal distribution and that different people have different views on what is equitable.

Equity capital - Funds provided by the owners of a firm, the return on which depends on the firm's profits.

Equity financing - Method of a firm raising funds by issuing either/or common and preferred stock

Equity method - Accounting method used to record  investments in associated companies.

Equity share capital - When the capital is raised by a firm via the issue of common shares.

Equity to asset ratio - The percentage of total assets financed through the owner’s equity capital. This is the reciprocal of the debt:asset ratio.

Equivalent unit of production (EPU) - number of fully completed units considered to b equivalent to a greater number of partially completed units i.e.1000 units are all 60% complete, then 600 whole units could be considered to be equivalently completed.

Eurocurrency - Currency deposits held in banks outside their country of origin, e.g. eurodollars are US dollar deposits held in banks outside the US,

though not necessarily in Europe.

European monetary system (EMS) - An agreement under which EU countries attempt to promote exchange rate stability within the European Union.

Ergonomics - the study of people in their working environment and the adaptation of machines and conditions to improve efficiency.

ERM (the exchange rate mechanism) - A system of semi-fixed exchange rates used by most of the ED countries prior to adoption of the euro. Members' currencies were allowed to fluctuate against each other only within agreed bands. Collectively they floated against all other currencies.

Error of commission - A double-entry term which means that one or both sides of a double-entry has been posted to the wrong account (but is within the same class of account). Example: Petrol expense posted to Vehicle maintenance expense.

Error of omission - A double-entry term which means that a transaction has been omitted from the accounts entirely.

Error of original entry - A double-entry term which means that a transaction has been entered with the wrong amount.

Error of principle - A double-entry term which means that one or possibly both sides of a double-entry has been posted to the wrong account (which is also a different class of account). Example: Petrol expense posted to Fixtures and Fittings.

Estate - Is the entire group or value of the assets owned by a person at the time of their or her death.

Estate taxes - Levy paid to the federal government or state on a deceased person's assets that have been left to heirs.

Ethical standards - A statement or document which contains the basic principles and  procedures together with any related and relevant guidance in the form of explanatory notes and other documents.

Ethics - The values and beliefs of individuals or groups.

Ethical behaviour - Behaviour which is viewed as correct.

EV (economic value) - The worth of an asset which is calculated by its ability to generate revenue.

Excess burden - The value to taxpayers of the changes in behaviour that are induced by taxes; the amount that taxpayers would be willing to pay, over and above the direct burden of taxes, to abolish the taxes.

Excess capacity - The amount by which actual output falls short of capacity output (which is the output that cor responds to the minimum short-run average total cost).

Excess capacity (under monopolistic competition) - The property of long-run equilibrium in monopolistic competition that firms proportion of their average total cost curves so that they have excess capacity measured by the gap between present output and the output that coincides with minimum average total cost.

Excess demand - A situation in which, at the given price, quantity demanded exceeds quantity supplied. Also called a shortage.

Excess reserves - Reserves held by a commercial bank in excess of the legally required minimum.

Excess supply - A situation in which, at the given price, quantity supplied exceeds quantity demanded. Also called a surplus.

Exchange - The act of trading, usually done on a voluntary basis, in which both parties to the trade are better off.

Exchange rate - The price in terms of one currency at which another currency, or claims on it, can be bought and sold. amount of one currency that is necessary to purchase one unit of another currency (e.g. $1.60 = £1).

Exchange rate appreciation - When the value of a country's currency rises compared to other currencies.

Exchange rate band - Where a currency is allowed to float between an upper and lower exchange rate, but is not allowed to move outside this.

Exchange rate depreciation - When the value of a country's currency falls compared with other currencies.

Exchange rate index - A weighted aver exchange rate expressed as an index where value of the index is 100 in a given base year. The weights of the different currencies in index add up to 1.

Exchange rate overshooting - Where a fall (or rise) in the long-run equilibrium exchange rate causes the actual exchange rate to fall (or rise) by greater amount before eventually moving back to the new long-run equilibrium level.

Exchange rate regime - The system under which the government allows the exchange rate to be determined.

Exchange rate risk - In foreign exchange, refers to the position of a firm in relation to changes in the exchange rates.

Excise duties (taxes) -  A tax on the sale of a particular product; may be a specific tax (fixed tax per unit of product) or an percentage of the value of the product). Normally taxes levied on fuel, alcohol, tobacco and betting.

Excludability - The property of a good whereby a person can be prevented from using it.

Execution lag - The time that it takes to put policies in place after a decision has been made.

Exempt - Not being subject to an obligation or liability of something. For example exempt from a specific  tax.

Exogenous money supply - Money supply that does not depend on the demand for money but is set by the authorities.

Exogenous variable - A variable that influences endogenous variables but is itself determined by factors outside the theory.

Expansionary gap - When the equilibrium level of real national income exceeds the full-capacity level of real national income; the positive difference between total desired spending and the full-capacity level of real national income.

Expectational inflation - Inflation that occurs because decision makers raise prices (so as to keep their relative prices constant) in the expectation that the price level is going to rise.

Expectations – Beliefs about what will happen in the future.  People's actions are influenced by their expectations. People respond just to what is happening now (such as a change in price), but to what anticipate will happen in the future.

Expectations-augmented Phillips curve - (short-run) The relationship between unemployment and the rate of increase of money wages or between national income and the rate of increase of money prices that arises when the demand and expectations components of inflation are combined.

Expected inflation rate - The rate at which people, on average, believe that the price level will rise.

Expected value - Weighted average using the probabilities as weights. For decisions involving uncertainty, the concept of expected value provides a rational means for selecting the best course of action.

Expendable - An item that when used it can be discarded and will not hurt the firm's operations

Expenditure – Accounting, The costs which are incurred from normal business activates aimed at helping to generate revenues.

Expenditure-reducing policies - Concretionary macro-economic policies designed to reduce incomes and so reduce spending on imports and on goods which could be exported

Expenditure-switching policies - Policies which lead to a fall in spending on imports and a rise in spending on domestically produced goods in both export and domestic markets.

Expense - This refers to when a service or asset is used in the operation of business activities.

Expenses - Goods or services purchased directly for the running of the business. This does not include goods bought for re-sale or any items of a capital nature (see Stock and Fixed Assets ).

Explicit costs - The payments to outside suppliers of inputs.

Export license - A legal permit or license to export merchandise issued by the government.  Can be used as a form of protection.

Exports - Goods and services sold by people in one country to people in other countries.

Exposure – 1. is the extent to which an item or product is kept in the public domain through advertising. Or 2. in finance, exposure normally means the amount that an individual or business can lose from there position or investment.

Expropriation - The taking of property or some other thing by governmental authority.

External audit - Audit conducted by an independent public accountant. It refers to the type of audit and not the place of the audit.

External auditor - Independent public accountant who examines a business entity's books. The external auditor is not an employee of the company.

External debt - The total value of all private and public debt owed by a country to other countries.

External communication - Messages between one organisation and another organisation or individuals not employed in the business.

External economies of scale - Scale economies that cause the firm's costs to fall as industry output rises but are external to the firm and so cannot be obtained by the firm's increasing its own output..

Externality -  An effect of consumption or production which is not taken into account by the consumer or the producer and which affects the utility or costs of other consumers or producers.

External benefits - Benefits from production (or consumption) experienced by people other than the producer (or consumer).

External costs - Costs of production (or consumption) borne by people other than the producer (or consumer).

External diseconomies of scale - Where a firm's costs per unit of output increase as the size of the whole industry increases.

External economies of scale - Where a firm's costs per unit of output decrease as the size of the whole industry grows.

External environment – The factors outside a business that influence its decisions.

External growth - Occurs when a business takes over or merges with another business. Often called integration (see vertical integration and horizontal

integration) as one firm is integrated into another one.

External recruitment - The vacancy is filled by someone who is not an existing employee and will be new to the business.

External sources - Sources of information outside the company used to compile market research as a basis for marketing decisions.

External value of the dollar - The value of the dollar expressed in terms of foreign currencies; changes in the dollar's external value are measured by changes in the exchange rate.

Externalities - Costs or benefits of production or consumption experienced by society but not by the producers or consumers themselves. Sometimes referred to as 'spillover' or 'third-party' costs or benefits.

Extraordinary items - One that is both unusual in nature and infrequent in occurrence.

 

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"The vision must be followed by the venture. It is not enough to stare up the steps - we must step up the stairs."      Vance Havne

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) 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, appropricomprehensive. Fairly presented financial statements are not slanted to favour one party over another and are not subject to manage

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 thanstandard 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 collecaccounts 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,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

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 strucmanaging 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 obligaleverage 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 thestatements 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. 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 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. 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 viability - Ability of a firm or other entity to be able to continue to accomplish its operating and other  objectives and achieve its mission or goals over the long term period.

Fine tuning - The attempt to maintain national income at or near its full employment level by means of frequent changes in fiscal or monetary policy.

Finished goods inventory - That percentage of items in recorded in the inventory which are completed in there manufactured state and are available and ready for sale.

Firm -  A unit that employs factors of production to produce goods and services. 

First in, first out (FIFO) - Method of inventory valuation that assumes merchandise is sold in the order of its receipt. The first-price in is the first-price out. Hence cost of sales is based on older dollars. Ending inventory is reflected at the most recent prices.

First-mover advantage - When a firm gains from being the first one to take action.

Fiscal - Used in relation to government accounting and means Belongs to the public (government) treasury or is pertaining to the area public finance.

Fiscal drag - The tendency of automatic fiscal stabilisers to reduce the recovery of an economy from recession.

Fiscal period – A period of time into which the fiscal year is then divided. In Hong Kong the fiscal year is 1st of April to 31

Fiscal policy - The use of the government's tax and spending policies in an effort to influence the behaviour of such macro variables as GDP and total employment.

Fiscal stance - How deflationary or re-flationary the Budget is.

Fiscal quarter - Any of the individual four different financial accounting quarters that exist as a  part of the fiscal year.

Fiscal year - The term used for a business's accounting year. The period is usually twelve months which can begin during any month of the calendar year (e.g.. 1st April 2001 to 31st March 2002).

Fisher effect - The one-for-one adjustment of the nominal interest rate to the inflation rate.

Five-year plans - Economic plans set up by the central government in a country that plots the future course of its economic development.

Fixed assets - These consist of assets which are likely to be kept by the business for more than one year. Most fixed assets, apart from land, depreciate over time so the value of these will fall on the balance sheet from one year to the next.

Fixed assets (net) - Plant, property, and equipment, net of the accumulated depreciation or the depletion of the asset.

Fixed asset turnover - A measure of the management's ability to be able to generate revenue flow from the firms investments in its fixed assets.

Fixed budget - A budget that does not get adjusted for any changes in the level of sales or service.

Fixed costs  - The costs that do not vary with output. Fixed costs include such things as rent on a building and the price of machinery. These costs are fixed for a certain period of time; in the long run they are variable. Fixed exchange rate - An exchange rate that is maintained within a small range around its publicly stated par value by the intervention of a country's central bank in foreign market operations.. Fixed factor - An input that cannot be increased in supply within a given time period

Fixed income - Used to refer to types of investment that give or yield a regular or fixed amount.  Fixed income can also be used to apply to people's income which does not change in each period of time e.g. pensions which give a fixed income or fixed income investment bonds.

Fixed investment. - Purchases, made by business, of capital goods, such as machinery and office equipment. .

Fixed overhead - expenses like rent, utilities, loan payments, etc., that do not change when sales volume increases or decreases. Variable overheads are those expenses which vary or change directly with output.

Fixed expenses - The  expenses of a firm that remain constant regardless of changes in output or sales volume.

Fixed price - 1.the price that serves as a standard for the valuation of certain inventory accounts (i.e., raw materials, work-in-process, and finished goods) in standard costing. OR 2. the price that must be charged under a contract regardless of production costs. Or 3. an economic concept utilized by governmental units establishing a fixed price for a price floor (below which the price is not legally allowed to fall) and price ceilings (above which the price is not legally allowed to rise) on certain regulated goods and services. Or 4. the price at which investment bankers agree to sell the issue to the investing public in a public offering of new security issues.

Fixtures & fittings - This is a class of fixed asset which includes office furniture, filing cabinets, display cases, warehouse shelving and the like.

Flash earnings - A news release issued by a company that shows its latest quarterly results.

Flat (rate of) interest - is when interest is charged on the full amount of the original loan as opposed to the declining balance of the loan.

Flat rate – A per unit price that remains constant regardless of the volume purchased.

Flat tax - One in which the income tax rate is the same for all income levels. It is a proportional tax. A pure flat tax would eliminate all deductions, exemptions, and loopholes, and tax all income at the same low tax rate.

Flexible budget (variable budget) – A budget based on different volumes of activity. It is an extremely useful tool for the comparison the actual cost incurred to the cost that are allowed for a given activity level. It is dynamic by its nature rather than static. By using the cost volume formula (or flexible budget formula), a series of budgets can be developed easily for various levels of activity. Flexible budgeting is a way of distinguishing between the fixed and variable expenses, thus allowing for a more flexible budget that is able to be automatically adjusted (via changes in variable cost totals) to the particular level of activity which is actually achieved. Thus variances between actual costs and budgeted costs are adjusted for volume ups and downs before differences due to price and quantity factors are computed. The primary use of the flexible budget is for accurate measure of performance by comparing actual costs for a given output with the budgeted costs for the same level of output.

Flexible exchange rate - An exchange rate that is left free to be determined by the forces of demand and supply on the free market, with no intervention by the monetary authorities.

Flexible firm - A firm that has the flexibility to respond to changing market conditions by changing the composition of its workforce.

Flexible workforce - A workforce that can respond (in quantity and type) to changes in demand a business may face.

Flextime (flexi-time) - Scheduling concept that allows for nontraditional work hours to be employed on a systematic basis. Hours can be arranged for different times or periods of time to accommodate such aspects as efficiency, traffic, motherhood, disabilities, continuous operations, etc.

Float -  1. the amount of funds represented by checks that have been issued but not yet collected. Or 2. to issue new securities, usually through an underwriter. Or 3. time between the deposit of checks in a bank and payment.

Floatation cost - Cost of issuing new securities in the market.

Floating exchange rate - When the government does not intervene in the foreign exchange markets, but simply allows the exchange rate to be freely determined by demand and supply.

Flow - Activities that occur over time. For example, income is a flow that occurs per week, per month, or per year. Consumption is also a flow, as is Production. Flowchart - Method of representing in schematic form the flow of data in a system. The flowchart shows the points of input and output, the logic or sequence of the various processing steps in the system, and the relationship of one element of the system to the other parts of the system or to other information systems. Flow of funds - This is a report which shows how a balance sheet has changed from one period to the next. Flow production  - Very large scale production of a standardised product, where each operation on a unit is performed continuously one after the other, usually on a production line.  Also called mass production because of the large quantity of a standardised product that is produced.

Folio – 1. a manuscript or book that consists of sheets of paper that have been folded in the middle to make four pages. Or 2. a sheet of any printed or written material . Or 3. a system of giving pages numbers. Or 4. with reference to investments, refers to an unstructured mixed basket of various common stocks that may or may not represent a particular stock index, a specific sector or specific theme, or an managed portfolio, that may be modified by the investor or their advisor to meet the differing tax and expenditure needs of its beneficial owner.

Footing - Summary of the debits (left side of any account) and credits (right side of any account) to obtain a new balance.

Footloose industries - Those industries which are neither influenced by their market or the source of raw materials when deciding where to locate.

Footnote (accounting) - Explanatory data that follows the financial statements and is integrally related to them. Footnotes help the user understand financial statement figures and any other matters essential in gauging a company's financial position

Forecast - 1. projection of future financial position and operating results of an organisation. Or 2. projection or estimate of future sales, revenue, earnings, or costs.

Foreign - Other nations than your own.

Foreign aid - Administered transfer of resources from a donor country or international agency or NGO organisation to an LDC to encourage economic growth.

Foreign currency transaction - One that requires settlement in a currency other than the entity's domestic currency.

Foreign exchange - Actual foreign currencies or various claims on them, such as bank balances or promises to pay, that are traded on the foreign exchange market.

Foreign exchange market - The market for buying and selling foreign currencies.

Foreign exchange rate - The price of foreign currency in terms of domestic currency, or vice versa.

Forensic accounting - A science (i.e., a department of systemized knowledge) dealing with the application of accounting facts gathauditing methods and procedures to resolve legal problems. Forensic accounting is much different from traditional auditing. Forensic accounting is a specialty requiring the integration of investigative, accounting, and auditing skills.

Forex - Foreign exchange market.

Foreseeable - What may be reasonably anticipated.

Formal groups - Groups specifically set up by a carry out tasks. They have certain formal rules of behaviour.

Formal organisation – The relationships between the employees and the organisational structure determined by business as shown on the organisation chart.

Formula - A standard and systematic procedure or process for solving a class/variety of different mathematical problems.

Forward exchange market - Where contracts are made today for the price at which currency will be exchanged at some specified future date.

Forward vertical integration - Merging with a firm involved in the next stage of production.

45° line - In macroeconomics, the line that graphs the equilibrium condition that aggregate desired expenditure should equal national income

Fractional reserve system - A banking system in which commercial banks are required to keep only a fraction of their deposits in cash or on deposit with the central bank.

Franchise - an agreement where a business (the franchisor) sells rights to other businesses (the franchisees) allowing them to sell products or use the company name.

Franchising - Where a firm is given the license to operate a given part of an industry for a specified length of time.

Fraud - 1. falsification of a tax return by an individual. Examples of tax fraud are intentionally not reporting taxable income or overstating expenses. Tax fraud is a criminal act. Or 2. deliberate action by individual or entity to cheat another, causing damage. There is typically a or purposeful withholding of material data needed for a proper decision. An example of fraud is when a bookkeeper falsifies records in order to steal money.

Free cash flow – The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level; net cash flows from operating activities, minus dividends, minus net capital expenditures..

Free enterprise - A system in which private business firms are able to obtain resources. to organize those resources and to sell the finished product in they choose.

Free good - A product for which the quantity supplied exceeds the quantity demanded at a price of zero; therefore, a good that does not command a positive price in a market economy.

Freehold - 1. an interest in a piece of property that is both unconditional and also represents the most broad ownership interest recognised under the law. Or 2. an interest in a piece of land the period or duration that is restricted to the life/lives of a particular individual holding it,

Free-market economy - An economy where all economic decisions are taken by individual households and firms and with no government intervention. Free rider - Someone who consumes a good, service without paying for it.   

Free-rider problem - The tendency for the scale of provision of a public good to be too small – to be allocatively inefficient - if it is privately provided.The free-rider problem means that people are often unwilling to pay for things if they can make use of things other people have bought. This problem can lead to people not purchasing things which would be to the benefit of themselves and other members of society to have. Freely floating (or flexible) exchange rates - Exchange rates that are allowed to fluctuate in open market in response to changes in supply demand. Sometimes called free exchange rate floating exchange rates.

Free trade - The absence of any form of government intervention in international trade, which implies that imports and exports must not be subject to special taxes or restrictions levied merely because of their status as "imports" or "exports.

Free trade agreement – An agreement that is between different countries that is aimed at achieving, over an specified length of time, in the elimination or reduction of protectionist measures and policies for goods and services flowing or exchanged between thesignatories to the agreement i.e. NAFTA (North American Free Trade Area) between the US, Canada and Mexico.

Free trade area - An agreement among two or more countries to abolish tariffs on all or most of the trade among themselves while each remains free to set its own tariffs against other countries.

Freely floating exchange rate -Where the exchange rate is determined entirely by the forces of demand and supply in the foreign exchange market with no government intervention whatsoever.

Free trade zone (FTZ) - An area, often a port of entry, designated by the country for duty-free entry of goods

Freight collect - The buyer pays the shipping costs.

Freight-in - Transportation charge the company pays when it receives goods from a supplier. It is a separate account that is added to purdetermining the cost of goods and ending inventory.

Freight-out cost of transporting goods to a customer. It is a selling expense. When the freight is included in the selling price, it is deducted from sales.

Frequency - Marketing, the number of different times a firm hopes to reach its target market through a specific advertising campaign.

Frequency distribution - Schedule showing the number of times each observation in the data occurs. Data collected need to be organized in some fashion. One method of summarizing a population or sample is to organize the data in terms of their frequency.

Frictional (search) unemployment - Unemployment caused by the time that is taken for labour to move from one job to another.

Friendly takeover - A buyout of a company that has the support of the company being purchased Board of Directors. The shareholders may receive cash and/or shares of the acquiring firm's stock.

Fringe benefits - Non-monetary rewards given to employees.

Full cost method - Accounting method used by some extractive industries, particularly oil and gas companies, in which capitalized whether the projects are successful or unsuccessful. The capitalized cost is then amortized into expense as the total reserves are produced.

Full disclosure - Comprehensively and understandably presenting all material facts in the footnotes to the financial statements so that financial statement users are properly informed.

Full-employment level of national income - The level of national income at which there is no deficiency of demand.

Fully depreciated - When a fixed asset has been charged (accumulated depreciation) with the maximum total amount of depreciation that is allowed under the relevant tax law for accounting purposes.

Functional based accounting - Accounting and reporting by activity. It aids in conforming organisational performance to plan so that proper budgetary and operational controls can be maintained.

Functional currency - Legal tender of the primary economic environment in which a company operates.

Functional distribution of income - The distribution of total national income among the major factors of production.

Functional flexibility - Where employers can switch workers from job to job as requirements change.

Fund - 1. in government accounting, fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with related liabilities and residual equities or balances, and changes therein. Funds are segregated for the purpose of conducting specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Or 2. the cash, securities, or other assets designated for a specified purpose such as in a sinking fund. Or 3.can be used as a verb, to finance, using long-term debt, usually bonds.

Fund accounting - . Used by government entities and not-for-profit organisations. This method of accounting groups assets and liabilities in accordance with the purpose they are intended to be used

Fundamental analysis - Evaluation of a company's stock based on an examination of the firm's financial statements. It is distinguished from technical analysis, which attempts to predict the market price of a company's stock based on historical price performance and overall stock market trends. It considers overall financial health, economic and political conditions, industry factors, marketing aspects, management quality, and future outlook of the company.

Fundamentals - Factors that are “fundamental” to the operations of a firm’s business, its profitability, operating costs, prices, etc.

Funding - Where the authorities alter the balance of bills and bonds for any given level of government borrowing.

Fund management – A professional individual or firm, that is often regulated. A fund manager performs the role as a caretaker of their client assets for a specified or variable fee.

Future price - A price agreed today at which an item (e.g. commodities) will be exchanged at some set date in the future. ' Futures or forward market  - A market in which contracts are made to buy or sell at some future date at a price agreed today.

Future value - Amount to which an investment will grow at a future time if it earns a specified interest that is compounded annually. The process of calculating future values is called compounding.

FX account (Foreign Exchange Account) - Refers a trading account in foreign currencies.

 

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"The important thing to recognize is that it takes a team, and the team ought to get credit for the wins and the losses. Successes have

many fathers, failures have none."  Philip Caldwell

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 forwould 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 methodextreme 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.

Historical cost accounting - The accounting practice requiring all financial items reported in the firm's financial statementcost.

Hit-and-run competition - When a firm enters an industry to take advantage of temporarily high profits and then leaves again as soon as the high profits have been exhausted.

Holders of record – The owners of a firm's shares on the DATE OF RECORD indicated on the firm's stock ledger. Holders of record receive stock rights or dividends when they are announced.

Holding company – Any corporation owning enough voting stock in another company to control its policies and management.

Homogenous product - In the eyes of purchasers, a product every unit of which is identical to every other unit.

Horizontal equity - The idea that taxpayers with similar abilities to pay taxes should pay the same amount.

Horizontal financial analysis – Is a time series analysis of financial statements covering more than one accounting period; also called trend analysis.

Horizontal integration - One firm merges with or takes over another one in the same industry at the same stage of production.

Horizontal merger - When two firms in the same industry at the same stage in the production process merge.

Hostile takeover -  This refers to when a company attempts to purchase out another company without the support of the second company's board of directors. A hostile takeover of a company can only occur if the shares are publicly traded , as it needs the buyer to bypass the other company's board of directors and then purchase the needed shares from other different sources.

Hot-spot - High-speed wireless Internet access that is provided in convenient public locations or at home. Using either a laptop or PDA that is 802.11 wirelessly enabled, people can download their e-mail attachments, watch a live webcast, or listen to streaming audio.

Household - All of the people who live under one roof and who make joint financial decisions or are subject to others making decisions for them.

Households' disposable income - The income available for households to spend: ie. personal incomes after deducting taxes on incomes and adding benefits.

Human capital -The capitalised value of productive investments in persons; usually refers to value derived from expenditures on education, training,

and health improvements.

Human Development Index (HDI) - A composite index made up of three elements: an index for life expectancy, an index for school enrolment and adult literacy, and an index for GDP per capita (in PPP$).

Human resource accounting – Accounting method that recognises a variety of human resources and shows them on a company's balance sheet. Under human resource accounting, a value is placed on people based on such factors as experience, education, and psychological traits, and, most importantly, future earning power (benefit) to the company. Human resources - The employees or personnel in a business that help it to achieve its goals.

Human resources management - An integrated approach which ensures the efficient management of human resources.

Human resources plan or the workforce plan - The suggested quantity, quality and type of employees a business will require in future and how this demand is to be met.

Human resources planning/workforce planning - The process of calculating the number of employees a business needs in the short term and the long term and matching employees to the business's requirements.

Hurdle rate –  Used in capital budgeting, it means the required rate of return of a discounted cash flow analysis. If the expected rate of returnparticular investment is below that of the hurdle rate, then the project will not begun. The hurdle rate needs to be equal with the incremental cost of capital.

Hygiene factors - Those things that can lead to workers being dissatisfied.

Hyper-inflation – A situation where inflation levels are very high.

Hypothesis testing - The use of a statistical test to discriminate between two hypotheses at two specific risk (or probability) levels.

Hysteresis - The persistence of an effect even when the initial cause has ceased to operate. In economics, it refers to the persistence of unemployeven when the demand deficiency that caused it no longer exists.

 

[A ] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K] [L] [M] [N] [O] [P] [Q] [R] [S] [T] [U]

 

"Everything that irritates us about others can lead us to an understanding of ourselves."  Carl Jung

IB – International baccalaureate

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 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 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 indimanufacturing 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. 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 stateprobable 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 - These are accounts not held in the name of persons (ie. they do not relate directly to a business's customers and suppliers). There are two types, see Real and Nominal.

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 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 method of topping up petty cash. A fixed sum of petty cash is placed in the petty cash box. When the petty cash balance is nearing zero, it is topped up back to its original level again (known as 'restoring the Imprest'

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. 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, 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 consumption 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 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,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.

Income tax - Government levy on the net earnings of an individual, corporation, or other taxable unit.

Income tax payable – Is a liability showing the income taxes now due this includes the current portion (due) of any deferred taxes.

Incompetence – The inability to use or lack of the physical ability or intellectual capacity or qualifications.

Incorporated – The legal state of existence signifying that a corporate entity has been recognised under the appropriate law.

Incorporation - The legal process by which a business becomes incorporated i.e. a limited company.

Increasing opportunity costs of production - When additional production of one good involves ever-increasing sacrifices of another.

Increasing returns - A situation in which output increases more than in proportion to inputs as the scale of a firm's production increases. A firm in this situation, with fixed factor prices, is a decreasing cost firm.

Incremental – The process of increasing gradually or by small steps through the regular increase in degrees or additions.

Incremental cost - The increase or decrease in costs as a result of one more or one less unit of output.

Incur - This is used to describe the situation where a business has acquired or got itself into a situation which is not desirable or has made itself subject to a form of liability e.g. to incurring the cost or to incur a debt.

Indenture – The legal document that specifically states the conditions under which a bond has been issued, the rights of the bondholders, and the duties

of the issuing corporation; also called bond indenture or deed of trust.

Independence – (Accounting) The condition of accountant having no bias and being neutral regarding the client or another party in performing the audit function.

Independence (of firms in a market) - Where the decisions of one firm in a market will not have any significant effect on the demand curves of its rivals. Independent risks - Where two risky events are unconnected. The occurrence of one will not affect the likelihood of the occurrence of the other.

Independent variable - a variable that may take on any value in a relationship.

Indexation - Automatic change in any money payment in proportion to the change in the price level.

Index linked bond - A secure investment measured in  real terms, as the bond payments and any redemption payments or proceeds are linked to movements in the CPI (Consumer Prices Index).

Index number - An average that measures change over time of such variables as the price level and industrial 'production; conventionally expressed as a percentage relative to a base period, which is assigned the value 100.

Indicative planning - A system which involves the government setting up general targets for the major sectors of the economy in order to guide the private sector in their decision-taking.

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,

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 that does not arise out of the spending of domestic firms.  Injections equal investment (I) plus government expendon exports (X).

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 prop

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.intangibles and include trademarks, goodwill, patents, copyrights,  catalogs, brands, franchises, formulas, and mailing lists, net ofamortisation.

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. 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.

Interest bearing - Means that these items pay interest.

Interest cover (coverage) - Asses a firm’s ability to meet interest  payments by comparing profit and interest payable.interest and taxes divided by interest.

Interest expense - The cost of borrowing funds or the price paid for money in the current fiscal period. It is classified as a financial expense in the income statement.

Interest rate - The rate, often expressed as a percentage per annum charged on money borrowed or lent. The interest rate may be variable or fixed. The various types of interest rates are: 1) prime (interest) rate: rate charged on business loans to the most credit-worthy customers by the nation's leading banks. The prime rate fluctuates with changing supply and demand relationships for short term funds. (2) nominal predetermined loan rate. The stated interest rate often differs from the effective interest rate.

Interim audit – 1. An audit which is conducted during the financial year for the purpose of minimising the work and or time that would be taken otherwise to conclude the audit after the end of the financial year. Or 2. An audit for an interim period e.g. quarterly statements.

Interim dividend - The declaration of a dividend and subsequent payment prior to annual earnings being finalised.

Interim statement - Is a statement issued for an accounting period of less than one year, such as quarterly or monthly.

Internalising an externality - Altering incentives so that people take account of the external effects of their actions.

Intermediate products - All outputs that are used as inputs by other producers in a further stage of production.

Intermediate targets - Variables that the government cannot control directly and does not seek to control ultimately, yet that have an important influence on policy variables.

Internal communication - Messages between people working in the same organisation.

Internal economies of scale - Scale economies that result from the firm's own actions and hence are available to it by raising its own output.

Internal value of the dollar - The purchasing power of the dollar measured in terms of domestic goods and services; changes in the internal value of the dollar are measured by changes in an index of U.S. prices.

Internal growth - Occurs when a business expands its existing operations.

Internal recruitment - The vacancy is filled by someone who is an existing employee of the business.

Internal sources - Sources of information within the company, used to compile market research as a basis for marketing decisions.

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, 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 harinformation, 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, elecand 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 reportSome 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.

Invisible balance - The balance of all items on the current account of the balance of payments except for exports and imports of goods.

Invisibles - All items of foreign trade that are intangible services as opposed to goods.

Invoice - A term describing an original document either issued by a business for the sale of goods on credit (a sales invoice) or received by the business for goods bought (a purchase invoice).

Involuntary unemployment - Unemployment due to the inability of qualified persons who are seeking work to find jobs at the going wage rate.

Inward investment - The setting up of business, or investment in business, by a company from another country.

IOU – Used to refer to an informal debt agreement or instrument in the form of a written or unwritten promise to pay back the monies owed; e.g., a

personal loan and/or the payment for services rendered.

IPO (Initial public offering) - The first / primary offering of stock/shares to the public via listing on a public stock exchange.

Irrelevant cost - Management accounting – means it has no impact on the decision needing to be considered.

IRS - Internal Revenue Service.

ISO 9000 - Certification standards developed by the International Organisation for Standardization (ISO) that serve as a basis for qualglobal manufacturers.

Isoquant - A curve showing all technologically efficient factor combinations for producing a specified amount of output.

Isoquant map - A series of isoquants from the same production function, each isoquant relating to a specific level of output.

Issued share capital – Amount of current share capital arising from the sale of shares.

Issuing house – Any institution that deals with the sale of new shares. 

 

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"If you don't do it excellently, don't do it at all. Because if it's not excellent, it won't be profitable or fun, and if you're not in business

for fun or profit, what the hell are you doing there?"  Robert Townsend

J-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 individualmethod 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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"Many attempts to communicate are nullified by saying too much." Robert Greenleaf

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 budbudget 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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"I don't think anybody yet has invented a past time that's as much fun, or keeps you as young, as a good job."  Fredrick Hudson Ecker, Chairman Metropolitan Life

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 Used

Labour 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 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 withcomplete project.

Latest start time - in program evaluation and review technique (PERT), latest time at which an activity must begin without holdproject.

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

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 accumulated 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 relyAccountants 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.

LILO (last In last out) - A method of valuing stock using an inventory cost flow whereby the last goods purchased are assumed to be the last goods sold so that the ending inventory consists of the last goods purchased.

Limitation - Under contract law refers to a certain limited period of time specified by law after which time any legal actions, suits, or other prosecutions will not be considered by the courts.

Limited liability – The limitation of the financial responsibility of an owner (shareholder) of a corporation to the amount of money that the shareholder has actually invested in the firm by purchasing its shares.

Limited partner - A partner in a firm who has no recognised management level authority and therefore whose liability has been restricted by the partnership agreement to the amount of their investment.

Limited partnership - A form of business organisation in which the firm has two classes of owners: general partners, who take part in managing the firm and are personally liable for all of the firm's actions and debts, and limited partners, who take no part in the management of the firm and risk only the money that they have invested.

Line authority - The power to give orders to subordinates. It contrasts with staff authority, which is the authority to advise but not commanagers are responsible for attaining the organization's goals as efficiently as possible. Production and sales managers typically exercise line authority.

Line graph - A line which shows the relationship between two variables.

Line management - The administration and management of the firms line functions. The administration of any activities which contribute directly to the firm's production.

Line managers - Managers with direct authority over subordinates in their departments; they are able to take decisions in their departmental area.

Line of best fit – A line plotted through a series of points which balances those on one side with those on the other, and best represents the slope of the points.

Line of credit - Bank's commitment to make loans to a company for a specified maximum amount for a given period of time, typiusually no commitment fee charged on the unused line. However, a compensating balance requirement often exists.

Liquid - To maintain sufficient or enough assets in the form of cash (or cash like) or any other assets that can easily be converted to cash in order to satisfy an entity's current liabilities.

Liquid asset – Refers to cash (or cash like) and any other asset that can easily sand quickly be converted/changed into cash (e.g., cash, and other easily-convertible assets).

Liquidation - Is used to refer to the process of selling of the total assets of a person or entity who is a debtor and then the use of any proceeds raised by the sale of to pay off outstanding creditors. Or 2) Declared by a court when a company is unable to meet its debts.

Liquidation value - Liquidation value is often very different from the book value because it uses the value of the entity's assets at the time of liquidation, which is often much lower than either the market or book value of those assets. The entity's liabilities will then be deducted from the stated liquidation amount or value of the total assets in order to determine the correct liquidation value of the entity

Liquidity - The ease with which an asset can be converted into cash without loss.

Liquidity preference (LP) function - The function that relates the demand for money to the rate of interest. Also called demand for money function.

Liquidity problems - Difficulties that arise because of the lack of assets that can easily be converted into cash to make immediate payments.

Liquidity preference - The demand for holding assets in the form of money.

Liquidity ratio (Economics) -The proportion of a bank's total assets held in liquid form.

Liquidity ratio (Accounting) -  Cash ratio.

Liquidity trap - Where the economy is in such a deep depression that interest rates have fallen as far as they will ever go.cannot use monetary policy through reducing interest rates to stimulate aggregate demand.  Only fiscal policy can help revive demand.

Listed company - A public company which is listed or quoted on a specific or may different stock exchange/s.

Listed investments - Refers to the investments which have been listed and/or quoted on the stock exchange.

Living standards – The amount of goods and services available per person. Living standards are limited by a country's ability to produce. Potential national output depends on the country's resources". technology and productivity,

Loan - An agreement in which the owner of specific assets (the lender) agrees to allow another entity/individual (the borrower) to have use ofspecific assets for a stipulated period of time. In return, the borrower has agreed that they will pay the lender interest and also will return the specified assets or cash at the completion of the time period agreed.

Lock-outs - Union members are temporarily laid off until they are prepared to agree to the firm's conditions.

Logarithmic scale - A scale in which equal proportional changes are shown as equal distances (for example, 1 inch may always represent doubling of a variable, whether from 3 to 6 or 50 to 100). Also called log scale or ratio scale.

Logging - The practice of recording data, in some medium, sequential input, often in a time-associated format.

Logrolling - The political practice in which a voter agrees to support another's programs in exchange for support for his or her own.

Long run - That time-period in which all factors of production can be varied.

Long-run aggregate supply - The relationship between the aggregate quantity of final goods and services (real GNP) supplied and the price level (the GNP deflator) when there is full employment - that is when unemployment is at its natural rate.

Long-run aggregate supply (LRAS) curve - A curve showing the relationship between the price level of final output and the total quantity of output supplied when all markets have fully adjusted to the existing price level; a vertical line at Y = Y.

Long-run average cost (LRAC) curve - The curve relating the least-cost method of producing any output to the level of output when all inputs can be varied.

Long-run Phillips curve - Shows the relationship between inflation and unemployment when the actual inflation rate equals the expected inflation rate.

Long-run profit maximisation - An alternative theory of the firm which assumes that managers aim to shift cost and revenue curves so as to maximise profits over some longer time period.

Long-run shut-down point - This is where the AR curve is tangential to the LRAC curve. The firm can just make normal profits. Any fall in revenue

below this level will cause a profit-maximising firm to shut down once all costs have become variable.

Long-run supply curve - The supply curve that describes the response of the quantity supplied to a change in price after adjustments have been made.

Long term - 1. long period or length of time. In securities a bond of ten years or more is considered long term. Or 2. it may refer to strategic goals and plan whereas short term refers to operational goals and plans. Or 3. in accounting  thought a period of in excess of 12 months is considered long term, e.g. long-term liabilities. or 4. in economics long term is where al factors are considered variable.

Long term debt - Monies owed for a period exceeding one year.

Long term debt to equity - Shows the relationship between the long-term capital that has been contributed from the creditors as compared to that contributed by the owners.

Long term liabilities - These usually refer to long term loans (ie. a loan which lasts for more than one year such as a mortgage).

Lorenz curve - 1. a graph showing the extent of departure from equality of income distribution. Or 2) a type of cumulative frequency curve which shows the disparity between equal distribution and actual distribution.

Loss -  Finance, is when the expenses of an entity exceed sales or revenues of the entity, i.e. items are sold for less than they cost the firm.

Loss leaders - Products with prices set deliberately below average total cost to attract customers who will then buy other; more profitable, products.

Lot - 1. a group of specific items which may purchased or sold at the same time. Or 2. when multiple different shares are held or possibly traded together. or 3. A specific parcel/piece of land.

Low-income Developing Countries - Countries with a low standard of living such that many people cannot meet even their basic needs. These include some of the most populous countries in the world covering approximately 3 billion people.

Lump sum - An agreed upon amount of money, which is to be all paid at one time in complete and final settlement of a claim or outstanding bill.

Lump-sum tax - A tax that is the same amount for every person.

 

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"Avoid having your ego so close to your position that when your position falls, your ego goes with it."  Colin Powell

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 employthe 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 supdecision 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 responsibleindividual 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 analydetermine 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 oftype of factor of production equals the value of the marginal product of that factor multiplied by the number of units of that factor that are employed.

Marginal profit - The change in the total profit that is a direct results from the sale of one more unit of an item.

Marginal propensity to consume (MPC) - The change in consumption divided by the change in disposable income that brought it about; mathematically, the rate of change of consumption with respect to disposable income.

Marginal propensity to import - The proportion of an increase in income which is spent on imports.

Marginal propensity to save (MPS) - The change in total desired saving related to the change in disposable income that brought it about.

Marginal propensity to withdraw - The proportion of an increase in national income that is withdrawn from the circular flow.

Marginal rate of income tax - The income tax rate. The rate paid on each additional dollar earned.

Marginal rate of substitution (MRS) -  (1) In consumption, the slope of an indifference curve, showing how much more of one product must be provided to compensate for the giving up of one unit of another product if the level of satisfaction is to be held constant. (2) In production, the slope of an isoquant, showing how much more of one factor of production must be used to compensate for the use of one less unit of another factor of production if production is to be held constant.

Marginal rate of technical substitution - Is the absolute value of the slope of the isoquant. It measures the rate at which the firm can give up one input for one more unit of another input, holding output constant.

Marginal revenue (MR) - The change in a firm's total revenue resulting from a change in its rate of sales by one unit. Mathematically, the rate of change of revenue with respect to output. Also called incremental revenue.

Marginal revenue product (of a factor) - The addition of revenue attributable to the last unit of a variable factor (MRP the rate of change of revenue with respect to quantity of the variable factor.

Marginal social benefit - The total value of the benefit from one additional unit of consumption. This includes the benefit to the buyer and any indirect benefits to other members of society.

Marginal social cost - The total cost of producing one additional unit of output. This includes the costs borne by the producer and any indirect costs

indirectly incurred by any other member of society. It is the marginal private cost incurred by the producer plus any marginal costs imposed as an externality on others.

Marginal tax propensity - The proportion of an increase in national income paid in tax.

Marginal tax rate - The amount of tax that a taxpayer would pay on an additional dollar of income; the fraction of an additional dollar of income that is paid in taxes.

Marginal utility - The additional satisfaction obtained by a consumer from consuming one unit more of a good or service; mathematically, the rate of change of utility with respect to consumption.

Margin analysis - The approach utilising such concepts as marginal revenue, marginal cost, and marginal profit for economic decision making

Margin call (Stocks) - A demand for an individual investor to supply additional funds that has resulted from of adverse price movement in the particular investment item.

Margin of safety - The range of output between the break-even level and the current level of output, over which a profit is made.

Markdown -  1. reduction of the original selling price. It may be due to any of several reasons, such as a decline in overall prices of goods, excessive competition, special sale, damaged merchandise, or excess supply. In markdown cancellation, the markdown is partially offset at a subincreases in the prices of goods that had been marked down below the original selling price. Or 2. dealer markdowns in securities trading.

Market - An abstract concept concerning all the arrangements that individuals have for exchanging with one another.

Market capitalisation - The value of determined by multiplying the share of shares in an issue. It is calculated by the multiplication of the number of shares multiplied by the current market price. Also known as “market cap”.

Market-clearing (or equilibrium) price -The price at which quantity demanded equals quantity supplied so that there are neither unsatisfied buyers nor unsatisfied sellers; the equilibrium price.

Market economic system - A system in which individuals own the factors of production and decide individually how to use them; a system with completely decentralized economic decision-making.

Market economy or capitalist economy or free enterprise economy - An economic system which allows the market mechanism to allocate resources.

Market failure - Failure of the unregulated market system to achieve optimal allocative efficiency or social goals. A situation in which a market leads to either an under, or over-allocation of resources to a specific economic activity. 

Market for loanable funds - The market for loans from and deposits into the banking system.

Market imperfection - Any factor which hinders the free operation of markets, such as where one firm dominates resulting in exploitation.

Marketing - The management process which identifies customer wants and anticipates their future wants.

Marketing budget - A financial plan for the marketing of a product or product range for a specified period of time.

Market loans - Short-term loans (e.g. money at call and short notice).

Market-orientated - A description applied to a business in which market research is carried out to find out consumer wants before the product is

developed and produced.

Market orientated pricing - Methods of pricing bas, upon the pricing conditions in the market at which a product is aimed. Market orientated supply-side policies - Polices to increase aggregate supply by freeing up the market.

Market orientation - An approach to business which places the requirements of consumers at the centre of the decision making process.

Market position - The strength (relative strength) of an firm or a particular product within a specific target market. Investment, refers to the amount and/or breadth and depth of an individual holding within the identified sectors of the specific market.

Market positioning - The view consumers have about the quality, value for money and image of a product relative to those of its competitors.

Market power – Where a firm is said to be a price setter. Market power benefits the powerful at the expense of others. When firms have market power over prices, they can use this to raise prices and profits above the perfectly competitive level. Other things being equal, the firm will gain at the expense of the consumer. Similarly, if consumers or workers have market power, they can use this to their own benefit.

Market rate of interest - The actual interest rate in effect at a given moment.

Market research - Finds out consumer wants before a product is developed and produced.

Market sector - The portion of an economy in which commodities are bought and sold and in which producers

Market segmentation - Breaking down a market into sub groups which share similar characteristics.

Market share - The proportion of total sales in a particular market for which one or more firms are responsible. It is usually expressed as a percentage.

Market structure – All features of a market that affect the behaviour and performance of firms in that market, such as the number and size of sellers, the extent of knowledge about one another's actions, the degree of freedom of entry, and the degree of product differentiation.

Market value - The price at which sellers and buyers trade items in the open marketplace.

Marketable security - A readily tradable equity or debt security with quoted prices; to include commercial paper and Treasury bills. It is a "close to cash" asset which is classified as a current asset.

Marketing - The management process involved in identifying, anticipating and satisfying consumer requirements profitably.

Marketing audit - An analysis of the internal and external factors which may affect a business's performance.

Marketing budget - A plan agreed in advance of the funds to be used for marketing and how they will be used.

Marketing lever - Anything that provides positional advantage or power to act effectively: Potential levers may be price, brand name, corporate image, broad distribution, effective advertising, etc.

Marketing mix - The elements of a business's marketing that are designed to meet the needs of its customers. The four elements are often called the 4 'Ps' - price, product, promotion and place.

Marketing objectives - Marketing goals that businesses try to achieve.

Marketing plan – A detailed plan of the companies  marketing at present, what it wants it to be in the future and how it intends to change it

Marketing planning – The process by which marketing  activities are identified and decided upon.

Marketing research – The collection, collation and analysis of data relating to marketing and the consumption of goods and services.

Marketing strategies - Approaches to marketing taken by a business which enable it to achieve its objectives.

Mark-up - that part of a price which seeks to provide business with profit as opposed to covering its costs. It is used in cost plus pricing. Or 2) A profit margin added to average cost to arrive at price.

Marshalling - To prepare something for action and/or use, e.g., to marshal ones resources.

Mass production - Flow production.

Master budget - The plan of activities expressed in monetary terms of the assets, equities, revenues, and costs that will be involved in carrying out the plans. Simply put, a master budget is a set of projected or planned financial statements.

Matching - Accounting, is the matching of purchases orders and the delivery notes to invoices prior to the payment being made.

Matching principle - A method of analysing the sales and expenses which make up those sales to a particular period (e.g.. if a builder sells a house then the builder will tie in all the raw materials and expenses incurred in building and selling the house to one period - usually in order to see how much profit was made).

Material - 1. raw material, direct or indirect. An example is steel to make a car. Usually accounted for separately by a debit to materials (stores conand a credit to accounts payable or cash. When materials are transferred to work-in-process, inventory is credited. Or 2. relatively important and significant in dollar amounts.

Material control - Refers to the particular department that is responsible for the control of any specified materials within the manufacturing environment of a firm.

Materials price variance (MPV) - Difference between what is paid fora given quantity of materials and what should have been paid, multiactual quantity of materials used.

Materials quantity variance (MQV) - Difference between the actual quantity of materials used in production and the standard quantity of materials allowed for actual production, multiplied by the standard price per unit.

Materials variance (MV) - Difference between the actual and standard costs of materials.

Materiality - The importance of an event or other information that has an influence on a company's share price.

Materiality principle - Accountants should (GAAP) generally accepted accounting principles unless to do so would be to expensive and/or difficult, and further to this where it makes no real or material difference if the rules are not followed. If a rule is to be ignored, the principle states that the firms net income must not be in any way significantly affected. The principle also states the reader of the financial statements ability to judge the statements must not be impaired.

Materials - is the physical items (cost of) used in the manufacture of  other products.  Under cost accounting these are often separated into direct material (that which goes directly into the item) and indirect material (that which is used in maintaining the manufacturing environment). Indirect materials are considered to bean overhead. The term material is mainly used to refer to the direct materials.

Matrix organisation - Where a firm superimposes a interdisciplinary team or group of project specialists on top of a functional organisational design.

Maturity date - Is the date at which a financial asset is converted into a money or other assets.

Maturity value - The (usually projected) value of an intangible asset on the date it becomes due.

Maximax - The strategy of choosing the policy that has the best possible outcome.

Maximin - The strategy of choosing the policy whose worst possible outcome is the least bad.

Maximin criterion - The claim that the government should aim to maximize the well-being of the worst-off person in society.

Maximum price - A price ceiling set by the government or some other agency. The price is not allowed to rise above this level (although it is allowed to fall below it).

Mean (or arithmetic mean) - The sum of the values of each of the members of the sample divided by the total number in the sample.

Mean deviation - The average deviation of all figures from the mean, which ignores plus or minus signs in its calculation.

Means - The methods of achieving one's goals.

Means-tested benefits - Benefits whose amount depends on the recipient's income or assets.

Median - The value within any set of data at which half of the observations are greater and half are less. Thus half of a population earns income above the median income, and half earns income below the median.

Median voter theorem - A mathematical result showing that if voters are choosing a point along a line and each voter wants the point closest to his most preferred point, then majority rule will pick the most preferred point of the median voter.

Media plan - The plan that gives the details of how the media is to be used for a specific advertising campaign.  This would include costs, the running dates, target markets, expected reach, how frequent, the rationales, and different strategies to be employed.

Medium of communication - The method used to send a message.

Medium of Exchange - Anything that is generally acceptable in exchange of goods and services.

Memo billing (aka memo invoicing) - Goods ordered and invoiced on approval. There is no obligation to buy.

Memo entry -  Explanatory or supplemental information given on a reporting schedule. It is often used for the clarification of otherwise complex accounting entries.

Memorandum accounts - A name for the accounts held in a subsidiary ledger. E.g.. the accounts in a sales ledger.

Menu costs of inflation - The costs associated wit having to adjust the price lists or labels.

MER (Management Expense Ratio) - The proportion of the assets under management that were used to run a mutual fund.

Merchandise - The commodities that are being offered for sale.  May also mean to engage in the trade of commodities.

Merchandise exports - The goods a country produces and sells to other countries, they account for most of a developing country's exports.

Merger - The purchase of either the physical assets or the controlling share of ownership of one firm by another. In a horizontal merger, both firms are in the same line of business; in a vertical merger, one firm is a supplier of the other; if the two are in unrelated industries, it is a conglomerate merger.

Merit good - A good that is recognised as socially desirable. As it has positive externalities it will be underprovided in a free market.

Message - The information or instructions being passed by the sender to the receiver.

Microeconomic policy - Activities of governments designed to alter resource allocation and/or income distribution.

Microeconomics - The study of the allocation of resources and the distribution of income as they are affected bythe workings of the price system and by government policies.

Middle-income developing countries - Countries with. a slightly higher standard of living than low -income countries but in which many people still cannot meet their basic needs. Over a billion people live in such countries.

Minimum efficient scale (MES) - The smallest output at which long run average cost reaches its minimum be cause all available economies of scale in production and/or distribution have been realised. Also called minimum optimal scale.

Minimum payment - The minimum amount stipulated under the credit agreement that an individual or entity must pay (often monthly)

Minimum price - A price floor set by the government or some other agency. The price is not allowed to fall below this level (although it is allowed to rise above it).

Minimum reserve ratio - A minimum ratio of cash (or other specified liquid assets) to deposit (either total or selected) that the central bank requires banks to hold. 

Minimum wage law - A regulation making it illegal to hire labour below a specified wage.

Minimum wages - Legally specified minimum rate of pay for labour in covered occupations.

Minority interest - A minority interest represents a minority of shares not held by the holding company of a subsidiary. It means that the subsidiary is not wholly owned by the holding company. The minority shareholdings are shown in the holding company accounts as long term liabilities.

Misappropriation - The non-violent but criminal taking of some property. It may Includes theft, embezzlement, and fraud. Often it is used to refer to an employee taking the property of their employer.

Miscellaneous expenses - Incidental expense of a business, not classified as manufacturing, selling, or general and administrative expenses. It is presented on an income statement after operating income. Miscellaneous expenses are immaterial.

Miscellaneous income - That income that a firm earns that is not directly related to the main operations of the firm from the sale of its products and services e.g. bank interest

Misery index - An index that tracks economic conditions including inflation and unemployment.

Mixed economy - An economy in which some decisions about the allocation of resources are made by firms and households and some by the government.

Mixed market economy - A market economy where there is some government intervention.

Mode – The most commonly occurring item in a set of data.

Model (of competition) -  A simplified theory to explain the types of competition between businesses.

Models, or Theories - Simplified representations of the real world, used to better understand the real world or to make predictions.

Modern team management practices - Is usually referring to the process of organising large groups in smaller teams which work on the individual parts of a project simultaneously. 

Monetary  - Anything having to do with or pertaining to money,money supply,  money creation, and the government's management of the money supply.

Monetary assets - Are measured at the assets collectible amount. Non-monetary assets though are measured at the assets historical costs.

Monetary neutrality - The proposition that changes in the money supply do not affect real variables.

Monetarists - Economists who stress monetary causes of cyclical fluctuations and inflation and believe that an active stabilisation policy is not normally required.

Monetary base - Notes and coin outside the central bank.

Monetary equilibrium - A situation in which the demand for money equals the supply of money.

Monetary policy - An attempt to influence the economy by operating on such monetary variables as the quantity of money and the rate of interest.

Monetary union - The proposed replacement of the currencies of the EU member countries by a single EU currency, an arrangement which would require a European central bank to regulate the supply of the new European currency.

Monetary unit - The unit used to measure economic activity (e.g., U.S. $).

Monetary unit assumption - Assumes that values can be relevantly measured in current monetary units.

Money - A medium of exchange that can also serve as a store of value, a unit of account and a standard of deferred payment.

Money illusion - When people believe that a money wage or price increase represents a real increase - in other words, they ignore or underinflation. Money income - Income measured in monetary units per period of time.

Money market - The market for short-term loans and deposits.

Money measurement principle (concept) - States that all business transactions should be expressed in their money terms, i.e. If something has no monetary value it should not be included in the firms accounts.

Money multiplier - The number of times greater the expansion of money supply is than the expansion of the monetary base that caused it.

Money substitute - Something that serves as a temporary medium of exchange but is not a store of value.

Money supply – The total quantity of money in an economy at a point in time. Also called the supply of money.

Monitor - To keep under surveillance or keep an eye on.

Monopolist  - The single supplier that comprises the entire industry.

Monopolistic competition - 1. market structure of an industry in which there are many firms and freedom of entry and exit but in which each firm has a product somewhat differentiated from the others, giving it some control over its price. Or 2. any industry in which more than one firm sells differentiated products.

Monopoly - A market structure where there is one firm in the industry.

Monopsony - A market with a single buyer or employer.

Moral hazard - A situation in which an individual or a firm takes advantage of special knowledge while engaging in socially uneconomic behavior.

Moratorium – The legally authorised postponement prior to a particular obligation being discharged.

Mortgage - A conditional conveyance of a specific piece of property which has been used as security or collateral for of a loan. e.g. A mortgage on a home loan.

Mortgage bond - A bond where the issuer has given the bondholder/s a claim against specific pledged assets.

Motivated - Being encouraged to do something.

Motivation - Why employees want to work effectively for the business.

Motivators - Those things that can lead to workers being satisfied.

MOU - Memorandum of Understanding.

Moving average - A way of smoothing out (i.e. removing the highs and lows) of a series of figures (usually shown as a graph). If you have, say, 12 months of sales figures and you decide on a moving average period of 3 months, you would add three months together, divide that by three and end up with an average for each month of the three month period. You would then plot that single figure in place of the original monthly points on your graph. A moving average is useful for displaying trends.

Moving average inventory method - A method used under  a perpetual inventory system, which requires that a new weighted average cost must be calculated after each purchase

Multi-national companies (MNCs) also Trans national companies (TNCs) - Companies with headquarters in one country but production units in one or more foreign countries.

Multiple-step income statement (aka Multi-step) - An income statement (aka Profit and Loss ) which has had its revenue section split up into sub-sections in order to give a more detailed view of its sales operations. Example: a company sells services and goods. The statement could show revenue from services and associated costs of those revenues at the start of the revenue section, then show goods sold and cost of goods sold underneath. The two sections totals can then be amalgamated at the end to show overall sales (or gross profit).

Multiplier - The ratio of the change in national income to the change in autonomous expenditure that brought it about.

Multiplier effect - An initial increase in aggregate demand of $xm leads to an eventual rise in national income that is greater than

Multi-skilling - The processes of enhancing the skills of employees.

Mutual agency - The right of all the partners in a partnership to act as the agents for the partnerships normal business activities, with the authority to bind the partnership it to business agreements which have been entered into.

Mutual fund - An institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds.

Mutual organisation - Businesses owned by members who are customers, rather than shareholders.

MYOB (Mind Your Own Business) - A computerized accounting package for small to medium sized enterprises.

 

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"You can buy a person's hands but you can't buy his heart. His heart is where his enthusiasm, his loyalty is."         Stephen Covey

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

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 estabreporting, 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 - The value of expenses less sales assuming that the expenses are greater (ie. if the profit and loss account shows a debit balance).

Net of tax - The price less any tax. e.g.. if you sold some goods for $12 inclusive of $2 sales tax, then the 'net of tax' price would be $10

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 - The value of sales less expenses assuming that the sales are greater (ie. if the profit and loss account shows a credit balance).

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.

Network firms - Is a term used when the firms belong to a larger structure that is aimed at cooperation and is clearly aimed at profit or cost sharing, or shares common ownership, control or management, common quality control policies and procedures, common business strategy, the use of a common brand-name or a significant part of professional resources.

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' equity

Neutrality – 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 - A set of accounts held in the nominal ledger. They are termed 'nominal' because they don't usually relate to an individual person. The accounts which make up a Profit and Loss account are nominal accounts (as is the Profit and Loss account itself), whereas an account opened for a specific customer is usually held in a subsidiary ledger (the sales ledger in this case) and these are referred to as personal accounts.

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 which holds all the nominal accounts of a business. Where the business uses a subsidiary ledger like the sales ledger to hold customer details, the nominal ledger will usually include a control account to show the total balance of the subsidiary ledger (a control account can be termed 'nominal' because it doesn't relate to a specific person). 

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 itor 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 advertising.

Non profit accounting - Accounting policies, procedures, and techniques employed by non profit organisations.

Non profit organisation - An organisation that is not setup to make a profit but to provide a service such as a charity or sports club.

Nonrecurring - Is an income statement item that is infrequent in occurrence or unusual in nature.

Non renewable resources - Any productive resource that is available as a fixed stock that cannot be replaced once it is used.

Non rivalry - Where the consumption of a good or service by one person will not prevent others from enjoying it.

Non strategic behaviour - Behaviour that does not take account of the reactions of rivals to one's own behaviour.

Non tariff barriers (NTBs) - Restrictions other than tariffs designed to reduce the flow of imported goods.

Normal activity – The level of production that will satisfy average demand by consumers over a time span (often five years) that includes trend, seasonal, and cyclical factors. It is a long-run average expected activity that is a basis for developing the factory overhead application rate.

Normal costs - 1. the annual average of product costs, not actual product costs that are affected by month-to-month fluctuations in production volume and by erratic or seasonal behaviour of many overhead costs. Typical examples of erratic behaviour include repairs and maintenance, fuel, air-conditioning costs, vacation and holiday pay, and the employer's share of Social Security taxes. All the costs that distort monthly overhead rates are collected in the annual overhead pool along with the kinds of overhead that do have uniform behaviour patterns. In summary, normal costs are the sum of actual direct materials, actual direct labour, and applied factory overhead. Or 2. the pension plan costs incurred during an accounting period for services performed during the period.

Normal distribution - A naturally occurring frequency distribution where many of the values cluster around the mean, but where there are a few high and low values away from the mean.

Normal distribution curve – A graphical representation of the normal distribution.

Normal good - A good (or service) for which demand increases as income increases.

Normalise - This term can be applied to many aspects of accounting. It means to average or smooth out a set of figures so they are more consistent with the general trend of the business. This is usually done using a Moving average .

Normal loss - This is the loss that can be considered under normal efficient operating procedures in the production process e.g. the loss of liquid through evaporation in chemical production. It is an inevitable consequence of the production process  under efficient operation conditions and is therefore  considered to be unavoidable. Losses greater  or less are refereed to as abnormal gains or losses and may have resulted from reduced or improved efficiency.

Normal profit - The opportunity cost of capital and risk taking just necessary to keep the owners in the industry. Normal profits are usually included in what economists (but not businesspersons) call total costs.

Normal rate of return - The rate of return (after taking risks into account) that could be earned elsewhere.

Normal spoilage – The product deterioration that is expected even under the best operating conditions. It is inherent and unavoidable in the short run. Costs of normal spoilage are allocated to the remaining good units in inventory.

Normative statement - A statement about what ought to be, in an ethical sense, as opposed to what actually is, in a positive sensean opinion that cannot be verified by observation.

Notes to the financial statement – This is a detailed set of notes that are submitted with the financial statements. These notes explain specific points in relation to parts or items on the statements.

No-strike agreements - Trade unions and management agree to have pay disputes settled by an independent arbitrator instead of tiling strike action.

Numerical flexibility - Where employers can change the size of their workforce as their labour requirements change.

NPV - Net Present Value. 

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"Recently, I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. No, I replied, I just spent

$600,000 training him. Why would I want somebody to hire his experience?"  Thomas J. Watson

Object 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 sub

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 decishould 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 deterithrough 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, 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 tradersfederal 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.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.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 cashthe 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.

Opening the books - Every time a business closes the books for a year, it opens a new set. The new set of books will be empty, therefore the balances from the last balance sheet must be copied into them (via journal entries) so that the business is ready to start the new year.

Operating activities - The business activities that involve the cash effects of transactions and other events that enter into the determinaincome.

Operating allowance –  Is the money or allowance advanced to carry out specific operations.

Operating assets – Refers to the long-term, non-current, assets acquired for the business to use in its activates rather than for resale e.g.plant, and equipment.

Operating budget – Is the budget that relates on the budgeted income (profit and loss) statement and the supporting documentation and schedules.operating budget embraces the impacts of operating decisions. It contains forecasts of sales, net income, the cost of goods sold, selling and administrative expenses, and other expenses. The cornerstone of an operational budget is forecasted sales. Therefore, the SALES BUDGET is the basic building block for the operational budget. Once the sales budget is prepared, then the PRODUCTION BUDGET can be formulated. The operational budget also consists of the ending inventory budget, direct material budget, direct labor budget, factory overhead budget, selling and administrative budget, and budgeted income statement.

Operating cycle – Is the average time period between buying inventory and receiving cash proceeds from its eventual sale.

Operating decisions - The decisions that involve routine tasks, such as planning production and sales, scheduling personnel and equipment, adjusting production rates, and controlling the quality of production.

Operating expenditures – Refers to the amount used over a specific period of time directly used to support the day-to-day operations of a business such as wages, office supplies and such like.

Operating expenses – Are the costs associated with the selling and administrative activities of the company.

Operating income – Refers to the revenue minus cost of sales and other related operating expenses that apply to the day-to-day operational activities of the firm. It does not include  items such as interest income, interest expense ,extraordinary items or taxes.

Operating loss - The amount by which the cost of goods sold plus operating expenses exceeds operating revenues.

Operating margin – Refers to the ratio of a firms operating income as compared to its sales revenue.

Operating profit – Refers to the gross profit less the firms operating expenses.

Operating profit to sales ratio – This ratio discounts the effect of differing tax rates and other benefits to show a more accurate or realistic situation of the returns from the firm.

Operating ratio – Is calculated by company operating expenses divided by its operating revenues. It is a measure of a firm's operating efficiency

Operating revenue – Is the net sales plus other regular income sources related to the normal business operations carried out by the entity.

Operating risk – Is the risk caused by fluctuations of operating income. Sometimes this is called business risk.

Operating system - Is computer program that allows users to enter and run their software packages i.e. Windows XP.

Operational audit – Is the evaluation made of management's performance and conformity with policies and budgets. The organization and its operations are analysed, including appraisal of structure, controls, procedures, and processes.

Operational gearing -  The higher is the percentage of fixed costs in relation to the variable operating costs, the higher is the operational gearing of a firm. Therefore the higher the risk.

Operational decisions - Lower level, often administrative decisions with little or no risk.

Operational research - A logical and scientific approach to decision making which uses calculations.

Opportunism – The legal behaviour of self-interest seeking whereby party who has information that another other party does not takes advantage of this information. This is different from insider trading which is illegal.

Opportunistic behaviour – Refers to when party takes advantage of knowledge that the another party does not have, in order to further their interests, and fails to tell the other such information.

Opportunity cost - The cost of using resources for a certain purpose, measured by the benefit given up by not using them in their best alternative use. The best alternative forgone.

Opportunity cost approach – (Management) Refers to the decision method in which the concept of opportunity cost  is applied to solve a short-term, non routine decision problem. Opportunity cost represents the net benefit lost by rejecting some alternative course of action. Its significance in decision making is that the best decision is always sought, since it considers the cost of the best available alternative not taken.

Optimal currency area - The optimal size of a currency area is the one that maximises the benefits from having a single currency relative to the costs. If the area were increased or decreased in size, the costs would rise relative to the benefits.

Optimal price - The profit maximising price. Where marginal revenue is equal to marginal cost.

Optimal solution -  The most profitable or the least costly solution that simultaneously satisfies all the constraints.

Optimism - To expect the best in the issue under consideration.

Option - 1. ability or right to choose a certain alternative. Or 2. right to buy/sell something at a specified price within a specified period of time. If the right is not exercised within the specified time, the option expires.

Ordering costs - Are all costs associated with preparing a purchase order. These include the cost of preparing a purchase invoice, teleof purchasing clerks, and stationery.

Order of performance – Refers to where fixed assets are listed in the balance sheet of a firm in a descending order based on their permanence (i.e. land, buildings, then equipment etc.).

Ordinary course of business – Refers to the operations of a business that could be normally expected to occur under their day to day operations.

Ordinary income  - 1. earnings attributable to the nominal and recurring business operations of the entity. Or 2. in taxation, income on the sale of an investment held for 6 months or less.

Ordinary share - This is a type of share issued by a limited company. It carries the highest risk but usually attracts the highest rewards.

Organic growth - Growth achieved through the expansion of current business activities.

Organisational structure - The levels of management and division of responsibilities within an organisation.

Organisation chart - A diagram which illustrates the structure of an organisation.

Organisation costs – Refers to the amounts of money spent in beginning a business organisation.

Organisation theory - A set of hypotheses that predicts that the substance of a firm's decisions is affected by its size and form of organisation.

Original book of entry - A book which contains the details of the day to day transactions of a business (see Journal ).

Original entry - The recording a business transaction in a journal.

Other assets -  Refers to the balance sheet category for minor assets not classified under the typical headings (e.g., current assets, intangible assets, and long-term investments). This type of asset may be immaterial in amount relative to total assets. An example is obsolete machinery to be sold.

Other income – Refers to income gained from activities that are not part of the businesses normal operations.

Out of pocket - The actual cash outlays made during the period for wages, amenities, advertising, and other operating expenses.

Output - The goods or services resulting from production. Output depends on the amount of resources and how they are 1 Different amounts and combinations of inputs will lead to different amounts of output. If output is to be produced efficiently, then inputs should be combined in the optimum proportions

Output gap - Potential national income minus actual national income. Also called the GDP gap.

Outsiders - Those out of work or employed on, a casual, part-time or short-term basis, who have little or no power to influence wages or employment.

Outsource -  Is the process of obtaining items or services from a supplier external to the business organisation.  These activities may have previously been done within the organisation.

Outsourcing - The contracting out of work to of the businesses that might otherwise have been performed within the organisation.

Outstanding - The amount owed as a debt, example: outstanding bills.

Outstanding shares – Refers to the number  or amount of shares which currently are owned by all a company's investors.may  have repurchased or possibly retired are not counted as outstanding stock.

Overdraft - 1. a draft that is greater than the credit balance of the account. Or 2. a facility of revolving credit (usually with a bank) enabling an account holder to write cheques over their account balance for an agreed period of time.  A form of short term finance.

Overhaul - To repair and rebuild or to make repairs and/or adjustments to something.

Overheads -  These are the costs involved in running a business. They consist entirely of expense accounts (eg. rent, insurance, petrol, staff wages etc.).

Overhead absorption - Is used to describe the transfer of the value from an asset which is fixed  such as a machine to the final item being produced.This is the that indirect costs of a firm can be assigned or attributed to the products/services produced.

Overhead budget – Is a budget which shows the expected cost of all production costs other than direct materials and direct labour.

Overhead rate - Calculated by totalling the relevant expenses excluding labour and materials, and dividing this number by the total cost of labour and other materials.

Overtrading - A situation where a business attempts to raise production without increasing the size of its working capital.

Overstated - When something is that is being represented as of greater value than is really true or the items reasonable value.

Overtime - Paid work for working beyond normal working hours.

Overtime ban - A form of industrial action when employees refuse to work longer than their normal working hours

Own brands – Products which have the brand name of their retailer on them.

Owners equity - The interest of the owners in the assets of the business represented by capital contributions and retained earnings.

 

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"If we could sell our experiences for what they cost us, we'd all be millionaires."  Abigail Van Buren

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. 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. Orof 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 particularinvestment 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) - The name given to the income tax system where an employee's tax is deducted before the wages are paid.

Pareto optimum - An economic theory by Vilfredo Pareto. It states that the optimum allocation of a society's resources will not happen whilst at least one person thinks he is better off and where others perceive themselves to be no worse.

Pay on delivery (COD) - The buyer pays the cost of the goods (to the carrier) on receipt of 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 - An equation which gives you a very rough estimate as to how much confidence there is in a company's shares (the higher it is the more confidence). The equation is: current share price multiplied by earnings and divided by the number of shares . 'Earnings' means the last published net profit of the company.

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.

Periodic inventory - A Periodic Inventory is one whose balance is updated on a periodic basis, ie. every week/month/year. See Inventory.

Peripherals – Refers to the auxiliary equipment used in computer systems.

Permanent account - An account that is included on the Balance Sheet, e.g. Accounts Receivable and Accounts Payable.

Permanent capital – Share capital which is never repaid by the company.

Permanent employment - Employment for an indefinite period of time.

Permanent income - The maximum amount that a household can consume per year into the indefinite future without reducing its wealth. Also called lifetime income.

Permanent-income theory - A hypothesis that relates actual consumption to permanent income rather than (as in the original Keynesian theory) to current income.

Perpetual inventory - A Perpetual Inventory is one whose balance is updated after each and every transaction. See Inventory .

Perpetual succession - A legal distinctions between what constitutes a business and what constitutes a company. A company has perpetual succession which means that any change in the company's membership does not have any affect the legal existence of that company whereas a business which is not a company does not enjoy this perpetual succession relationship. For example, in a partnership, a change in the membership (one of the partners dies etc) affects the legal stance of the partnership.

Perpetuity – An annuity that goes on indefinitely.

Persistent earnings – Refers to the level of earnings, from one accounting period to the next accounting period, that continually recure.

Personal accounts - These are the accounts of a business's customers and suppliers. They are usually held in the Sales and Purchase Ledgers.

Personal equity – Refers to that percentage of equity that is held to an individuals own benefit or invested as a part of the range of assets of the legal entity.

Personal financial planning – The field of financial planning for individuals.  It involves (I) analysing a client's personal finances; and (2) recommending how to improve the client's financial condition.

Personal income - Income earned by, or paid to, individuals before allowance for personal income taxes on that Income.

Personal loan - A loan for a short term period of time that is given based on the personal credit worthiness of the individual borrower.

Person specification - A profile of the type of person needed to do a job.

Persuasive advertising - Advertising which seeks to  influence and persuade consumers to buy a product

PEST analysis - An analysis of the political, economic, social and technological factors affecting a business.

Petty cash - A small amount of money held in reserve (normally used to purchase items of small value where a cheque or other form of payment is not suitable).

Petty cash slip - A document used to record petty cash payments where an original receipt was not obtained (sometimes called a petty cash voucher).

Phantom profit – Is used to refer to a hypothetical or non existent profit, i.e., no actual cash flow has been generated. Appreciation on any given asset, e.g. stock, may be called a phantom profit.  This is the situation until the asset is then sold, at which time it generates a cash flow.

Phillips curve - Originally, a relationship between the percentage of the labour force unemployed and the rate of change of money wages. Now often drawn as a relationship between the percentage of the labour force employed and the rate of price inflation or between actual national income and the rate of price inflation. Physical capital - The stock of equipment and structures that are used to produce goods and services.

Physical inventory (stock-take) - Is determining the quantity of inventory on hand through an inventory count (i.e., quantity, weight).

Picketing - When people on strike gather at the entrance to the, firm and attempt to persuade workers or delivery vehicles from entering.

Pictograph or pictogram - A chart where numerical data is represented by pictorial symbols.

Piece rates - A payment system where employees are paid an agreed rate for every item produced.

Pie chart - A chart which consists of a circle where the data components are represented by the segments.

Pigovian tax - A tax enacted to correct the effects of a negative externality.

Placement –  When one bank depositing (sells) Eurodollars with/to another different bank.  This is said to be the bank making a placement.

Planned economy or command economy – An economics system in which the state is responsible for resource allocation.

Planning - Planning is the process of deciding, in advance, what is to be done and how it is to be done.

Planning permission - When a government body allows a business to build a factory or office in a particular location.

Plant asset - A non-current physical (real) asset that is used by the firm in its manufacturing activities.

Plant economies of scale - Economies of scale that arise because of the large size of the factory.

Pledge 1. the transfer or commitment of a specific asset or set of assets being used as collateral to secure payment relating to a debt obligation.example, when a firm/individual pledges securities to a lender for a loan that is then secured by the owner of those pledged securities.and/or the placing of some personal property/assets as security for a specific debt or other specific obligation with another person is called a pledgee. The pledgee then has the power to sell the specific property or asset if the debt is subsequently not paid in full. When the debt is paid in full, the right to the possession of the property or asset return to the original pledgor. Or, 3. a pledge may be a oral or written agreement to contribute cash or assets to

some activity.

Pledged asset – Is when the asset has been used as a form of collateral in order to secure a debt or other contract. The lender takes possession of the pledged asset, but ownership does not change hands unless a default on the loan occurs e.g. a pawn shop.

Point elasticity - A measure of the responsiveness of quantity to price at a particular point on the demand curve.

Point of diminishing average productivity - The level of output at which average product reaches a maximum.

Point of diminishing marginal productivity - The level of output at which marginal product reaches a maximum.

Point of sale (POS) - The place where the product is being sold, e.g.. a shop.

Point of sale promotion- A promotion at any point where a consumer buys a product.

Policy instruments - The variables that the government can control directly to achieve its policy objectives.

Policy variables - The variables that the government seeks to control, such as real national income and the price level.

Poll tax - A lump-sum tax per head of the population. Since it is a fixed amount, it has a marginal rate of zero with respect to both income and wealth.

Pool - 1. a group of different individuals/entities that have organised for a common and purpose or any other communal grouping of funds. Or 2. in capital budgeting, when investment projects are to be out of a pool of bonds, common stock, and preferred stock at a weighted-average cost. or 3. in insurance, it refers to when a group of different insurers share the risk premium. Or 4. in investments, a pool may mean a combination of funds which is for the benefit or support of some common project. Or 5. when a group of investors use their combined level of influence in order to manipulate the price of something.

Population - Rate of Natural Increase - Birth rate minus death rate expressed as a percentage, ignoring any migration.

Population doubling time - The number of years it will take for a population to double assuming a constant rate of increase.

Population growth rate -The increase in a country's population in a year expressed as percentage of the population at the beginning of the year. It reflects the difference between birth rate and death rate plus net migration. The average of several years is more representative than any single year.

Population per physician - The population of a country divided by the number of doctors. It takes no account of numbers of nurses or medical technicians.

Population structure - The breakdown of the people in a country into groups based on differences in age, gender. geographical location etc.

Portfolio - 1. the act of combining securities to reduce risk by diversification. Or 2. is a term used to describe all the different investments that an individual or entity does own. A diversified portfolio is one that contains a range of different investments.

Portfolio balance - The balance of assets, according to their liquidity, that people choose to hold in their portfolios.

Portfolio investment - In balance-of-payments accounting, foreign investment in bonds or a minority holding of shares that does not involve legal control. See also direct investment.

Position - The financial condition of an entity.

Positive action – Measures geared towards improving employment opportunities and training of groups that are under-represented at work.

Positive statement - A statement about what actually is (was or will be), as opposed to what ought to be. An expression that can be verified by observation.

Post - Is the transfer of the accounting entries from a specific journal (book of first entry) into the correct ledger book.  This is done in a chronological order in accordance to when the entry was generated.

Post closing trial balance - This is a trial balance prepared after the balance sheet has been drawn up, and only includes balance sheet accounts.

Post date - Is when a date from the future is paced on a cheque or other document.  This means the document does not become valid until that date e.g. a post dated cheque can not be cashed until on or after the date on the cheque.

Posting - The copying of entries from the journals to the ledgers.

Postulate - A proposition which is considered as true in order to give a basis for further logical reasoning.

Potential growth - The percentage annual increase in the capacity of the economy to produce.

Potential income (Y) - The real gross domestic product that the economy could produce if its productive resources were fully employed at their normal levels of utilisation. Also called potential GDP or high employment income.

Potential output - The output that could be produced in the economy if there were a full employment of resources (including labour).

Poverty gap - The number of dollars per year required to raise the income of everyone below the poverty level to that level.

Poverty level - The official government estimate of the annual family income that is required to maintain a minimum adequate standard of living.

Poverty line - An absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty.

 Poverty rate - The percentage of the population whose family income falls below an absolute level called the poverty line

Poverty trap - Where poor people are discouraged from working or getting a better job because any extra income they earn will be largely taken away in taxes and lost benefits.

PPI - Producer price index.

PR – Public relations

Practical capacity - Is the highest activity level at which the factory can operate with an acceptable degree of efficiency, taking into conunavoidable losses of productive time (i.e., vacations, holidays, repairs to equipment); also called maximum practical capacity.

Predatory pricing - Where a firm sets its prices below average cost in order to drive competitors out of business.

Precautionary balances - Money balances held for protection against the uncertainty of the timing of cash flows.

Precious metals - Are valuable commodities (e.g., gold and silver) representing a private store of value. Precious metals are liquid, have intermarkets, and provide a hedge against inflation, currency risk, and unfavourable political and economic developments.

Pre-emptive right – Refers to the right of a current share holder to maintain the proportional ownership they have in the company by buying any new

share issue on a pro rata basis prior to the shares being released to the public.

Preference shares - This is a type of share issued by a limited company. It carries a medium risk but has the advantage over ordinary shares in that preference shareholders get the first slice of the dividend 'pie' (but usually at a fixed rate).

Preferential trading arrangements - A trade agreement whereby trade between the signatories is freer than trade with the rest of the world.

Preferred creditor – Is  a creditor that has priority over another creditor when the company becomes bankrupt.

Preferred stock -  Is non-voting capital stock which normally pays a dividend at a specific stated rate and also has a preferential position over common stock with regard to the payment of dividends and/or any liquidation of the firms assets.

Premium on capital stock – Refers to the excess monies that are received higher then the par value of the stock issued.

Premium price - A price above the average charged by businesses in the market.

Prepaid expenses – Refers to amounts that are paid in prior to the good or service being received to a supplier or creditor for goods & services. Prepaid Expenses is classified as a current asset on the balance sheet of the firm. This is because the item has already been paid for and someone owes a good or service for which has already prepaid.

Pre-payments - One or more accounts set up to account for money paid in advance (eg. insurance, where part of the premium applies to the current financial year, and the remainder to the following year).

Prerequisite - An event or action that has to be satisfied before the next event or action can occur.

Present value (PV) – The value today of a sum of money in the future. It is the discounted value of an individual payment or possibly a stream or flow of payments to be received at sometime in the future, applying a specific interest or specific discount rate e.g. inflation rate. Present value is the representation of future cash flows expressed in the value of today's dollar amount.

Pressure groups - Groups of people without direct political power who seek to influence decision makers in politics. business and society.

Price - Price is most often given by the amount of money an item or service would bring if or when it is sold.

Price benchmark - A price that is typically used. Firms, when raising prices, will usually raise them from one benchmark to another.

Price consumption line - A line connecting the points of tangency between a set of indifference curves and a set of budget lines where one absolute price is fixed and the other varies, money income being held constant.

Price controls - Government policies that attempt to hold the price in a particular market at a disequilibrium value.

Price ceiling – Usually refers to a government imposed limit on how high a price can be charged on a product.

Price change accounting - Accounting for the value of assets, stock, raw materials etc. by their current market value instead of the more traditional Historic Cost .

Price control - Government regulation of the market prices such that a legal maximum price is specified.

Price discrimination - The practice of charging a higher price to some customers than to others for an identical good or service i.e. there are no differences in cost as in price differentiation.

Price earning multiple - The price-earnings ratio (P/E) : the price of a company's share of common stock at the current market price divided by the company's earnings per share. If this is multiplied by the company's net income is one way to value a business.

Price earnings ratio (PER) – Relates the earnings per share to its market price and reflects the return for buying shares.

Price elasticity of demand - The percentage (or proportionate) change -in quantity demanded divided by the percentage (or proportionate) change in price.

Price elasticity of supply - The percentage (or proportionate) change in quantity supplied divided by the percentage (or proportionate) change in price

Price fixing - A practice which is often illegal, where companies that should be competing agree, formally or informally, to restrict and/or control the price often within a specified price range.

Price floor - A government imposed minimum permissible price at which a product may be sold.

Price index - A measure of the average level of prices in one period as a percentage of their level in an earlier period.

Price level - The average level of prices as measured by a price index.

Price maker - A firm that administers its prices.

Price mechanism - The system in a market economy whereby changes in price in response to changes in demand and supply have the effect of making demand equal to supply.

Price mix - The value of an item that is determined by the individual producer. The price mix can include decisions relating to, the price level, any discounts and,  any credit terms to be allowed to customers.

Price skimming - A pricing strategy where a high price is set for a new product on the market.

Price stability - A situation in which the average level of prices is moving neither up nor down.

Prices and incomes policies - Government policies which restrict the increase of prices and incomes in order to attain price stability.

Price taker - A firm that cannot influence the price of its output.

Price theory - The theory of how prices are determined; competitive price theory concerns the determination of prices in competitive markets by the interaction of demand and supply.

Price to earnings ratio (P/E) – This ratio is used as a performance benchmark to compare one company against other companies or may also be used to compare  the company's  own historical stock performance.

Price variance (PV) – Is the difference between actual unit price and standard unit price, multiplied by actual quantity of input used. It reflects a change between the expected price and actual price of input.

Pricing strategy - The pricing policy or method of pricing adopted by a business.

Primary data - Information which does not already exist and is collected through the use of field research.

Primary health care - Health service provision based upon preventing rather than curing diseases. It includes clean water supply, sanitation, immunization and nutritional and family planning services.

Primary labour market - The market for permanent full-time core workers.

Primary market – 1. Accounting, The first sale of a newly issued security to the market. Those new securities are purchased within the primary market. All trading of those securities subsequently is done via secondary market. Or 2. Economics - The market for primary products.

Primary production - The production of goods that are sold or used as they are they are found in nature e.g. fish, trees, diamonds, oil.

Primary research - The collection and collation of original data via direct contact with potential or existing customers. Also called field research.

Primary sector - Industry which extracts the natural resources of the earth.

Primary school enrolment rate - The number of children of primary school age, usually 6 to 11 years, who are enrolled at school as a percentage of the age group. Sometimes this is greater than 100% due to younger and older pupils enrolling.

Prime book of entry - See Original book of entry .

Prime cost - Refers to the sum of direct material plus direct labour. It excludes overheads.

Prime rate - The interest rate that is charged by the bank to its preferred customers. If the prime rate changes other rates will then change e.g. mortgage interest rates.

Principal - 1. face amount of a financial instrument on which interest accrues.  Or 2. carrying value of an obligation (i.e., bonds payable). Or3. amount invested, excluding return on investment. Or 4. high-level individual (i.e., partner) in a CPA firm having major authority and responsibilities. Or 5. owner, especially one with executive authority, of a business firm.

Principal-agent problem - The problem of resource allocation that arises because contracts that will induce agents to act in their principals' best interests are generally impossible to write or too costly to monitor.

Principle of substitution - The principle that methods of production will change if relative prices of inputs change, with relatively more of the cheaper input and relatively less of the more expensive input being used.

Prior period - refers to the accounting periods that have occurred before the current one.

Prisoners' dilemma - Where two or more firms (people), by attempting independently to choose the best strategy for whatever the other(s) a likely to do, end up in a worse position than they had co-operated in the first place.

Private benefits – The benefit of an activity to an individual or a business.

Private corporation (company) - A corporation whose ownership is held with the private sector i.e. either LTD or PLC.

Private costs – The cost of an activity to an individual or business.

Private efficiency - Where a person's marginal benefit from a given activity equals the marginal cost.

Private equity – Refers to the equity securities of companies which are unlisted i.e. non-publicly traded.

Private good  - A good (or service), each unit of which is consumed by only one individual.

Private limited company (PLC) - A company owned by its shareholders. Shareholders' liability is limited to the value of their shares. Shares can only be bought and sold privately.

 Private saving - Saving on the part of individuals, the part of disposable income that is not spent on consumption. Private sector - The portion of an economy in which goods and services are produced by non governmental units, such as firms and households.

Privatisation - The process of selling a public corporation to private shareholders.

Private sector - Businesses that are owned by individuals or groups of individuals.

Probability - The degree of likelihood that something will happen.

Proceeds -  The total amount received from an activity, e.g. the proceeds of a specific sale. In insurance, it refers to the net amount which is received after any deductions for discount or other charges.

Process - The method used to convert inputs to final goods or services.

Process costing - A method used in cost accounting that is applied to a production process where the product is created by a series of different operational or chemical stages in the production processes. Costs are normally accumulated for the whole production process and the the average unit cost is calculated for each stage of the process to get the total unit costs.

Procurement - The purchasing of specific materials or services.

Pro cyclical - Moving in the same direction as the business cycle up in booms and down in slumps.

Producer price index (PPI) -  A measure of the average price change over time in the selling price received by the domestic producers within a country for their production.

Producer surplus - The difference between the total amount that producers receive for all units sold of a product and the total variable cost of producing the product.

Product - 1. the end result of a specific manufacturing or other production process. Or 2. commodities which are offered for sale. Or 3. an artefact or item that has been made by individual or a process.

Product cost – The cost of any  inventory which is currently on hand.  It is also referred to as inventoriable cost. They are considered assets of the firm until the products/items are sold. Once the product/item is sold, it is treated as a  expense, i.e. Cost of Good Sold (COGS). All manufacturing costs are considered to be product costs, e.g., direct labour, direct material and factory overhead.

Product differentiation - Slight differences in products which may be real or perceived.

Product family - A group of products or services that have a defined relationship because of physical and production similarities.

Product life cycle - The period that starts with the initial product specification and ends with the withdrawal of the product from the marketplace. A product life cycle is characterised by certain defined stages, including research, development, introduction, maturity, decline, and abandonment.

Product mix (product portfolio) – The particular mix of products that the firm is marketing. Or 2) involves planning and developing the right type of product that will satisfy fully the needs of customers. A product has several dimensions. These dimensions are collectively called 'product mix'. Product mix for example may consist of size and weight of the product, volume of output, product quality, product design, product range, brand name, package, product testing, warranties and after sales services and the like.

Product orientation - An approach to business which places the main focus of attention upon the production process and the product itself.

Production - The conversion of natural, human and capital resources into goods and services.

Production budget - The schedule for expected units to be produced. It sets forth the units expected to be manufactured to satisfy budgeted sales and inventory requirements.

Production function - A functional relation showing the maximum output that can be produced by each and every combination of inputs.

Production possibility frontier (curve) - A curve that shows which alternative combinations of commodities can just be attained if all available resources are used; it is thus the boundary between attainable and unattainable output combinations. Also called the production possibility boundary.

Productive activity - Is defined as including any activities that generate economic value for the firm in the marketplace. May also be defined as a any activity that produces or creates a good or service that has value even if the good or service has not been actually paid for.

Productive efficiency - A situation where firms producing the maximum output for a given amount of inputs, or producing a given output at the least cost.

Productivity - Output produced per unit of some input; frequently used to refer to labour productivity, measured by  total output divided by the amount of labour used.

Productivity agreement - Workers and management agree an increase in benefits, in return for an increase in productivity.

Productivity deal - When, in return for a wage increase, a union agrees to changes in working practices that will increase output per worker.

Productivity ratio – Shows the ratio of outputs as compared to inputs. The closer  to 1:0, the higher the productivity, the closer to 0:0, the lower the productivity. Productivity can be affected by different work methods, quality, technology, management practices etc.

Product life cycle - The stages a product will pass through from its introduction, through its growth until it is mature and then finally its decline.

Product markets - Markets in which outputs of goods services are sold. Also called goods markets.

Product-orientated - A description applied to a business whose main focus of activity is on the product itself. See also market-orientated.

Professional ethics - The moral principles and standards of conduct guiding professionals such as CPAs in performing their functions.

Profit - 1. in ordinary usage, the difference between value of outputs and the value of inputs. Or 2. in economics, the difference between revenues received from the sale of goods and the value of inputs, includes the opportunity cost of capital, so that profits are economic profits.macroeconomics, profits exclude interest on borrowed capital but do not exclude the return on owner's capital. Or 4.  Profit (π) = Total Revenue (TR) – Total Cost (TC). (See Gross profit , Net profit , and Profit and Loss Account .

Profitability - The ability of a business entity to generate net income i.e. revenues in excess of the costs incurred in producing those revenues.

Profitability index - The ratio of the total present value (PV) of future cash inflows to the initial investment (I).

Profitability ratios – Ratios that measure the performance of a firm, where earnings compared to its sales, assets or equity.

Profit after tax (PAT) - The net profit earned by the company after deducting all expenses like interest, depreciation and tax. PAT can be fully retained by a company to be used in the business. Dividends, if declared, are paid to the share holders from this residue.

Profit and loss account - An account made up of revenue and expense accounts which shows the current profit or loss of a business (i.e.. whether a

business has earned more than it has spent in the current year).

Profit and loss appropriation account -  Shows how the profit after tax is distributed between shareholders and the business.

Profit and loss sharing (PLS) - This is a method used in Islamic banking to comply with the Islamic prohibition of interest. The Islamic solution, commonly referred to as Profit & Loss Sharing (PLS), implements the idea of an equitable sharing of risks and profits between the different parties involved in the financial transaction. In banking, there are three parties - the entrepreneur or the individual or firm that actually uses the capital, the bank which serves the roles of a partial user of capital funds and as the financial intermediary, and thirdly the depositors in the bank who supplied the savings used as the capital funds. There two different partnership that are created  in this Islamic banking method are: the partnership between the individual depositors and their bank, and the partnership between the the borrower (entrepreneur) and the bank. Under this method of banking, the bank or other financial institution will not receive a fixed rate on the outstanding loans, rather, they will get to share the profits or  losses of the business owner to whom they have provided the funds. Similarly, those people who deposit their funds in the bank will get to share in the profit or losses of the bank.

Profit and loss statement (P&L) or (income statement) - This statement shows a firms revenues and expenses for a specific time period. The e total revenues less total expense is the firms net income or net profit.

Profit before taxes (PBT) - A profitability measure that looks the firm's profits before it pays its company/corporation/profit tax.

Profit centre - Part of a business where revenues and costs can be clearly defined.

Profit margin - The percentage difference between the costs of a product and the price you sell it for. Eg. if a product costs you $10 to buy and you sell it for $20, then you have a 100% profit margin. This is also known as your 'mark-up'.

Profit maximisation - Producing a level of output which generates the most profit for a business.  Where marginal cost is equal to marginal revenue.

Profit maximising rule - Profit is maximised where marginal revenue equals marginal cost.

Profit sharing plan - A plan by which corporate executives and employees receive a share of the company's net income on some equibasis may relate to salary level and service years.

Profit variance – Is the difference between actual profit and budgeted profit.

Profit volume (PV) chart (Break even chart) – A chart or graph that determines how profits vary with changes in volume. Profits are plotted on the vertical axis while units of output are shown on the horizontal axis.

Pro-forma - To provide a prescribed form for completing a specified task.

Pro-forma accounts (pro-forma financial statements) - A set of accounts prepared before the accounts have been officially audited. Often done for internal purposes or to brief shareholders or the press.

Pro-forma invoice - An invoice sent that requires payment before any goods or services have been dispatched.

Program budget - A budget where the inputs of any resources and outputs of the final services are identified by different specific programs without any regard to the number of different organisational units involved in the performing and completing of various different aspects of the specific program.

Progressive income tax - An income tax where the portion of income paid in tax is higher for people on high incomes than for people on low incomes. The marginal rate of tax is greater than the average rate of tax.

Progressive tax - A tax that takes a larger percentage of come the higher the level of income.

Proportional income tax - An income tax where the portion of income paid in tax is the same for people on high incomes as it is for people on low incomes.

Proportional tax - A tax that takes a constant percentage of income at all levels of income and is thus progressive nor regressive.

Project - A broad, complex, multidisciplinary approach to the production of a good or service.

Project costing - A cost system that collects information on activities and costs associated with a specific activity, project, or program.

Projection - An approximation or prediction of future events. Usually a projection is based on the known information and then used to estimate a future period but also taking into consideration events that could affect or influence the possible outcomes.

Promissory note - A formal unconditional promise in writing to pay on demand or at a future date a definite sum of money.

Promotion - An attempt to retain and obtain customer by drawing attention to a firm or its products.

Promotional pricing - A pricing strategy where the product is sold at a very low price for a short period of time.

Proportional tax - A tax whose average rate with respect to income stays the same as income rises.  In many country’s company tax or profits tax is proportional.

Proprietary asset - An asset that falls under the category of intellectual property and therefore should not be disclosed by an employee e.g., all information to do with customers or clients including names, addresses, telephone numbers and other contact information, as well as any business related or personal information and unique proprietary asset to a company. Proprietary assets could also include things like trade secrets and new inventions.

Proprietary theory – Is the theory that assets are owned by the proprietor and liabilities are owed by him. The accounting equation is: Assets - Liabilities = Capital.  Capital is the net value of the business to the owner.

Proprietors funds -  Owner's capital + net profit - owners drawings.

Proprietorship – 1. assets – liabilities = contributed capital + earnings. Or 2. form of business organisation.

Pro rata – Refers to the basis for allocating an amount proportionally to the items involved. An amount may be proportionally distributed to assets, expenses, funds, etc.

Prospectus - The document that must accompany a new issue of securities. It contains the same information appearing in the registration statement, such as a list of directors and officers, financial reports certified by a CPA, underwriters, the purpose and use for the funds, and other reasonable information that prospective buyers of a security need to know.

Protectionism - Any government policy that interferes with free trade in order to give some protection to domestic industries against foreign competition.

Provision – The allowance made in accounts for depreciation. Or 2) Is to prepare in advance for an event that is projected to place in the future. In accounting, it is an amount charged against profits for a specific liability (for example: bad debts, depreciation or taxes). A liability may be known, but the amount is often uncertain. This uncertainty may lead to an adjustment in a later income statement once the final amount of the liability is ascertained.

Provisions - One or more accounts set up to account for expected future payments (e.g.. where a business is expecting a bill, but hasn't yet received it).

Proxy - A person authorised to act on behalf of another. An example would be the power of attorney document being given by the shareholder of a

company  the authorisation for a specific vote to be taken on their behalf at a company meeting.

Prudence – This term is used to mean the having fo foresight and exercising caution along with discretion or to not act recklessly.

Prudence concept (conservatism) – This concept requires that whenever there are alternative procedures or set of  values, the accountant should always choose the values that give the lower profit, lower asset value and the higher liability value.

Psychological pricing - A pricing strategy where particular attention is paid to the effect that the  price of a product will have upon consumers'.

Public accounting - The profession that public accountants are engaged in. Independent public accountants perform many functions, including auditing financial statements, designing financial accounting systems, assisting in the managerial accounting function, providing managerial advisory services, and tax preparation.

Public corporation - A corporation owned by the government.

Public good - A good which is non-excludable, non-rivalrous. A good which can be jointly consumed by many individuals simultaneously additional cost, and with no reduction in the q or quantity of the provision concerned. 

Public limited company (PLC) - A company owned by its shareholders. Shareholders' liability is limited to the value of their shares. Shares may be bought and sold publicly - on the Stock Exchange.

Public offering - The presenting new securities to the investing public, after registration requirements have been filed with the appropriate authorities.

Public ownership - 1. The Government owns and operates the productive facility to provide goods or services to citizens. Or 2. In investments, percentage of a company's stock that is publicly traded and also owned on the open market.

Public relations - An organisation's attempts to communicate with interested parties.

Public saving - Saving on the part of governments. Public saving is exactly equal to government budget surpluses, or government revenues less government expenditures.

Public sector - The portion of an economy in which goods and services are produced by the government or by government owned agencies and firms.

Public-sector borrowing requirement (PSBR) - The old name for the public-sector net cash requirement 

Public-sector debt repayment (PSDR) or Public sector surplus - The old name for a negative public-sector net cash requirement. The (annual) surplus of the public sector, and thus the amount of debt that can be repaid. Public-sector net cash requirement  (PSNCR) - The (annual) deficit of the public sector (central government, local government and public corporations), and thus the amount that the public sector must borrow.

Purchase account - The account in which all purchases of inventory are recorded. The purchase account is used when a periodic inventory method is being applied.

Purchase agreement - A contract which states the terms of a speciifc purchase.

Purchase discount  (cash discount)  - A reduction in the purchase price or amount payable for the purchase,  if payment is made within a specified time period.

Purchase ledger - A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is held in the general ledger which shows the total balance of all the accounts in the purchase ledger.

Purchase order - The written authorisation for a vendor to supply goods or services at a specified price over a specified time period.

Purchase returns (return outwards) - A contra purchase account that records all credits from returned inventory purchases.

Purchases budget - A budget of the expected levels of usage of materials that will be used in the production process and the purchase of those direct materials that are required.

Purchasing power – Refers to the value of a particular monetary unit in terms of the amount of goods or services that can be purchased with it.

Purchasing power of money - The amount of goods and services that can be purchased with a unit of money. The purchasing power of money varies inversely with the price level. Also called value of money

Purchasing power parity - A situation that occurs when money has equal value across countries.

Purchasing power parity theory - The theory that over the long term, the exchange rate between two currencies adjusts to reflect relative price levels (relative purchasing power).

Pure fiscal policy - Fiscal policy that does not involve any change in money supply.

Pure research – Research that is motivated exclusively by the search for knowledge for its own sake.

Push-down accounting - An accounting method of accounting in which the financial statements of a subsidiary are presented to reflect the costs incurred by the parent company in buying the subsidiary instead of the subsidiary's historical costs.

Push-pull strategy – The simultaneous use of a combination of two marketing strategies: PUSH = 1. (physical distribution definition) A manufacturing strategy aimed at other channel members rather than the end consumer. The manufacturer attempts to entice other channel members to carry its product through trade allowances, inventory stocking procedures, pricing policies, etc. 2. (sales promotion definition) The communications and promotional activities by the marketer to persuade wholesale and retail channel members to stock and promote specific products. distribution definition) A manufacturing strategy aimed at the end consumer of a product. The product is pulled through the channel by consumer demand initiated by promotional efforts, inventory stocking procedures, etc. 2. (sales promotion definition) The communications and promotional activities by the marketer to persuade consumers to request specific products or brands from retail channel members.

Put - 1. option to sell a specific security at a specified price within a designated period for which the option buyer pays the seller (writer) a premium or option price. Contracts on listed puts (and CALLS) have been standardized at date of issue for periods of three, six, and nine months, although as these contracts approach expiration, they may be purchased with a much shorter life. Or 2. bondholder's right to redeem a bond prior to maturity.

 

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"There is less to fear from outside competition than from inside inefficiency, discourtesy and bad service."  Anonymous

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.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 qualreviewer 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 decialso 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.

 

[A ] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K] [L] [M] [N] [O] [P] [Q] [R] [S] [T] [U]  

 

"Whenever you are asked if you can do a job, tell 'em, 'Certainly, I can!' Then get busy and find out how to do it."  Theodore Roosevelt

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 indifferent 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 cost

Rational 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 - This refers to the materials bought by a manufacturing business in order to manufacture its products.

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 - These are accounts which deal with money such as bank and cash accounts. They also include those dealing with property and investments. In the case of bank and cash accounts they can be held in the general ledger, or balanced in a journal (eg. the cash book) where they can then be looked upon as a part of the nominal ledger when compiling a balance sheet. Property and investments can be held in subsidiary ledgers (with associated control accounts if necessary) or directly in the general ledger itself.

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 exchange rate - A measure of the price of domestic goods and services relative to the price of foreign goods and services.the price of foreign goods not just in currency-adjusted terms but also in price-level adjusted terms. The real exchange rate is calculated as the nominal exchange rate multiplied by the ratio of the home country price level to the foreign country price level multiplied by 100. If purchasing power parity holds between two countries, their real exchange rate will be 100. When the real exchange rate is above 100, the foreign currency is undervalued.

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 - The principle whereby the value of an asset can only be determined when it is sold or otherwise disposed of, i.e. its 'real' (or realised) value.

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 byat 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 - If you pay for a service, then cancel it, you may receive a 'rebate'. That is, you may be refunded some of the money you paid for the service. (e.g.. if you cancel a 1 year insurance policy after 3 months, you may get a rebate for the remaining 9 months)

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 term typically used to describe confirmation of a payment - if you buy some petrol you will normally ask for a receipt to prove that the money was spent legitimately.

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 portfoyear-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 - The procedure of checking entries made in a business's books with those on a statement sent by a third person (e.g.. checking a bank statement against your own records).

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 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 exam

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, efficiency, control, ethics, and legal considerations.

Reimbursement - Means to repay or pay back to an individual or entity, e.g. to pay an employee for items that were paid by that person's own personal funds.

Related party transaction – Refers to a transaction between different two parties, one of those parties can be considered to exercise control and/or significant levels of influence over the operating practices and policies of the other. A special relationship may be said to exist, e.g. a company and its largest shareholder.

Relationship marketing - An approach to marketing which seeks to strengthen a business's relationships with its customers.

Relative price - The price of one good compared. with another (e.g. good A is twice the price of good B).

Relevance - An item that is capable of making a difference in decision making. Information is available in a timely fashion before it loses its value in decision-making.

Relevance concept - This refers to the accounting information being considered or offered ability to make a material difference to the specific external decision makers who are using the information in the financial reports.  This is especially true in management accounting.

Relevant costs - Are expected future costs that differ from the alternatives being considered. Sunk costs are not relevant to the decision at hand, because they are historical costs.

Relevant range – Refers to the span of activity over which a certain cost behaviour holds true.

Reliability - 1. in auditing, confidence that the financial records have been properly prepared and that accounting procedures and internal controls are correctly functioning. Or 2. in financial accounting theory, term describing information that is reasonably free from error and bias and accurately presents the facts. Verifiability exists when a reconstruction of financial data, following acceptable accounting practices, results in the same actual results previously attained; further, two accountants working independently will come up with similar results. Or 3. probability that a product or process will perform satisfactorily over a period of time under specified operating conditions.

Reliability concept – This concept refers to the quality of the accounting information that allows the decision makers to be assured that the information being represented in the relevant financial records and associated financial statements truly captures the actual operating and other conditions and events of the reported business.

Remittance – When a national of one country that is working in another country sends their income (or portion of) back to their original country.very important source of foreign currency for many developing countries.

Remitting bank – Refers to the bank that has sent the draft to a bank overseas for collection.

Remuneration - The act of paying for an item or to recompense an individual or entity for losses (Example: receiving your pay).

Renewable resources - Productive resources that can be replaced as they are used up, as with physical capital; distinguished from non renewable resources, which are available in a fixed stock that can be depleted but not replaced.

Rent seeking - Behaviour whereby private firms and individuals try to use the powers of the government to enhance their own economic well being.

Re-order level - The level of stock when new orders are placed.

Re-order quantity - The amount of stock ordered when an order is placed.

Replacement cost - 1. the current cost to replace the service potential of an existing asset. Or 2. the current cost to replace property in a particular geographic area.

Replacement cost accounting - The valuing assets and liabilities, at their cost to replace.

Replacement investment - The amount of investment that is needed to maintain the existing capital stock intact.

Reporting – The  periodically furnishing others with financial information to aid in control or decision making.

Repos / Repo - Sale and repurchase agreements. 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.

Repositioning - An attempt to change the views of consumers about a product relative to its competitors.

Representative (union) - Person with responsibility to communicate union information between members and regional offices and to represent the union members to management.

Requisition – Refers to a written order or request to buy an item. Once approved, the requisition is then changed to a purchase order.

Required reserves - The reserves that a bank must, by law, keep either in currency or in deposits with the central bank.

Rescheduling - The renegotiating of debt conditions between borrower and lender, often the repayment period is lengthened. 

Research - An investigation involving the process of enquiry and discovery used to generate new business ideas.

Research and development (R&D) – Is the carrying out of research into a planned activity or experimentation aimed at discovering new knowledge with the goal being to develop new or improved products & services. Development is when the research is  then translated into the design of new or improved products and services.

Reserve -  1. the appropriation of retained earnings for a designated purpose, such as plant expansion or a bond sinking fund. The purpose of the reserve is to tell stockholders and creditors that part of retained earnings is unavailable for dividends. Or 2. the accrued liability, such as reserve for taxes (outdated usage). Or 3. contra account to the gross cost of an asset to arrive at the net amount, such as reserve for depreciation or reserve for bad debts. In this use, the term reserve is outdated; accumulated depreciation and allowance for bad debts are used instead.

Reserve accounts - Reserve accounts are usually set up to make a balance sheet clearer by reserving or apportioning some of a business's capital against future purchases or liabilities (such as the replacement of capital equipment or estimates of bad debts).  A typical example is a company where they are used to hold the residue of any profit after all the dividends have been paid. This balance is then carried forward to the following year to be considered, together with the profits for that year, for any further dividends.

Reserve ratio - The fraction of its deposits that a commercial bank holds as reserves in the form of cash or deposits with a central bank.

Reserve requirements - Regulations on the minimum amount of reserves that banks must hold against deposits.

Residual - Something left after other parts have been taken away.

Residual income – Refers to the  income or monies that arise from earlier efforts which still continue to generate a revenue flow over time without requiring the need for any additional effort (e.g., a stream or flow of future royalty payments from a song).

Residual value - 1. value of leased property at the end of the lease term. Or 2. at any time, the actual or estimated value (that is, proceeds minus disposal costs) of an asset, also called scrap value or salvage value.  Or 3. value of a depreciable asset after all allowable depreciation has been taken.

Resource allocation - The assignment of resources to specific uses i.e. determining what will be produced, how it will be produced, and for whom it will be produced.

Resource costs – Are those costs of economic elements or inputs used to perform activities. They include people's salaries, as well as the cost of materials, supplies, equipment, technologies, and facilities.

Resources - Inputs used in the production of the goods and services; the factors of production.

Responsibility - The duty to complete a task.

Responsibility accounting – Is used to refer to the accounting method of the collection, summarisation, and reporting of the financial information about different decision centres throughout an organisation.

Responsibility centre – Is that unit of the organisation that has control over costs, revenues, or investment funds. For accounting purposes, responsibility centres are classified as cost centres, profit centres, investment centres or revenue centres.

Restatement of financials – Is the reiteration or republication of a financial statement or document, such as a balance sheet or income statement, in a manner that incorporates revisions and changes based on accounting principles or policies.

Restricted – Refers to when something that is regulated, prohibited or curbed, e.g. restricted stock options.

Restricted assets – Refers to assets or resources which have been restricted by legal or other contractual requirements.

Restrictive practice - Where two or more firms agree to adopt common practices to restrict competition.

Restructuring - Restructuring is often implemented to realise cost savings.  It involves changes the business cost and revenue arrangements.

Retail - A term usually applied to a shop which re-sells other people's goods. This type of business will require a trading account as well as a profit and loss account.

Retail banks - 'High street banks'. Banks operating extensive branch networks and dealing directly with the general public, with published interest rates and charges:

Retail deposits and loans - Deposits and loans made through bank/building society branches at published interest rates.

Retailer - A retailer is an outlet selling goods direct to the customer (see also wholesaler). Some producers are also retailers, having their own retail branches as well as their own production sites.

Retail price index (RPI)  - Measures the average level of the prices of a basket of good sand services consumed by typical households in the UK. Retail price index  X (RPIX)  - RPI minus the effect of change in home mortgage interest rates.

 Retail price index - X (RPIX - X)  - The method used in the UK for regulatory bodies to calculate what price increases will be allowed for privatized monopolies.  The X is the efficiency gain the monopoly is obligated to make before it can increase its price.

Retained earnings - This is the amount of money held in a business after its owner(s) have taken their share of the profits.

Retainer - A sum of money paid in order to ensure a person or company is available when required.

Retention ratio - The proportion of the profits retained in a business after all the expenses (usually including tax and interest) are taken into account. The algorithm is retained profits divided by profits available for ordinary shareholders (or available for the proprietor/partners in the case of unincorporated companies).

Retirement - 1. the permanent withdrawal of an employee from employment normally due to age. Or 2. the repayment of a debt. Or 3.fixed asset from operative service with the appropriate adjustments to the fixed asset and accumulated depreciation accounts. Retirement may be due to a variety of reasons such as the asset having reached the end of its useful life or it having been disposed of by sale. Or 4. the cancellation of reacquired shares of stock or bonds by a corporation.

Return on assets (ROA) – The  ratio that shows net income divided by average total assets. Used to measure the amount earned on each dollar of assets invested.

Return on capital employed (ROCE) - The profit of a business as a percentage of the total amount of money used to generate it.of the effectiveness of the way a firm is using its capital. The formula: Profit before interest and tax (PBIT) divided by (total assets - current liabilities)

Return on equity (ROE) - Measures the return on shareholders investment by expressing the profit earned by ordinary shareholders as a percentage of total equity.  This gives a measures the overall level of efficiency of the business in managing its total range of different investmentsthe return for its stockholders. It is the main measure of how well the management is running the firm.

Return on investment (ROI) – This ratio is used to measure of the earning power of assets. The ratio reveals the firm's profitability on its business operations and thus serves to measure management's effectiveness. It equals net income divided by average total assets.

Return on net assets - Expresses profit as a percentage of long term assets only.

Returns inwards (sales returns) – Refers to those are items sold on credit by a firm to a customer and then returned for to the firm because of a specifc reason and the customer needs to be refunded for.  In accounting these are considered a contra revenue account.

Returns outwards (purchase returns) – Refers to those items purchased on credit from a vendor and returned to that supplier for some specific reason for which a refund must be given. In accounting these are considered a contra expense account.

Returns to scale - Increases in output that result from increasing all the inputs by the same percentage.

Revaluation (accounting)- The reconsideration of the worth or value of an asset or property.

Revaluation (economics) -Where the government re-pegs the exchange rate at a higher level.

Revenue - The sales and any other taxable income of a business (e.g. interest earned from money on deposit).

Revenue centre – Is a unit within an organisation that is responsible for generating revenues.

Revenue expenditure - Spending on business resources which have already been consumed or will be very shortly

Revenue recognition – Refers to the process of the recording of revenue using one of the acceptable accounting methods for the accounting period.

Revenue sharing - The return of some of the revenue collected by the federal government to a state or local government for unrestricted expenditure; a non categorical or general grant-in-aid.

Reverse engineering - A method of analysing a product's design by taking apart the product.

Reverse repos - When gilts or other assets are purchased under a sale and repurchase agreement. They become an asset to the purchaser.

Reverse takeover -  Where a company takes over a larger company than itself.  IT can occur in different forms: 1. a smaller firm entity over a larger one.; 2. a private company purchases a public comapny.

Reversing entries (see adjusting entries) – These entries reverse the previous years adjusting entries.  This is easy, just the opposite debits and credits used for the adjusting entry (not depreciation).  For example

Dr – rent

            Cr – prepaid expense.

This removes the temporary account from your balance sheet and returns it to the expense account for the new financial year.

Revolving credit – Refers to a line of credit that has been extended to customers who may then use it as often as they desire up to a certain predetermined monetary amount. Common examples would be an overdraft facility with a bank or a credit card.

Revolving fund – Is a fund where the money that is used it is replaced  An example would be the petty cash fund under the imprest method.

Rework – Is used to refer to the process by which an item is changed in order to improve on it or in order to make it more suitable or useful for a particular purpose or job. e.g. to redesign or reengineer a poor product into one that does the job it was originally intended for.

Ricardian neutrality - The proposition that the financing of a government deficit has no current effect because private saving will just offset any government dissaving. Hence, if the government increases the national debt, private agents will save enough to cover the future taxes required to repay the increased debt, leaving national saving and AD unchanged.

Rising cost industry - An industry in which the minimum cost attainable by a firm rises as the scale of the industry expands.

Risk - Is used to refer to the measurable possibility of something losing or not increasing in value. Risk is not the same as uncertainty. Uncertainty is not considered to be measurable. Or, when an outcome may or may not occur, but its probability of occurring is known.  Peoples actions are influenced by their attitudes towards risk. Many decisions are taken under conditions of risk or uncertainty. Generally, the I the/probability of (or the more uncertain) the desired outcome of an ac the less likely it is that people will undertake the action.

Risk averse - Exhibiting a dislike of uncertainty.

Risk analysis – Refers to the process of measuring and analysing the risk associated with financial and investment decisions.

Rivalry - The property of a good whereby one person's use diminishes other people's use.

ROI (Return on Investment) – This ratio can be calculated in various ways. The most common method is Net Income as a percentage of Net Book Value (total assets minus intangible assets and liabilities).

Rollover - 2. the movement of funds from one investment to another. For example, when a certificate of deposit or bond matures, the funds may be

rolled over into another certificate of deposit or bond. Or 1. the renewal of a short-term obligation by mutual agreement of debtor and creditor. This short-term debt appears under current liabilities. Footnote disclosure of the arrangement is made along with major provisions.

Royalty – Refers to the monies paid to use property, such as the use of copyrighted materials and natural resource extractions.

Rule - 1. the directive, instruction, or order detailing something to be done. Requiring the cash receipts to be counted at the end of the day to assure that the physical cash received agrees with the recorded book amount is an example of rule. Or 2. the statement governing procedures, interpretations, or inferences belonging to sets of operations or decisions.

Rule of thumb – Refers to an approximation or useful method which is based on an individuals experience rather than the use of a precisely accurate measure.

Run rate - A forecast for the year based on the current year to date figures. If a company's 1st quarter profits were, say, $25m, they may announce that the run rate for the year is $100m.

 

 

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"Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity."  George S. Patton

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 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-balancing ledgers - A system which makes use of control accounts so that each ledger will balance on its own. A control account in a subsidiary ledger will be mirrored with a control account in the nominal ledger.

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, general & administrative expense budget – Refers to a detailed budget of the planned expenditure (operating expenses) for the firms non-manufacturing activities, such as office salaries, marketing and sales commissions.

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 - A term usually applied to a business which sells a service rather than manufactures or sells goods (e.g. an architect or a window cleaner).

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.

Set of accounts – Refers to a group of ledger accounts that a particular firm adopts.

Set-off -  Refers to the discharging of a debt by the off-setting against it a specific claim that is in the favour of that specified debtor.

Settlement date – Is the date at which a security transaction must be paid by the buyer and the securities delivered by the seller.

Setup costs – Refers to expenses incurred each time a batch is produced. It consists of engineering cost of setting up the production runs or machines, paperwork cost of processing the work order, and ordering cost to provide raw materials for the batch.

Severance pay - An amount payable to an employee on termination of contract.

Share – Refers to one individual unit or share of ownership in a  mutual fund, company, limited partnership, etc.

Share buy back - When a company makes an offer to buy back some of its own shares.

Share capital - Money introduced into the business through the sale of shares.

Shareholders - The the owners of a limited company; they have bought shares which represent part ownership of a company.

Share premium - The extra paid above the face value of a share. Example: if a company issues its shares at $10 each, and later on you buy 1 share on the open market at $12, you will be paying a share premium of $2

Shares - These are documents issued by a company to its owners (the shareholders) which state how many shares in the company each shareholder has bought and what percentage of the company the shareholder owns. Shares can also be called 'Stock'.

Shares issued (aka Shares outstanding) - The number of shares a company has issued to shareholders.

Shelf life – The  specified time period of time which a product can be stored, under specified conditions, and remain in optimum condition and suitable for use or consumption.

Shoeleather costs - The resources wasted when inflation encourages people to reduce their money holdings.

Shop steward - An elected union official who represents workers' interests in the place in which the shop steward works.

Short run - A period of time in which the quantities of some inputs are fixed while others can be varied.

Short-run aggregate supply - The relationship between the aggregate quantity of final goods and services (real GNP) supplied and the price level (the GNP deflator), holding everything else constant.

Short-run aggregate supply curve - A curve showing the relation between the price level of final output and the quantity of output supplied on the assumption that all factor prices are held constant. Short-run equilibrium - Generally, equilibrium subject to fixed factors or other things that cannot change over the time period being considered. For a competitive firm, the output at which market price equals marginal cost; for a competitive industry, the price and output at which industry demand equals short-run industry supply and all firms are in short-run equilibrium. Either profits or losses are possible. Short-run Phillips curve - Shows the relationship between inflation and unemployment, holding the expected inflation rate and the natural rate of unemployment constant.

Short-run shut-down point - This is where the AR curve is tangential to the AVC curve. The firm can only just cover its variable costs. Any fallrevenue below this level will cause a profit maximising firm to shut down immediately.

Short-run supply curve - A curve showing the relationship between quantity supplied and market price, with one or more fixed factors; it is the horizontal sum of marginal cost curves (above the level of average variable costs) of all firms in a perfectly competitive in

Short term – In accounting is used encompasses a period of twelve months or less.

Short term asset - An asset expected to be converted into cash within the normal operating cycle (usually one year), e.g. accounts receivable and inventory.

Short term debt - is money payable by the debtor to the creditor within one year.

Short term liability - A liability that will come due within one year or less.

Shrinkage – Refers to the excess of inventory shown on the books over actual quantities on hand. It can result from theft, evaporation, or general wear and tear.

Shutdown point - The level of output and price at which the firm is just covering its total variable cost.

Sight deposits - Deposits that can be withdrawn on demand without penalty.

Sight draft – Refers to a draft which is payable on demand.

Signaling - An action taken by an informed party to reveal private information to an uninformed party.

Significance – Is often used to mean something that is not expressly stated but can be inferred, e.g. the significance of an increase in product demand can only be known after the financial effects are calculated.

Significant - Is important, essential, distinctive, or of sufficient nature to warrant special notice relative to a standard or norm.

Silent partnership – Means a partner  who furnishes capital only, i.e., the partner is not involved in the day-to-day operations or decisions of the entity.

Simple interest - Interest applied to the original sum invested (as opposed to compound interest ). e.g.. 1000 invested over two years at 10% per year simple interest will yield a gross total of 1200 at the end of the period (10% of 1000=100 per year).

Simple multiplier - The ratio of the change in equilibrium national income to the change in autonomous expenditure that brought it about, calculated for a constant price level.

Simulation - A technique which imitates what might happen in reality by using random numbers.

Single entry bookkeeping – Refers to a simple bookkeeping system in which all transactions are recorded in a single record (e.g., a cheque book that indicates expenditures only).

Single European market - An agreement by EU countries remove all barriers to trade.

Single-step income statement - An income statement where all the revenues are shown as a single total rather than being split up into different types of revenue (this is the most common format for very small businesses). See Profit and Loss , Multiple-step income statement .

Single-union agreement - A firm will only deal with one particular trade union and no others.

Sign off – Refers to the approval or agreement by an authorised person e.g. to sign-off on a purchase contract.

Sinking fund - An account set up to reduce another account to zero over time (using the principles of amortization or straight line depreciation). Once the sinking fund reaches the same value as the other account, both can be removed from the balance sheet.

Sit-in/Work-in - The illegal occupation of premises by workers, which allows workers to gain control of the factory.

Size distribution of income - The distribution of income among households, without regard to source of income or social class of households.

Skills shortages - Where potential employees do not have the skills demanded by employers.

Skimming pricing – Is a pricing strategy used when a new product is introduced. It involves setting a high initial price primarily to recoup research and development investments; the price is progressively lowered as time passes and competition sets in.

Slippage – Refers to the difference between estimated transactions costs and actual transactions costs.

Slope - The ratio of the vertical change to the horizontal change between two points on a curve.

SMART Targets – targets that are specific, measurable, achievable, realistic and time based.

SME - Small and Medium Enterprises (ie. small and medium size businesses). The distinction between what is 'small' and what is 'medium' varies depending on where you are and who you talk to.

Smoothing – method used in forecasting trends, seasonality and level change, e.g. averaging month-to-month fluctuations. Works well with data that has a lot of randomness.

Social auditing - The process by which a business evaluates the effect of its activities on all of its stakeholders.

Social benefit - Private benefit plus externalities in consumption.

Social capital/cohesion – Refers to networks, together with shared norms, values and understandings which facilitate cooperation within or among those groups for mutual benefit.

Social cost - Private cost plus externalities in production. 

Social efficiency - Production and consumption at the point where marginal social benefit equals marginal social cost

Social impact statement – Is used to evaluative and detailed report to assess the effect and consequences of the public-interest, non-profit activities of an entity.

Socialism - An economic system based on state ownership of land and on a centrally planned allocation of resources.

Social efficiency – An equitable and desirable outcome for society. Markets generally fail to achieve social efficiency. There are various types of market failure. Market failures provide one of the major justifications for government intervention in the economy.

Social regulation - The regulation of economic behavior to advance social goals when competition and economic regulation will fail to achieve those goals.

Social responsibility - The responsibility that a business  has towards those directly or indirectly affected by its activities.

Soft landing - This term is used to describe the economy slowing enough to eliminate the need for the government to further raise interest rates to dampen activity-but not enough to threaten a recession, which is what results when the economy contracts instead of expands. Hard landing, on the hand, could mean a recession. 

Soft loan - A loan with an element of concession or aid in it i.e. the conditions are more favourable than market conditions.

Sole-proprietor - The self-employed owner of a business (see Self-employed ).

Sole trader  - A business organisation which has a single owner.

Solow residual - Growth in GDP that cannot be accounted for by increased use of capital and labour.

Solvent - The condition of a company able to satisfy its debt obligations when due.

Sound - When used in a financial context, means financially secure and safe.

Source document - An original invoice, bill or receipt to which journal entries refer.

Span of control - The number of subordinates working directly under a manager.

Special deposits - A. system used up to 1980. Deposits that the banks could be required to make in the Bank of England. They remained frozen there until the Bank of England chose to release them.

Special drawing rights (SDRs) - Financial liabilities of the International Monetary Fund, held in a special account generated by contributions of member countries. Members can use SDRs to maintain supplies of convertible currencies when these are needed to support foreign exchange trades.

Specialisation and division of labour - Where production is broken down into a number of simpler, more specialised tasks, thus allowing workers to acquire a high degree of efficiency.

Special journals – Refers to a journal which records of original entry other than the general journal that are designed for recording specific types of transactions of similar nature, e.g. Sales Journal, Purchase Journal, Cash Receipts Journal, Cash Disbursements Journal, and Payroll Journal.

Special purpose vehicle/entity  (SPV /SPE) – Refers to a type of corporate entity or limited partnership created for a specific transaction or business, especially one unrelated to a company's main business.

Specific research – Refers to  a method used when gathering primary information for a market survey where targeted customers / consumers are asked very specific and in-depth questions geared toward resolving problems found through prior exploratory research.

Specific tax - A tax on a good or service which is set as a fixed amount per unit of the good or service sold.

Speculation - Where people make buying or selling decisions based on their anticipations of future prices.

Speculative balances - Money balances held as a hedge against the uncertainty of the prices of other financial assets.

Speculators - People who buy (or sell) commodities or financial assets with the intention of profiting by selling them (or buying them back) at a later date at a higher (lower) price.

Spending level – Refers to the true expenditure or cash outlay of any entity in a given category or budgetary area.

Spin-off – Refers to a type of corporate reorganisation in which the original corporation transfers some of its assets to a newly formed corporation.

Split-off point – Refers to the stage in the production process at which joint products become identified as distinct products which can be sold or processed further.

Spoilage / wastage – Refers to materials wasted or spoiled in the production process.

Spot rate -  Refers to the price at which a currency can be purchased or sold and then delivered within two business days, e.g., spot dollar.

Spot price - The current market price.

Spreadsheet - A method of storing data in cells in such a way that a change in one of the entries will automatically change any appropriate totals.

Stabilising speculation - Where the actions of speculators tend to reduce price fluctuations.

Stable dollar assumption – Is the assumption when using money as a measuring unit and preparing financial statements expressed in dollars, that the dollar is a stable unit of measurement.

Stable monetary unit concept – This concept allows accountants to ignore the effect of inflation in the accounting records.

Stabilisation policy - Any policy designed to reduce the economy's cyclical fluctuations and thereby to stabilise national income at or near a desired level.

Staff authority – Refers to the power to give advice, support, and service to line departments. Staff managers do not command others. Examples of staff authority are found in personnel, purchasing, engineering, and finance.

Staff managers - Specialist advisers who provide support to line managers and to the board of directors.

Stagflation - The coexistence of high rates of unemployment with high, and sometimes rising, rates of inflation.

Stake – Refers to a share or an interest in an enterprise, especially a financial share.

Stakeholder objectives - The goals of people with interests in the business. What stakeholders want to achieve.

Stakeholders (in a company) - People who. are affected by a company's activities and/or performance (customers, employees,. owners, creditors, people living in the neighbourhood, etc.). They may or may not be in a position to take decisions, or influence decision taking, in the firm.

Stale cheque – Is when a cheque is six months or older than the date affixed to the cheque by the maker. If a customer’s check is presented more than six months after the date appearing on the cheque, the paying bank has the option of paying or dishonoring the cheque because the cheque is deemed "stale".

Standard - A quantitative expression of a performance objective, such as standard hours of labor allowed for actual production or a standard purprice of materials per unit.

Standard & Poors (S&P) 500 - An index of the 500 largest, most actively traded stocks on the New York Stock Exchange. It provides a guide to the overall health of the US stock market.

Standard cost - The usual cost of a specific activity.  It is a production or operating cost that is carefully predetermined. A standard cost is a target cost that should be attained. The standard cost is compared with the actual cost in order to measure the performance of a given costing department or operation.

Standard cost system – A process in cost accounting by which production activities are recorded at standard costs and variances from actual costs are isolated. Standard costs are carefully predetermined target costs that should be attained under efficient operating conditions.

Standard deduction – Refers to the amount allowed to an individual taxpayer who does not elect to itemize deductions.

Standard deviation - The average deviation from the arithmetic mean of a set of data (accounting for plus and minus signs in the calculation) found by the square root of the variance.

Standardisation - The use of uniform resources and activities.

Standardised unemployment rate - The measure of the unemployment rate used by the ILO and OECD. The unemployed are defined as persons of working age who are without work, available to start work within two weeks and either have actively looked for work in the last four weeks or are waiting

to take up an appointment. Start-up capital - The finance needed by a new business to pay for essential fixed and current assets before it can begin trading.

Start-up costs – Refer to pre-opening one-time expenditures incurred to open a new facility, introduce a new product or service, conduct business in a new territory.

Stated capital - 1. the amount of capital contributed by stockholders of a corporation. It may also refer to the method of valuating no-par-value stock where the portion of the amount contributed is credited to the capital stock account and the balance is credited to paid in capital. Or 2. the legal capital of a company.

Stated value – Is used to refer to per share value sometimes assigned to no-par stock by the corporation.

Statement - 1. the summary statement documenting terms, conditions, or status of an account. An example is a statement of retail credit account status. Or 2. the formal document presenting the financial condition and operating performance of an enterprise. These include the income statement, balance sheet, and statement of changes in financial position. Also included may be documents for internal use such as performance appraisals, budgets, and so on. Or 3. verbal utterance or proposition.

Statement of account – Is the report indicating the account status of an agreement between creditor and debtor.

Statement of accounting policies -  Refers to a combination of the definition of the reporting organisation, statement of general accounting policies, statement of particular accounting policies, and a statement of changes in accounting policies.

Statement of affairs – Is a financial report showing assets and liabilities at expected liquidation values and stockholders' equity.

Statement of cash flow – Is a report that measures the flow of money in and out of a business, as they apply to operating, investing, and financing activities.

Statements of Standard Accounting Practice - A list of rules to provide uniformity in specific accounting practices. 

States of nature – Refers to those conditions that are likely to occur and over which the decision maker has no control.

Static efficiency - Occurs when resources are allocated efficiently at a point in time i.e. how much output that can be produced now from a given stock of resources, and whether producers are charging a price to consumers that fairly reflects the cost of factors used to produce a good or service.

Statistical process control - The collection of data about the performance of a particular process in a business.

Statistical quality control – Refers to the method of quality control that uses statistical sampling of units produced by a production process.

Statistical sampling – Is the method based on the assumption that, within a given confidence level and allowance for sampling risk, a ranselected sample of items from a population will reflect the same characteristics that occur in the population.

Statistics – The  field of study concerning information calculated from sample data.

Statuary audit – Is an audit conducted to meet the particular requirements of a governmental agency.

Statuary law – Refers to law enacted by the legislative branch of government, as distinguished.

Step costs – Refer to those costs that are approximately fixed over a small volume range, but are variable over a large volume range. For example, supervision costs are fixed for a given range of production volume, but increased production often requires additional work shifts leading to added

supervisory costs in a lump-sum fashion.

Stewardship - The responsibility for taking good care of resources entrusted to one, e.g., boards of directors must show good stewardship towards the company for which they are a board member.

Stock - This can refer to the shares of a limited company (see Shares ) or goods manufactured or bought for re-sale by a business.

Stock certificate – Is a document showing stockholder's ownership in the company.

Stock control account - An account held in the general ledger which holds the value of all the stock held in the inventory subsidiary ledger.

Stockholders - The owners of a corporation who have supplied money to the firm by purchasing its shares. Also called shareholders.

Stock index – Is a formalised screened listing of traded securities, e.g. the Dow Jones Industrial Average that tracks a portfolio of stocks.

Stock market - A special share market, usually where second hand shares can be traded.

Stock option – Is when the right is given the holder to buy a specified number of shares of stock at a certain price by a particular date. Stock option plans are often used to compensate corporate officers and other employees for specific services.

Stock rotation - the flow of stock into and out of stores.

Stock split – Refers to when there is the issuance of a large amount of additional shares, thereby reducing the par value of the stock on a proportionate basis.

Stock taking - Physically checking a business's stock for total quantities and value.

Stock turnover - The number of times in a trading year a firm sells the value of its stocks.

Stock turns – A ratio that is used to show the number of times per year that the stock (raw material, wip & finished goods) is turned over in relation to the sales revenue of a given product. Calculation - Stock turns = Sales turnover of products / Value of raw material, wip & finished goods.

Stock valuation - Valuing a stock of goods bought for manufacturing or re-sale.

Stop loss order – Is the direction given to a broker to buy or sell a stock when it rises to or drops below a certain price.

Storage - 1. the process of storing information in a computer memory or on a magnetic tape or disk. Or 2. an electronic memory device. Or 3. a depository for goods, e.g. a stockroom or warehouse;

Stores -   1. the  control account for all purchases of materials and supplies. All purchases of materials, parts, and supplies are charged to Stores as purchased because the storekeeper is accountable for them. The Stores Control account is supported by an underlying subsidiary ledger, called store cards. Or 2. the raw materials, supplies, and parts. 3. retail outlets.

Straight-line depreciation - Depreciating something by the same (ie. fixed) amount every year rather than as a percentage of its previous value. Example: a vehicle initially costs $10,000. If you depreciate it at a rate of $2000 a year, it will depreciate to zero in exactly 5 years. See Depreciation .referred to as

Straight line method - A method used to calculate the annual depreciation allowance by subtracting the estimated scrap value from the cost and

dividing the result by the expected life of the asset

Strategic alliance –  Used to refer to an agreement between two or more organisations/entities with complementary core competencies.result in synergy.

Strategic assets – Are any asset or group of assets that the entity needs to retain if the entity is to maintain the entity's capacity to achieve or promote any outcome that the entity determines to be important to the current or future well-being of the entity.

Strategic behaviour – Behaviour based on strategy. People often think and behave strategically. How you think others will respond to your actions is likely to influence your own behaviour. Firms, for example, when considering a price or product change will often take intQ account the likely reactions of their rivals

Strategic decisions - Decisions concerning policy that have a long term impact on a business. Can be risky.

Strategic planning – Is the planning process defining what you want to accomplish in your business and then identifying the path that will allow you to reach your goal in the most efficient and sensible manner.

Strategy – The pattern of decisions and actions that are taken by a business to achieve its goals and objectives.

Stratified sampling – is a sampling method where the population is divided into homogenous sub groups.  Each sub-group is sampled individually.

Strike - A form of industrial action where employees refuse to work.

Structural unemployment - Unemployment due to a mismatch between characteristics required by available jobs and characteristics possessed by the unemployed labour.

Structure of a business - The way in which a business is organised.

Subordinated debt - If a company is liquidated (i.e. becomes insolvent ), the secured creditors are paid first. If any money is left, the unsecured creditors are then paid. The amount of money owed to the unsecured creditors is termed the 'subordinated debt' of the company.

Substantive – refers to something which is real rather than apparent, as seen by an unbiased observer and not just the official view of management.

Sublet – Is used in real estate, refers to the leasing of space within a leased facility by the original lessee.

Subsidiary company - A firm in which a controlling interest is owned by another company, called the parent company.

Subsidiary ledgers - Ledgers opened in addition to a business's general ledger. They are used to keep sections of a business separate from each other (e.g.. a Sales ledger for the customers, and a Purchase ledger for the suppliers). (See Control Accounts )

Subordinated debt – Refers to a debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt holders receive payment only after senior debt claims are paid in full.

Subsidiary company - A firm in which a controlling interest is owned by another company, called the parent company.

Subsidiary ledgers - Ledgers opened in addition to a business's general ledger. They are used to keep sections of a business separate from each other (e.g.. a Sales ledger for the customers, and a Purchase ledger for the suppliers). (See Control Accounts )

Subsidy - A payment made by the government to producers of goods and services.

Subsistence farming - The production of farm output mainly for own consumption.

Substance over form – Refers to an accounting concept where the entity is accounting for items according to their substance and economic reality and not merely their legal form.

Substitute goods A pair of goods that are considered by consumers to be alternatives to each other. As the price of one goes up, the demand for the other rises.

Substitutes - Any good that can stand in for another good to satisfy similar needs or desires. The degree of substitutability is measured by the magnitude of the positive cross elasticity between the two.

Substitutes in supply - These are two goods where an increased production of one means diverting resources away from producing the other.

Substitution effect - The tendency of people to substitute in favour of cheaper commodities and away from more expensive commodities:

Substitution effect of a price change - The effect of a change in price on quantity demanded arising from the consumer switching to or from alternative (substitute) products.

Substitution effect of a rise in wage rates  - Workers will tend to substitute income for leisure as leisure now has a higher opportunity cost. This effect leads to more hours being worked as wage rates rise. 

Substitution effect of a tax rise - Tax increases reduce the opportunity cost of leisure and thus encourage people to work less.

Sum of years digits (SYD) method - The accelerated depreciation method in which a constant balance (cost minus salvage value) is multiplied by a declining depreciation rate.

Sundry account – Refers to an account where miscellaneous items are recorded, e.g., sundry receivables represent miscellaneous receivables.

Sunk costs - Costs that cannot be recouped (e.g. by transferring assets to other uses).

Superannuation – Is a monthly payment made to someone who is retired from work.

Supernormal profit (also known as pure profit, economic profit, abnormal profit, or simply profit) - The excess of total profit above normal profit.

Supporting documents – These documents  assist in making a case (prove a point or forward an argument) by providing additional depth and analysis for much of the case in question.

Suppressed inflation – Refers to a situation exists in which prices would rise -- if government regulations did not establish artificial limits on prices, wages, etc.

Supply - The entire relationship between the quantity supplied of a good or service and its price.

Supply curve - The graphical representation of the relationship between the quantity of some product that producers wish to make and sell per period of time and the price of that product, other things being equal.

Supply of labour - The total number of hours of work that the population is willing to supply.

Supply schedule - A table showing for selected values the relationship between the quantity of some product that producers wish to make and sell

per period of time and the price of that product, other things being equal.

Supply shock - An event that directly alters firms' costs and prices, shifting the economy's aggregate-supply curve and thus the Phillips curve.

Supply side measure - A government policy designed to increase output.

Supply-side " policy -  Government policy that attempts to alter the level of aggregate supply directly (rather than through changes in aggregdemand).

Surcharge – Refers to a charge added on top of another charge for a specific service, product or purpose.

Surety bond – Refers to a contract by which one party agrees to make payment on any default or the debt of another party.

Surplus - 1. Capital surplus, the stockholders' equity in a corporation in excess of par or stated value of capital stock. Or 2. earned surplus or retained earnings reflecting the accumulated net income less dividend distributions. Or 3. sometime used as a short form of government budget surplus.

Surveillance - This is to close watch kept over someone or something.

Suspense account - A temporary account used to force a trial balance to balance if there is only a small discrepancy (or if an account's balance is simply wrong, and you don't know why). A typical example would be a small error in petty cash. In this case a transfer would be made to a suspense account to balance the cash account. Once the person knows what happened to the money, a transfer entry will be made in the journal to credit or debit the suspense account back to zero and debit or credit the correct account.

Sustainable development - Is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Sustainable growth rate (SGR) – (Accounting) Is used to show how fast a company can grow using internally generated assets without issuing additional debt or equity.

Sustainability (environmental) - The ability of the environment to survive its use for economic activity.

Sustainable output - The level of national output corresponding to no excess or deficiency of aggregate demand.

SWOT Analysis -  An analysis of internal strengths and weaknesses and the external threats and opportunities facing a business.used forms of business analysis.

1. Strengths: Strengths are those factors that make an organization more competitive than its marketplace peers. Strengths are what the company has a distinctive advantage at doing or what resources it has that is strategic to the competition. Strengths are, in effect, resources, capabilities and core competencies that the organization holds that can be used effectively to achieve its performance objectives.

2. Weaknesses: A weakness is a limitation, fault, or defect within the organization that will keep it from achieving its objectives; it is what an organization does poorly or where it has inferior capabilities or resources as compared to the competition.

3. Opportunities: Opportunities include any favourable current prospective situation in the organization's environment, such as a trend, market, change or overlooked need that supports the demand for a product or service and permits the organization to enhance its competitive position.

4. Threats: A threat includes any unfavourable situation, trend or impending change in an organization's environment that is currently or potentially damaging or threatening to its ability to compete. It may be a barrier, constraint, or anything that might inflict problems, damages, harm or injury to the organization.

Swift code - Within the context of international payment transactions, is a code issued by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) that enables banks worldwide to be identified without the need to specify an address or bank number. SWIFT codes are used mainly for automatic payment transactions.

Syndicate – Refers to a group of investment bankers/individual firms that acts jointly, on a temporary basis, to achieve a goal.

Synergy – Refers to when the working together of two or more things to produce an effect greater than the sum of their individual effects. For example, in the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join.

Synergy -  Where the activities of two or more businesses when brought together create more value then they do separately.

System - Parts that work together to achieve an objective; a system can be a communications system, a business, an economic or a political system.

Systematic sampling – A sampling method that develops a system of selecting criteria and then uses this system to conduct its sample. i.e. every 10person that enters the door.

 

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"Some regard private enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow that they can milk. Only a handful

see it for what it really is - the strong horse that pulls the whole cart."  Winston Churchill

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 inflasubsequent "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.

Three column cash book - A journal which deals with the day to day cash and bank transactions of a business. The side of a transaction which relates directly to the cash or bank account is usually balanced within the journal and used as a part of the nominal ledger when compiling a balance sheet (ie. only the side which details the sale or purchase needs to be posted to the nominal ledger ).

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.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:

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, 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.

words subtracting cost of sales from turnover.

Trading blocs - 1. Countries that join together to restrict trade or 2. A trade bloc is a large free trade zone or near-free trade zone formed by one or more tax, tariff and trade agreements.

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.

True and fair view – This accounting principle states that a firm should provide a true and fair view in regard to financial conditions and also its operating results. The concept of true and fair view does not necessarily mean the absolute and total truth about the firm. Financial statements are after all the product of different management's judgments and various  estimates. The principle of true and fair view requires that theabout the firms' position.

Trust – Refers to an agreement in which the trustee takes title to property (called the corpus) owned by the grantor (donor) to protect or conserve it for either the grantor or the trust's beneficiary. The trust is established by the grantor. The trustee is typically given authority to invest the propreturn.

Turnaround – Refers to the reversal and other possible changes to the unfavourable circumstances relating to the business where a specific investment opportunity may possibly exist.

Turnover - The income of a business over a period of time (usually a year).

Turnover ratio – This ratio measure of a particular asset's activity (e.g., sales, cost of sales). The average asset balance for the period is used equal to the beginning balance plus the ending balance divided by 2. A turnover ratio is an activity ratio. By looking at the turnover of an asset in terms of generating revenue, the accountant can properly appraise a company's ability to manage assets efficiently.

Two-part tariff - A method of charging for a good or a service, usually a utility such as electricity, in which the consumer pays a flat access fee and a specified amount per unit purchased.

Two-way communication - When a receiver gives a response to a message and there is a discussion about it.

 

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"I learned that the only way you are going to get anywhere in life is to work hard at it. Whether you're a musician, a writer, an athlete or a businessman, there is no getting around it. If you do, you'll win—if

you don't, you won't."         Bruce Jenner, Olympic Gold Medalist

Ultra vires – Refers to an action outside the proper authority or power of a corin 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 - An account used to show the current total of money received (ie. not yet banked or spent). The 'funds' can include money, cheques, credit card payments, bankers drafts etc. This type of account is also commonly 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.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 ordispleasure that person would derive from that outcome.

 

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"If I had only known, I would have been a locksmith."  Albert Einstein

Validate -1. to attest to the correctness and reliability of a financial item. A validACCOUNTANT 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 conthe 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 serrendered. 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) - Value Added Tax, or VAT as it is usually called is a sales tax which increases the price of goods. At the time of writing the UK VAT standard rate is 17.5%, there is also a rate for fuel which is 5% (this refers to heating fuels like coal, electricity and gas and not 'road fuels' like petrol which is still rated at 17.5%).

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.

Variable costing – Is a costing method in which the costs to be inventoried include only the variable manufacturing costs. Fixed factory overhead is treated as a period cost-it is deducted along with the selling and administrative expenses in the period incurred.

Variable expenses – Refers to those business expenses that usually fluctuate dependent upon production or sales volume.

Variable factor - An input that can be varied by any desired amount in the short run.

Variable interest rate – This  is an interest rate that moves up and down based on the changes of an underlying interest rate index, e.g. a credit card

might have a variable rate that is a certain spread over the prime rate.

Variable inputs - Those inputs whose quantity used can be varied in the short run.

Variance - The average deviation of all figures from the mean, which removes plus and minus signs by 'squaring' the deviation figure. Or in accounting, is the difference between a projected number and the actual number, e.g. 1. a budget variance is spending either more or less from the amount that was budgeted; and 2. a cost variance is the difference between actual cost and standard cost in the categories of direct material, direct labor, and direct overhead.

Variance analysis - The process of calculating variances and attempting to identify their causes.  This is done by comparing the actual results with the budgeted or predicted results and investigating any discrepancies.

VAT – Value added tax.

Velocity of circulation - National income divided by quantity of money.

Vendor – Refers to a legal entity that promotes or exchanges goods or services for money.

Vendor rating - A method of measuring and evaluating the performance of suppliers.

Vent for surplus - When international trade enables a country to exploit resources that would otherwise be unused.

Venture capital – This is a financing source for new businesses or turnaround ventures that usually combine much risk with potential for

Venture capitalists - Providers of funds for small or medium sized companies that may be considered too risky by other investors.

Verifiable – This means confirming or substantiating an item. The term refers to the ability of accountants to ensure that accounting information is what it purports to be.

Verifiability – This is where the fact is capable of being tested (verified or falsified) by experiment or observation.

Vertical equity - The idea that taxpayers with a greater ability to pay taxes should pay larger amounts.

Vertical financial analysis – This is drawing a comparison of the financial ratios of a company in time – past, present and future.

Vertical integration – Is the combination of a parent firm and the suppliers of its raw materials or purchasers of its finished product. Vertical merger extends the lines of distribution or production, either backward toward the source or forward toward the end-user.

Very long run - A period of time that is long enough for the technological possibilities available to a firm to change.

Viability – Means  having the capability of developing and surviving as a relatively independent social, economic or political unit.

Visible balance - The balance of money received from exports of goods and money spent on the import of goods.

Visibles - All items of foreign trade that are tangible; goods as opposed to services.

Visible trade - The exports and imports of goods.

Voluntary export restriction (VER) - An agreement by an exporting country to limit the amount of a good exported to another country.

Volume gain – This means to obtain advantages due to increase in volume, such as value increase, points in gross margin or profit.

Voucher – Refers to a form used in an internal control system to contain and verify all information about a bill to be processed or paid.

 

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"Perpetual devotion to what a man calls his business, is only to be sustained by perpetual neglect of many other things."  Robert Louis

Stevenson

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 engovernment'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. 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 thereexcludes 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 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.

Work papers – These refer to in accounting the documents that show the evidence which auditors have gathered through the work they have done, these papers also show the methods and different procedures the auditors have followed, and what conclusions the auditors have arrived at in the audit of the financial statements.

Working to rule - Workers do the bare minimum they have to, as set out in their job descriptions.

Work in progress - The value of partly finished (ie. partly manufactured) goods.

Work-in-progress - Partly finished goods.

Works councils - Committees, made up of workers, who are consulted or informed on matters that affect employees.

Work study - A process which investigates the best possible way to use business resources.

Work to rule - When employees do not carry out duties which are not in their employment contract.

World bank -  International Bank For Reconstruction and Development (IBRD).

World price - The price of a good that prevails in the world market for that good.

World Trade Organisation (WTO) -  An organisation which seeks to promote free trade between nations and monitors world trade.

World wide web (WWW) – Refers to the internet system for worldwide hypertext linking of multimedia documents, making the relationship of information that is common between documents easily accessible and completely independent of physical location.

Worm – A destructive computer program that replicates itself and penetrates a valid computer system. It may also spread within a network.

Worth – Refers to something having a specified value.

Write down - To reduce the book value of the asset.

Write-off - Depreciating an asset to zero in one go.

Write up  - To increase the recorded value of an asset, but it is not allowed under GAAP (Generally Accepted Accounting Principles) and therefore seldom used.

Writing off - The process of reducing the value of an asset by the amount of depreciation.

WTO - World Trade Organisation.  Organisation of member states aimed at reducing barriers to free trade.

 

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"Success is going from failure to failure without a loss of enthusiasm." Winston Churchill

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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"A teacher affects eternity; he can never tell where his influence stops."  Henry Brooks Adams

 

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.

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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"My father taught me to work; he did not teach me to love it."  Abraham Lincoln

 Zero Based Account (ZBA) - Usually applied to a personal account (checking) where the balance is kept as close to zero as possible by transferring money between that account and, say, a deposit account.

Zero Based Budget (ZBB) - Starting a budget at zero and justifying every cost that increases that 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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"Work is the refuge of people who have nothing better to do."  Oscar Wilde