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Product Details
| ISBN-13: | 9781482895834 |
|---|---|
| Publisher: | AuthorHouse |
| Publication date: | 05/01/2014 |
| Pages: | 606 |
| Sales rank: | 526,753 |
| Product dimensions: | 6.00(w) x 9.00(h) x 1.50(d) |
| Age Range: | 1 - 17 Years |
Read an Excerpt
The Entrepreneurs' Dictionary OF BUSINESS AND FINANCIAL TERMS
By Khwaja Masoom
Trafford Publishing
Copyright © 2013 Khwaja MasoomAll rights reserved.
ISBN: 978-1-4907-0133-2
CHAPTER 1
A
AAA: See Accumulated Adjustment Account.
A&E: Can mean either Appropriation & Expense or Analysis & Evaluation.
A&G: Administrative & General.
A&M: Additions and Maintenance.
A&P: Administrative and Personnel.
AAT: In Great Britain, it is Association of Accounting Technicians.
ABA: Accredited Business Accountant or Accredited Business Advisor. It is a national credential conferred by Accreditation Council for Accountancy and Taxation to professionals who specialize in supporting the financial needs of individuals and small to medium sized businesses. ABA is the only nationally recognized alternative to the CPA. Most accredited individuals do not perform audits. Generally, they are small business owners themselves. In addition to general accounting work, CPAs are also heavily schooled in performing audits; however, only a small fraction of America's businesses require an audit. In general, a CPA has majored in accounting, passed the CPA examination and is licensed to perform audits. An ABA has majored in accounting, passed the ABA comprehensive examination and in most states is not licensed to perform audits.
Abacus: (1) Instrument of ancient origin used to perform arithmetic calculations by sliding counters along rods or in grooves. (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.
Abandonment Option: The option of terminating an investment earlier than originally planned.
Abatement: Complete removal of an amount due, (usually referring to a tax abatement, a penalty abatement or an interest abatement within a governing agency.) In general, it is the reduction or lessening. In law, it is the termination or suspension of a lawsuit. For example, an abatement of taxes is a tax decrease or rebate.
ABC: See Activity-Based Costing.
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: (a) Separate finished goods into types (chairs of different models, and so on); separate raw materials into types (screws, nuts, and so on). (b) Calculate the annual dollar usage for each type of inventory (multiply the unit cost by the expected future annual usage). (c) Rank each inventory type from highest to lowest, based on annual dollar usage. (d) Classify the inventory as A-the top 20%; B-the next 30%; and C-the last 50% of dollars usage, respectively. (e) Tag the inventory with its appropriate ABC classification and record, those classifications in the item inventory master records.
ABM: See Activity Based Management.
Abnormal Expense: See Extraordinary Items.
Abnormal Gain: See Normal Loss.
Abnormal Items: See Extraordinary Items.
Abnormal Loss: See Normal Loss.
Abnormal Returns: Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone. Related: Excess Returns. Or it is the difference between the actual return and that is expected to result from market movements (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. Abnormal Spoilage is spoilage that is not part of everyday operations. It occurs for reasons such as the following: out-of-control manufacturing processes, unusual machine breakdowns, and unexpected electrical outages that result in a number of spoiled units. Some abnormal spoilage is considered avoidable; that is, if managers monitor processes and maintain machinery appropriately, little spoilage will occur. To highlight these types of problems so that they can be monitored, abnormal spoilage is recorded in a Loss from Abnormal Spoilage Account in the general ledger and is not included in the job costing inventory accounts (work in process, finished goods, and cost of goods sold).
Above Full Employment Equilibrium: A situation in which macroeconomic equilibrium occurs at a level of real GDP above long-run aggregate supply.
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. For the individual, is a term derived from a solid bold line on Form 1040 and 1040A above the line for adjusted gross income. Items above the line prior to coming to adjusted gross income, for example, can include: IRA contributions, half of the self-employment tax, self-employed health insurance deduction, Keogh retirement plan and self-employed SEP deduction, penalty on early withdrawal of savings, and alimony paid. A taxpayer can take deductions above the line and still claim the standard deduction. In accounting, denotes revenue and expense items that enter fully and directly into the calculation of periodic net income, in contrast to below the line items that affect capital accounts directly and net income only indirectly.
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 Change: A numerical change in an empirical value e.g. cost of goods was reduced by $9.00.
Absolute Poverty: When only a subsistence level is attained. When only the minimum levels of food, clothing and shelter can be met.
Absolute Priority: Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full before junior creditors receive any payment.
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. (2) To distribute or spread costs by the process of appropriation or allocation. (3) Is to assimilate, transfer or incorporate amounts in an account or a group of accounts in a manner in which the first entity loses its identity and is "absorbed" within the second entity. For example, see Absorption Costing.
Absorbed Costs: Incorporates both variable and fixed costs.
Absorption: See Absorb.
Absorption Costing: Method in which the costs of manufacturing, variable and fixed, are treated as product costs, the non-manufacturing costs (i.e., administrative and selling expenses) are classified as period costs. Absorption costing for inventory valuation is required for external reporting.
[A comparison between absorption and direct costing follows:
Absorption Costing
1. Required for outside reporting 2. Includes fixed overhead as an inventoriable cost. 3. Stresses gross profit. 4. Has a higher net income when production exceeds sales
Variable Costing
1. Not accepted for outside reporting 2. Does not include fixed overhead as an inventoriable cost. 3. Stresses contribution margin. 4. Has a higher net income when sales exceed production]
Absorption Variance: The variance from budgeted absorption costing of manufactured product and the actual cost of the manufactured product.
ACAS: A body which mediates where conflict exists in business.
ACAT: Accreditation Council for Accountancy and Taxation. Is a national organization established in 1973 as a non-profit independent testing, accrediting and monitoring organization. The Council seeks to identify professionals in independent practice who specialize in providing financial, accounting and taxation services to individuals and small to mid-size businesses. Professionals receive accreditation through examination and/or coursework and maintain accreditation through commitment to a significant program of continuing professional education and adherence to the Council's Code of Ethics and Rules of Professional Conduct.
ACB: Normally refers to 'adjusted cost base.'
Accelerated Cost Recovery System (ACRS): Schedule of depreciation rates allowed for tax purposes.
Accelerated Depreciation: A method recognizing high, amounts of depreciation in the earlier years and lower amounts in the later years of a fixed asset's life. Or the allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset's life is greater than the straight-line amount, but will be less in the later years. In total the amount of depreciation over the life of the asset will be the same as straight-line depreciation. The difference between accelerated and straight-line is the timing of the depreciation. For profitable companies, the use of accelerated depreciation on the income tax return will mean smaller cash payments for income taxes in the earlier years and higher cash payments for income taxes in later years.
Acceleration Clause: A clause (often in mortgages or other loans) where some action will occur ahead of schedule as a result of some other action. For example, an acceleration clause in a loan may mean that the full amount is due immediately if the debtor misses two monthly payments in a row.
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.
Acceptance: A drawee's promise to pay either a Time Draft or Sight Draft. Normally, the acceptor signs his/her name after writing "accepted" (or some other words indicating acceptance) on the bill along with the date. That "acceptance" effectively makes the bill a promissory note, i.e. the acceptor is the maker and the drawer is the endorser.
Acceptance Sampling: Is sampling to determine whether internal control compliance is greater than or less than the tolerable deviation rate.
Accidential Means Death Benefit: An option in an insurance policy where the payment is a multiple (frequently double) the policy face amount in the case of death by accidential means. Death must usually result from the accidential means within a certain time period (usually 90 days).
Accommodation Endorsement: (1) The guarantee given by one legal entity to induce a lender to grant a loan to another legal entity. (2) A banking practice where one bank endorses the acceptances of another bank, for a fee, qualifying them for purchase in the acceptance market.
Account: (1) The detailed record of a particular asset, liability, owners' equity, revenue or expense. A section in a ledger devoted to a single aspect of a business (e.g. a Bank account, Wages account, Office expenses account). (2) A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise on credit will record these sales in a Sales account and in an Accounts Receivable account.
Accountable Plan: An accountable plan is any reimbursement or other expense allowance arrangement of an employer that meets all of the following requirements (therefore excluding it from gross w-2 earned income and tax): (i) It provides reimbursements advances or allowances including per diem and meals, to employees for any job related deductible business expense; (ii) Employees must be able to substantiate expenses covered in the plan; (iii) Employee must return any excess advances or payments.
Account Aging: Usually refers to the methods of tracking past due accounts in accounts receivable based on the dates the charges were incurred. Account aging can also be used in accounts payable, to a lesser degree, to monitor payment history to suppliers. See also Aging of Accounts.
Account Analysis: A way to measure cost behavior. It selects a volume-related cost driver and classifies each account from the accounting records as a fixed or variable cost. The cost accountant then looks at each cost account balance and estimates either the variable cost per unit of cost driver activity or the periodic fixed cost.
Accountant: A person 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 specialize 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.
Accountant's Opinion: If an independent certified public accountant is requested to audit a company's books, he will issue a opinion as to the condition of the financial statements. There are several degrees of opinion from clean to adverse. A clean opinion doesn't mean that every number is correct, only that the financials fairly represent the position of the company. An adverse opinion means the financials don't represent the position of the company. A disclaimer means the auditor can't (for any number of reasons) express an opinion on the statements.
Accountants' Report: Formal document that communicates an independent accountant's: (i) expression of limited assurance on financial statements as a result of performing inquiry and analytic procedures (Review Report); (ii) results of procedures performed (Agreed-Upon Procedures Report); (iii) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management (Compilation Report); or (iv) an opinion on an assertion made by management in accordance with the Statements on Standards for Attestation Engagements (Attestation Report). An accountants' report does not result from the performance of an audit. (See Auditors' Report)
Account Balance: The amount remaining in an account after all additions and deductions have been made up to the current date.
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Excerpted from The Entrepreneurs' Dictionary OF BUSINESS AND FINANCIAL TERMS by Khwaja Masoom. Copyright © 2013 Khwaja Masoom. Excerpted by permission of Trafford Publishing.
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