Finance and Business Flashcards
Accounting
A monetary reporting system used to inform interested parties about a firm’s business transactions.
Accounting cycle
The accounting procedures organizations typically use to record, analyze and summarize financial transactions and events.
Accounting standards
Benchmarks prescribed for the reporting of accounting data.
Accrual basis accounting
Revenues recorded when earned and expenses recorded when incurred.
Activity-based budgeting (ABB)
Focuses on activities; includes the use of activity-based costs to make a clear connection between resource consumption and output.
Amortization
The systematic reduction of a lump-sum amount; the expense applies to intangible assets (such as patents, franchises, leaseholds, and goodwill) in the same way depreciation applies to physical assets.
Arbitration
Submission of a dispute to one or more qualified and impartial persons for a final and binding decision.
Asset
Something that retains value for a period of time after purchase such as a building or a piece of equipment.
Average inventory turnover
A ratio showing how many times an organization’s inventory is sold and replaced over a period.
Balance sheet
A “snap shot” of a firm’s financial position at a specific point in time.
Blanket purchase order (BPO)
Allows a stream of procurements over a length of time and/or within a dollar ceiling.
Budget
A formal, numerical expression of how an organization, or a part of the organization, expects to operate for a defined period of time. This identifies the resources and commitments needed to satisfy the identified goals over a period as well as the sources of the funding to provide those resources.
Business
The use, interpretation, and management of documents related to the administration and management of contracts, service providers, and leases including lease agreements, business cases, charge backs, and procurement policies and procedures.
Business case
Explains how a specific project or initiative will add value to an organization.
Capital asset
A depreciable item whose cost is significant to the company and whose expected life is longer than one accounting period and often much longer.
Capital budget
Shows financial impacts resulting from major, long-term, non -routine expenditures for items like property, plant and equipment.
Capital expenditures
Acquisitions of new or expanded long-term plant assets.
Capitalization cutoff point
A designated limit (or floor) for capital requests under which an item is expensed in the period purchased and over which it will be capitalized and depreciated for the length of its useful life.
Cartel
A formal (explicit) agreement among suppliers, producers or other organizations that agree to coordinate prices and/or production.
Cash basis
In financial recording, this method of accounting is used to account for cash when it is received or spent. Items promised to be paid or received, such as accounts payable and receivable, are ignored.
Cash flow
(1) Net cash before financing, including acquisitions. (2) The income from all sources less expenses, indicating how much cash is available at a given time.
Chargeback
The ability of facility management to charge its services to another group that is requesting those services. Also known as cross charging or recharging.
Chart of accounts
Numerical list of all standard items that an accounting system tracks: assets, liabilities, net assets, revenues, and expenses.
Closing fiscal period
Process of transferring account balances from sub-ledgers to trial balance account at the end of an accounting period; typically associated with income statement accounts.
Contract
A legal device used by two or more persons to indicate they have reached an agreement.
Contract administration
Any action from the time a contract is awarded until its closeout. It is the process of ensuring that the intent, requirements, and terms and conditions of the contract are met.
Cost
The price paid for acquisition, maintenance, production, or use of materials or services.
Cost accumulation
Collects and organizes cost information in some organized way through an accounting system.
Cost allocation
The process of determining the proportional share of a total cost that belongs to a particular cost object based on data about the proportions of the total resource cost consumed by the cost object.
Cost assignment
Precedes an activity or takes place without measurement of the activity, as it makes assumptions about the proportion of costs that are assumed to relate to an activity.
Cost-benefit ratio
Comparison of the net present value of an investment decision or project with its initial cost. Net present value is divided by the investment or project’s initial cost; a ratio of greater than one indicates that the project is viable.
Cost center
An organizational unit in which budgetary funding is used to sustain operations.
Cost of operation
The total costs associated with the daily operation of a facility. It includes all maintenance and repair costs (both fixed and variable), administrative costs (clerical, time-keeping, general supervision), labor costs, janitorial, housekeeping and other cleaning costs, utility costs and indirect costs (e.g., all costs associated with roadways and grounds). Might also include the amortized or depreciation costs of capital assets.
Cost of ownership
The cost to the owner of owning the building, servicing the existing debt, and receiving a return on equity. This also includes the cost of capital improvements, maintenance and repair, operations, and disposal.
Cost-reimbursement contract
Allows for payment of all incurred costs within a predetermined ceiling that can be allocated to the contract, that are allowable within cost standards, and that are reasonable. Also called a reimbursable or variable price contract.
Cost tracing
Assigning direct costs to a particular cost object.
Credit
The positive cash entries in a bank account. An amount due to be paid to, or already residing in, an account. The opposite of debit.
Creditor
A lender of money or one to whom funds are owed.
Currency conversion factor
The net rate at which the organization converts revenues and expenses from one currency into another. This is often an internally agreed rate set at the start of the budget year so as to remove the effect of currency fluctuations from operational budgets, and is almost never the same as the nominal exchange rate.
Debit
An amount due to be paid from, or already paid from, an account. The opposite of credit.
Debtor
An individual, company, or other organization that owes debt to another individual, company, or organization (the creditor). Almost always compensates a creditor with a certain amount of interest, representing the time value of money.
Depreciation
A noncash charge against assets, such as cost of property, plant, and equipment over the asset’s useful life. An expense associated with spreading (allocating) the cost of a physical asset over its useful life.
Differential cost
A cost concept that implies that costs and revenues differ depending on the conditions.
Direct costs
Costs that can be specifically traced to an item or activity. (For example, repairing a hole in the roof).
Discount rate
The rate at which future cash flows are discounted because of the time value of money. The interest rate used to compute a present value amount.
Double-entry accounting
An accounting system in which each transaction is recorded in at least two places: a debit to one account and a credit to another account. (Also known as dual-entry accounting.)
Earnings before interest and taxes (EBIT)
A measure of an organization’s earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes.
Earnings before interest, tax, depreciation and amortization (EBITDA)
An approximate measure of an organization’s operating cash flow based on data from the organization’s income statement. Calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.
EBIT
Earnings before interest and taxes.
Equity
The residual ownership interest in an organization’s assets after deducting all of its liabilities. Can also be the issued shared capital of the organization.
Equivalent annual cost (EAC)
The cost per year of owning and operating an asset over its entire lifespan. This measure facilitates comparisons of the cost effectiveness of various assets.
