AA Rating: In advertising, media and publishing, the Average Audience Rating. |
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ABUNDANCE OF CAUTION: In banking, a lender's requirement that the borrower's collateral equal more than the asset to be purchased with the loan and that the borrower have enough money invested to insure the borrower cannot back out without significant loss of personal finances. If the borrower has his or her own money invested, the borrower will be more committed to succeed. |
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ACCELERATED DEPRECIATION: Any method of cost recovery ofa FIXED ASSET that is faster than using the STRAIGHT-LINE DEPRECIATION method. Traditional rationale supports higher maintenance and repair costs in later years. These costs are offset in the early years by the higher depreciation expense, resulting in a level effect on earnings throughout the useful life of the asset. Sometimes accelerated depreciation is used as a tax shelter because of large up-front write-offs with no reduction of cash flow. See several methods of accelerated depreciation described: ACCELERATED COST RECOVERY SYSTEM; SUM-OF-THE-YEARS-DIGITS; DOUBLE-DECLINING BALANCE. |
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ACCELERATION CLAUSE: A provision in a NOTE, BOND or MORTGAGE that states that, in the event of a default by the debtor, the entire balance outstanding shall become due and payable. |
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ACCEPTANCE: In contracting, an agreement by a buyer to accept an offer by a seller, often preceded by negotiation of price, scope, terms and conditions. In general financial transactions, the free act of assuming a risk. Some examples include: commercial paper issued by a sales finance company; an agreement on a TIME DRAFT promising payment; a BANKER'S ACCEPTANCE; a time draft drawn by the seller of goods on the buyer (a TRADE ACCEPTANCE). |
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ACCEPTANCE COMPANY: A company that purchases consumer loans (PAPER) from others. When sales are made, small businesses can make loans to customers then sell the loans to an acceptance company to obtain cash, but less cash than waiting for payment. Also known as sales finance company; factoring company. See FINANCE COMPANY. |
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ACCOUNT: In general, the contractual relationship between buyer and seller under which payment is made at a later time. The term OPEN ACCOUNT is used for commercial transactions whereas CHARGE ACCOUNT is used to describe personal transactions. In accounting and bookkeeping, an historical record of transactions, as shown on a STATEMENT OF ACCOUNT. Each account is an individual subclassification of 1) an asset; 2) a liability; 3) equity; 4) income; or 5) an expense as represented by ledger pages to which debit and credit entries are chronologically posted to record changes in value. Guidance for typical account types can be found in a CHART OF ACCOUNTS. In banking, a relationship established at a bank in the name of a client where deposits and withdrawals are made. Usually deposits are on-hand against which withdrawals can be made. Administrative responsibility is handled by an ACCOUNT OFFICER. |
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ACCOUNT AGING: See AGING. |
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ACCOUNT EXECUTIVE: A professional person in a firm who is responsible for a customer's ACCOUNT; the person at the firm who is contacted for discussion about the account. |
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ACCOUNT PAYABLE: See ACCOUNTS PAYABLE. |
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ACCOUNT RECEIVABLE: Amounts due to others for goods and services purchased. They are usually payable within 12 months (from report date) and thus are classified as current liabilities on the balance sheet |
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Accountability: Obligation to give answers and explanations concerning one's actions. Internal accountability exists within organizations; an example is management's responsibility to a board of directors. External accountability denotes an organization's responsibility to shareholders, lenders, and the public. The Bank monitors borrower accountability through project reviews and auditing to ensure that Bank funds are used with economy and efficiency, and in support of good governance. |
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ACCOUNTANT: A practitioner of ACCOUNTING as a profession after having attained a level of financial knowledge. A person whose work is to inspect, keep and adjust accounts. See also BOOKKEEPER; CERTIFIED PUBLIC ACCOUNTANT. |
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ACCOUNTANT'S OPINION: A statement signed by an independent public accountant that describes the scope and accuracy of an examination of the financial books and records of a business. Because financial reporting involves considerable discretion, the accountant's opinion is an important assurance of integrity. |
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ACCOUNTING: The system for recording, verifying and reporting financial information. Also, the profession performing these functions. See also ACCOUNT |
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ACCOUNTING CONTROL: Procedures and systems used to maintain accurate financial records and to safeguard the assets of the company. |
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ACCOUNTING CYCLE: The routine steps in processing accounting data during an accounting period. In sequence,
1) occurrence of the transaction,
2) classification of each transaction in chronological order (journalizing),
3) recording the classified data in ledger accounts (posting),
4) preparation of financial statements and 5) closing of nominal accounts. |
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ACCOUNTING EQUATION: The mathematical formula that defines the relationships of accounting arithmetic. At a given point in time, the BALANCE SHEET reflects the results of the accounting equation, wherein ASSETS equal LIABILITIES plus NET WORTH. To account for changes in financial condition over a period of time, the equation must also consider the INCOME STATEMENT effects of operations, wherein ASSETS equal LIABILITIES plus NET WORTH plus INCOME less EXPENDITURES. |
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ACCOUNTING FIRM: A business that provides professional financial and accounting services. |
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ACCOUNTING PERIOD: The normal calendar duration for reporting of financial information. The time for closing accounts when accounting data are summarized into financial statements. In most businesses, this is done monthly, quarterly and annually. |
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Accounting polices: The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements |
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ACCOUNTING POLICIES: Basic concepts, assumptions, policies, methods and practices used by a company for maintaining the BOOKS OF ACCOUNT and summarization into FINANCIAL STATEMENTS. The principles should be consistent with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. In larger companies, accounting policy, practices and principles may each have more precise definitions. |
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ACCOUNTING PRACTICES: Basic concepts, assumptions, policies, methods and practices used by a company for maintaining the BOOKS OF ACCOUNT and summarization into FINANCIAL STATEMENTS. The principles should be consistent with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. In larger companies, accounting policy, practices and principles may each have more precise definitions. |
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ACCOUNTING PRINCIPLES: Basic concepts, assumptions, policies, methods and practices used by a company for maintaining the BOOKS OF ACCOUNT and summarization into FINANCIAL STATEMENTS. The principles should be consistent with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. In larger companies, accounting policy, practices and principles may each have more precise definitions. |
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Accounting standards: Accounting principles after they have been established by an authoritative accounting rule-making body |
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ACCOUNTS RECEIVABLE AGING: Classification of customer ACCOUNTS RECEIVABLE according to the date of sale. The aging schedule reveals patterns of delinquency and shows where collection efforts should be concentrated. The longer accounts are left unpaid, the more likely they become uncollectible. Aging evaluations can help prevent losses on future sales, since old customers who fail to pay may begin buying from other sources of supply and will leave bad debts on the aged accounts in your business. See AGING; AGING SCHEDULE. |
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ACCOUNTS RECEIVABLE FINANCING: Short-term loans made to obtain cash using ACCOUNTS RECEIVABLE as COLLATERAL. The cash received will be less than the amount of the accounts receivable. |
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Accounts receivable turnover: Measurement arrived at by dividing annual net sales by the average accounts receivable. For an entity with a decreasing turnover rate, the longer receivables are held, the less likely they are to be collected. |
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Accretion:
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a) Growth in assets through mergers, acquisitions, or internal expansion.
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(b) Adjustment of the difference between the face value of a bond and the price of the bond bought at an original discount.
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Accrual Accounting: Accounting method that recognizes transactions and other events when they occur (and not as cash or its equivalent is issued or paid). The events are recorded in the accounting periods and reported in the financial statements of the periods to which they relate. |
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ACCRUAL BASIS: An accounting method whereby income and expense items are recognized and entered in the books as they are earned or incurred, even though they may not have been received or actually paid. Many small businesses use the alternative CASH BASIS or MODIFIED CASH BASIS accounting method. Opposed to CASH BASIS. |
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ACCRUAL METHOD: See ACCRUAL BASIS. |
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ACCRUALS: See ACCRUED EXPENSE.
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ACCRUE: To accumulate over a period of time, such as ACCRUED INTEREST, ACCRUED EXPENSE or ACCRUED DEPRECIATION. As an example, accrued expenses have been incurred but are not yet payable. See also ACCRUED. |
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ACCRUED: That which has accumulated over a period of time and is an obligation that must be satisfied at some point in the future. |
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ACCRUED DEPRECIATION: See ACCUMULATED DEPRECIATION. |
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ACCRUED EXPENSE: A debt that has been incurred or has accumulated over a period of time and must be paid but has not yet been paid. |
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ACCRUED EXPENSE.: A debt that has been incurred or has accumulated over a period of time and must be paid but has not yet been paid. |
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ACCRUED INCOME: Sales or revenue that has been earned or accumulated over a period of time but has not yet been collected. |
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ACCRUED INCOME.: Sales or revenue that has been earned or accumulated over a period of time but has not yet been collected. |
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ACCRUED INTEREST: INTEREST that has accumulated over a period of time and is obligated to be paid but has not yet been paid. Accrued interest can either be income, such as interest from investments, or it can be an expense, such as payment of interest on a debt. |
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ACCRUED INTEREST.: INTEREST that has accumulated over a period of time and is obligated to be paid but has not yet been paid. Accrued interest can either be income, such as interest from investments, or it can be an expense, such as payment of interest on a debt. |
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Accrued Liability: Liabilities which are incurred, but for which payment is not yet made, during a given accounting period. Some examples in a manufacturing environment would be: wages, taxes, suppliers/vendors, etc |
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Accrued revenue: Revenue that has been earned and must be accounted for but is not received by the end of the reporting period |
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ACCUMULATED DEPRECIATION: An accounting term for the amount of DEPRECIATION accrued over a period of time. |
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ACCUMULATED DIVIDEND: Payment to stockholders due to be paid. |
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ACID TEST: See QUICK RATIO. |
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ACID TEST RATIO: See QUICK RATIO. |
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ACQUISITION: To purchase a business or buy another business. Also, the process of obtaining a loan, obtaining other forms of financing or the purchase of property by the business. |
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ACQUISITION COST: The amount of money expended to obtain title to property, usually relating to fixed assets. |
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ACTUAL: That which has occurred, as opposed to that which was previously expected, budgeted, estimated or planned. |
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ACTUAL COSTS: The expenses that have been incurred and recorded in the books; as opposed to forecasted or anticipated expenses. Also, production expenses that are incurred by production activities during an accounting period. |
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ACTUAL PERFORMANCE: In accounting, the financial amounts recorded as a result of operations; demonstrating the manner in which a product operates; the results of decisions. |
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AD VALOREM EQUIVALENT: In international trade, a "specific" duty imposed as a percentage of the value of the imported goods, usually applied during a tariff adjustment. |
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AD VALOREM TARIFF: In international trade, a duty (tariff) assessed by customs as a percentage of the value of the imported goods. |
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AD VALOREM TAX: A tax that is proportionate to the value of the property being taxed, such as sales tax; a tax calculated as a flat percentage of sales price. As opposed to a specific tax per unit based on quantity, such as excise tax per package of cigarettes. |
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ADD-ON INTEREST: A method of computing interest whereby interest charges are made for the entire principal amount for the entire term, regardless of any repayments of principal made. The result is an interest charge that is almost double that of the stated SIMPLE INTEREST RATE. |
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ADDENDUM: Additional material attached to and made part of a document. Often an addendum is the result of information learned after the original document was prepared. |
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Additional paid-in capital:
Excess received from stockholders over par value of the stock issued; also called contributed capital in excess of par. Additional paid in capital is shown in the shareholder equity section of the balance sheet.
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ADJACENCIES: In retail, adjoining merchandise-category areas in store layouts. |
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ADJUSTED BASIS:  The original COST BASIS of property reduced by depreciation and increased by improvements. |
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ADJUSTING ENTRY: An accounting entry to record an internal transaction on an account that is usually made at the end of an accounting period, such as an allocation or correction of an error.
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ADJUSTMENT ASSISTANCE: Financial and technical assistance by a government to companies, workers and communities designed to help them adjust to rising import competition. |
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ADMINISTRATIVE EXPENSE: Costs associated with staff and supporting personnel who are involved in managing the activities of the business; indirect expenses. As opposed to direct or production personnel expenses. |
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ADVANCE: To give an amount before it is due, such as an advance payment of salary to an employee. |
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ADVANCE PAYMENT: In international trade, payment for goods by a foreign customer prior to receiving the goods. This method of payment is beneficial to the supplier but is very risky for the foreign customer because the goods may not get shipped as planned, the goods may get lost or the goods could be damaged during shipment. |
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ADVENTURE CAPITAL: A speculative investment, sometimes by another entrepreneur who was previously successful in a new business venture, sometimes by another business looking for new avenues of growth. Adventure capital is a more risky investment than venture capital. In 1987, it was estimated that about $27 billion was invested as adventure capital, as compared to about $1 billion invested in VENTURE CAPITAL. See also ADVENTURE CAPITALIST; VENTURE CAPITAL |
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ADVENTURE CAPITALIST: A speculative investor who invests for the excitement of the venture, based on faith and trust that the vision of the person, new company, product or service will be successful; the decision is not based on solid financial analysis, but with the hope financial rewards will result. An adventure capitalist is more speculative than a VENTURE CAPITALIST. Also see ADVENTURE CAPITAL. |
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Adverse Audit Opinion: The auditor’s opinion accompanying a financial statement when the auditor concludes that qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements. |
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ADVERTISE: The act of providing information to the public concerning products and services for sale. |
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ADVERTISE.: The act of providing information to the public concerning products and services for sale. |
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ADVERTISEMENT: A paid message, in a public medium, designed to influence the purchasing behavior or thought pattern of an audience. |
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ADVERTISING: Providing information to the public concerning the products and services for sale through written or spoken media, such as newspapers, handbills, television and mail. An enticement to encourage people to buy. |
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ADVERTISING MEDIA: The public means for distribution of an advertising message. The most common media include newspapers, magazines, radio, television, direct mail and computer bulletin boards. |
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ADVERTISING SUCCESS FORMULA: The seven essential steps that are the keys to pay-off of advertising money spent: 1) get attention, 2) hold attention, 3) create desire, 4) make the message credible, 5) provide the value, 6) make it easy and 7) cause action now. |
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ADVISING BANK: In international trade, a bank, operating for the exporter in the exporter's country, who handles letters of credit for foreign banks. An advising bank informs the exporter of the conditions of the letter of credit without necessarily bearing responsibility for payment. |
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AFFIDAVIT: A written statement that is sworn under oath before a notary public or other official authorized by law to administer an oath. |
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AFFILIATE: Two companies are affiliated when one owns less than a majority of the voting stock of the other, or when both are subsidiaries of a third company, which is the parent company. Seealso SUBSIDIARY; PARENT COMPANY. |
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AFFIRMATIVE ACTION PROGRAM: A program designed to ensure that all parties are being treated equally regardless of color, sex, race, creed, age, disability, etc., particularly so that minorities are not discriminated against. |
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AFTERMARKET: The sale of goods, services or securities by another company after the original manufacture or original issue. |
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AGENCY: A legally established relationship (often a business firm) whereby one party (the PRINCIPAL) delegates to another party (the AGENT) the right to act on behalf of the principal in business transactions and to exercise some degree of discretion while acting. For example in the insurance industry, an agency represents an insurance company (the PRINCIPAL). |
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AGENT: One who is authorized to represent and act on behalf of another person or business (called the PRINCIPAL) in transactions involving a third party. Unlike an employee who merely works for the principal, an agent works in place of the principal. Agents have three basic characteristics: 1) they act on behalf of and are subject to control of the principal; 2) they do not have title to the principal's property; 3) they owe their duty of allegiance to the principal's orders. |
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AGING: In business, the process of determining the length of time since a financial transaction occurred on an account. A listing of the accounts (an AGING SCHEDULE) showing time periods, past due amounts, customer names, etc. See ACCOUNTS RECEIVABLE AGING; INVENTORY AGING. |
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AGING RECEIVABLES:
Time analysis of accounts receivable in which they are classified as either current or past due. If past due, they are classed according to due date. |
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AGING SCHEDULE: A listing of items showing time periods along with amounts, names, titles, actions, etc. Examples: a list of ACCOUNTS according to the length of time they have been outstanding; a list of maintenance actions according to the length of time since the last maintenance was performed. See AGING. |
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AGREEMENT: An understanding or arrangement between two or more businesses or business people; a CONTRACT. An agreement may be verbal or written; if only verbal, the agreement is subject to a greater amount of misunderstanding. |
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ALIEN: A person born outside the United States, that has not been naturalized and is not a citizen of the United States. |
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ALLOCATE: To set funds apart for a specific purpose. Also, to distribute proportionate shares according to a plan. |
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ALLOCATED COSTS: Expenses that are proportionately assigned to costs that result from a cause/effect basis. Example: Indirect costs are often proportioned to direct costs when establishing a bid posture. Also, expense proportioned to different areas of operation on an operating statement. |
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ALLOWANCE: In retail, any means by which the seller reduces the effective cost of goods purchased by a retailer. Common allowances are for advertising, freight or markdowns. |
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ALLOWANCE FOR BAD DEBTS: An account established to record a subtraction from ACCOUNTS RECEIVABLE, to allow for those accounts that will not be paid. |
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ALLOWANCE FOR DOUBTFUL ACCOUNTS: An account established to record a subtraction from ACCOUNTS RECEIVABLE, to allow for those accounts that will not be paid. |
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ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS: An account established to record a subtraction from ACCOUNTS RECEIVABLE, to allow for those accounts that will not be paid. |
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ALLOWANCES: Deductions from the price of previously sold merchandise for merchandise not received or received in damaged condition. |
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AMORTIZATION:
Either (a) the retirement of debt on an installment or serial payment basis, or (b) the process of systematically charging off the cost of an intangible asset (e.g., goodwill, systems development, copyright) over its estimated useful life. The second meaning is similar to the depreciation of tangible assets. |
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AMORTIZATION SCHEDULE: A tablefor an AMORTIZED ASSET that shows the term, time periods, principal amount, interest rate, payment amounts that are due, payable or paid. See AMORTIZE. |
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AMORTIZE: Repayment of a loan by installments; an accounting procedure allowing gradual repayment (retirement) of a debt by means of systematic payments of principal and interest over a period of the estimated life of the asset on which the loan is made or secured. For FIXED ASSETS, DEPRECIATION is the allowance for wear-out. For natural resources, DEPLETION is the allowance for the wasting away of the asset. |
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AMORTIZED ASSET: See AMORTIZE. |
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AMOUNT: A numerical representation of quantity. In finance, amount usually refers to quantity of money. Also refers to a sum, i.e., "That amounts to -." |
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Annual report: Annual statement, on either a calendar or a fiscal year basis, containing an entity's financial statements. The statements, such as balance sheet, income statement, and cash flow statement, include footnotes, supplementary schedules, management discussion and analysis of earnings, President's letter, audit report, accounting policies, and other explanatory data (e.g., on 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 others. The Bank reviews annual reports as part of monitoring projects and ensuring accountability. |
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Annuity: Series of equal periodic payments or receipts--for example, an investment that upon maturing provides payments of a fixed amount over a regular recurring period. |
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Appraisal:
The act of appraising the value of an item or real property, usually performed as a service by someone recognized as an expert or certified by an organization as such, and usually on property of high value that may need to be bought, sold or insured. |
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Arbitrage: The movements of funds to take advantage of differences in exchange or interest rates; such movements quickly eliminate any such differences. |
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