IA Knowledge VII Flashcards
Bonds that carry zero or very low interest but are instead issued at a substantial discount from par value, resulting in amortized discounts (a tax deduction) to maturity and no payments until maturity.
Zero-coupon bonds
Disbursement accounts that are maintained at a zero balance.
Zero-balance accounts (ZBAs)
A type of budget that starts with zero dollars allocated to budget items rather than making incremental changes to already existing allocations.
Zero-based budget
Paper or electronic documents arranged in columnar format for accumulating and recording adjusting entries when preparing financial statements.
Working papers
The combination of the present values of separate cash flows.
Yield-to-maturity (YTM)
A method for calculating the equivalent units of production for a department that uses the number of units transferred to the next department or to finished goods plus the equivalent units in the department’s ending WIP inventory.
Weighted average method
The incremental cost required to surpass the prior marginal cost of capital break point.
Weighted marginal cost of capital
The extent to which a high degree of consensus can be formed between independent measurers when using the same techniques.
Verifiability
The proportion of debt used in an organization times the after-tax cost of debt, plus the proportion of equity used times the cost of equity.
Weighted average cost of capital (WACC)
A method of inventory costing in which all variable manufacturing costs are included as inventoriable costs except for fixed manufacturing costs, which are treated as costs of the period in which they are incurred.
Variable costing
Costs that rise and fall as a firm’s output level rises and falls.
Variable costs
A tax that applies the equivalent of a sales tax to every operation that creates value.
Value-added tax (VAT)
A transfer pricing model that sets transfer prices at the unit’s variable cost, or the actual cost to produce the good or service less all fixed costs.
Variable cost model
A tax that is collected for a particular need, such as a gas tax levied to maintain roads.
Use tax
A ratio used as a prospecting tool to determine the maximum loss over a future period of time given an assigned level of probability.
Value at risk
Stock that has been repurchased by the issuing organization, reducing both assets and stockholders’ equity.
Treasury stock
The accumulated net incomes (losses) that have been retained in an organization.
Undistributed earnings
The risk that fluctuations in exchange rates will affect reported income.
Translation exposure
The most common money market instrument; government securities that are highly liquid with an active secondary market and that mature in a year or less.
Treasury bills (T-bills)
The use of fixed interest in the form of debt or preferred equity stock with the expectation of earning a greater return than the cost of the fixed interest.
Trading on the equity
A system for pricing products or services that are transferred from one organizational subunit to another within the same organization.
Transfer pricing
Symbols or words that distinguish an organization or product.
Trademarks
The risk of poorly trained investors making poor choices.
Trader risk
The practice of manufacturers inducing their wholesalers to carry more inventory than they can reasonably sell.
Trade loading
Symbols or words that distinguish an organization or product.
Trade names
A measure of an organization’s ability to service all of its liabilities; the number of times a company can cover fixed obligations with earnings before interest and taxes (EBIT).
Times interest earned
The financing advanced to a buyer to facilitate sales; results in an account receivable.
Trade credit
The concept that money received today is worth more than money received tomorrow because the money could be invested to earn a return greater than the original investment.
Time value of money
The concept that information must be available at the time the decisions need to be made or it will be of no value.
Timeliness
An issue of bonds that all have the same maturity date.
Term bonds
Loans with floating or fixed interest and a fixed maturity.
Term loans
Any costs that have already been incurred and that cannot be changed by any decision made now or in the future.
Sunk costs
An over-the-counter (possibly dealer-orchestrated) exchange or swap between two counterparties of required payment streams for a specific time period.
Swap
Bonds that have a lesser claim to cash in a default situation than other bonds.
Subordinate bonds
Events that occur after the balance sheet date (usually the end of the fiscal year) but before the financial statement issuance date; they should be disclosed if material (i.e., useful to users), such as sale of a plant.
Subsequent events
A financial statement that starts with the balances from the end of the prior period and shows changes due to net income (loss) and dividends for the period or any new issuances or repurchases of stock.
Statement of shareholders’ equity
Dividends that pay shares of stock, reclassifying a portion of retained earnings as paid-in capital instead of reducing total assets or shareholders’ equity.
Stock dividends
A cost measurement system in which costs are assigned to products using quantity and price standards for direct materials, direct labor, and overhead using a predetermined (standard) rate.
Standard costing system
A financial statement used to show cash levels as of two moments in time: the beginning of the period and the end.
Statement of cash flows
An inventory cost flow method in which each specific item in inventory held or sold is tracked separately; most often used for special order or low-volume, high-cost goods.
Specific identification method
The counterparty that accepts the opposite position from the hedger in a derivative transaction, taking on higher market risk with the expectation of greater returns.
Speculator
Bonds that have staggered maturity dates.
Serial bonds
A liability that accrues interest expense based on a settlement rate determined by actuaries, reflecting the interest rate needed to settle the assets if the plan were terminated.
Service cost
An asset-backed security that makes a pool of assets into a type of mutual fund by selling shares in the pooled principal and interest payments.
Securitization
A type of budget that includes nonmanufacturing expenses.
Selling and administrative expenses budget
A percentage of the amount paid for some purchases of goods and services.
Sales tax
The estimated value of an asset if sold at the end of its depreciation period or service life.
Salvage value
A 12- to 18-month budget system that rolls forward one month (or quarter) as the current month (or quarter) is completed.
Rolling budget
A projection of expected sales in units and expected selling prices.
Sales budget
The accumulated net incomes (losses) that have been retained in an organization.
Retained earnings
Enhancements or inflows of assets and/or settlements of liabilities generated when an organization makes or delivers goods or services as part of its primary ongoing operations.
Revenues
The process of recognizing subunits (responsibility centers) within an organization, assigning responsibilities to the managers of those subunits, and evaluating the performance of those managers.
Responsibility accounting
Any portion of an organization in which the manager is given responsibility for costs, profits, revenues, or investments; can be a single individual, a department, a functional area, or a division.
Responsibility center
An economic element applied or used to perform activities (such as salaries and materials).
Resource
A measurement of the amount of resources consumed by an activity.
Resource cost driver
The sale of product or inventory with an agreement to buy back the goods in the future; (2) a type of money market instrument in which a securities dealer issues a government security, agreeing to repurchase it on a specific date.
Repurchase agreement
A methodical process or search designed to discover new knowledge.
Research
The currency in which a parent company presents its financial statements.
Reporting currency
The assurance that descriptions of events and financial transactions correspond closely to what occurred in reality.
Representational faithfulness
The range of activity within which the assumptions about variable and fixed costs are valid.
Relevant range
A measure of the neutrality of the sources of information, faith that the information represents what it purports to represent, and its independent verifiability.
Reliability
To record revenue as a journal entry.
Recognize
Costs yet to be incurred that differ between alternatives.
Relevant costs
Describes assets such as goods or services that are exchanged for cash or claims to cash.
Realized
A type of processing in which a record is processed as soon as it is submitted.
Real-time processing
A ratio that is similar to the current ratio but eliminates inventory, which is considered the least liquid portion of current assets and therefore the least available for reducing current debts.
Quick ratio
Describes assets that can be readily converted to cash without significant extra expense through sale in an active market at prices that can be easily determined.
Realizable
A tax based on the value of taxable property, including residential housing, farms, factories, and business equipment.
Property tax
In standard costing, the amount of input that should be used per unit of output.
Quantity standard
A type of budget that is used when a project is completely separate from other elements of an organization or is the only element of a company.
Project budget
A type of dividend paid in the form of property, investments, etc., accounted for at the fair value of the assets given.
Property dividends
Those costs associated with the manufacture of goods or the provision of services.
Product costs
The plan for acquiring resources and combining them to meet sales goals and maintain a specific level of inventory.
Production budget
A costing system that accumulates product or service costs by process or department and then assigns them to a large number of nearly identical products by dividing the total costs by the total number of units produced.
Process costing system
The process of accumulating, classifying, and assigning direct materials, direct labor, and factory overhead costs to products and services.
Product costing
Either prepaid expenses, which are cash paid for goods or services prior to their consumption and treated as assets, or unearned revenues, which are cash received from customers as prepayment for goods or services and treated as liabilities.
Prepayments
In standard costing, the amount that should be paid for the quantity of input to be used.
Price standard
To record an item from the journal into the general ledger, including summarizing and classifying the items.
Posting
Stock that has both debt and equity qualities; gives preference in liquidation and has a fixed but optional dividend.
Preferred stock
A control that involves preparing a log of all checks to be disbursed and sending it to the bank; the bank then pays only items that reconcile.
Positive pay
A balance that is prepared after closing to show that debits and credits of the real accounts (assets, liabilities, and shareholders’ equity) are equal.
Post-close trial balance
The use of debt contracts that use money that the organization doesn’t have; occurs because derivatives require little or no money up front.
Portfolio leverage risk
A theory that states that as most financial assets are held in portfolios, measuring portfolio risk and finding the value of the portfolio are more important than individual asset risks and returns.
Portfolio theory
All the items that cannot be included in product costs and must be expensed in the period in which they occur.
Period costs
Type of asset-backed security in which finance companies (acting as factors) purchase receivables and collect payments from customers directly, also charging a fee to the seller to compensate for bad debts.
Pledging receivables/factoring
Tax that is levied directly on wages and salaries.
Payroll tax
Deferred employee compensation to be paid during retirement.
Pension
A capital investment decision model that focuses on the payback period.
Payback method
The time required for an organization to recover its original investment in a project.
Payback period
An association between two or more persons or corporations to be co-owners in a business for profit, such as a law firm.
Partnership (business type)
The exclusive right to sell, use, or manufacture something for a period of 20 years.
Patent
Privately arranged trades (no exchange intermediary); allow customization to meet investors’ needs.
Over-the-counter trading
(1) The amount of a bond owed at maturity; (2) a nominal price per share, set at issuance, usually at a low price to make it unlikely that a stock price will go below this value.
Par value
An annuity that requires payment at the end of each period.
Ordinary annuity
A type of budget that includes all production costs other than direct materials and direct labor.
Overhead budget
The potential benefits given up when one alternative is selected over another.
Opportunity costs
Type of derivative in which the buyer pays a premium or a percentage of the underlying asset’s value to get the right, but not the obligation, to purchase or sell the asset over a particular period.
Option-type contract
A measure of operational efficiency as well as effective pricing and cost controls. Calculated as the proportion of net sales less cost of goods sold plus operating expenses (i.e., selling, general, and administrative expenses) to net sales.
Operating profit margin
A hybrid costing system that incorporates elements of job costing and process costing; assigns direct materials to each job or batch but assigns direct labor and overhead in a manner similar to process costing.
Operation costing
Short-term, pure rental agreements where the asset and the related liability remain off the lessee’s books (they simply debit lease expense and credit cash).
Operating leases
The proportion of fixed costs used in the production of goods or services.
Operating leverage
Plans that identify needed resources and the way these resources will be acquired for all day-today activities of an organization, including sales and services, production, purchasing, marketing, and research and development.
Operating budgets
All the items that cannot be included in product costs and must be expensed in the period in which they occur.
Operating expenses
A cost measurement system that applies actual costs for direct materials and direct labor to a job, process, or other cost center and then uses a predetermined rate to assign overhead to cost centers.
Normal costing system
Legal loopholes that allow organizations to acquire funds without having to report a related liability on the balance sheet.
Off-balance-sheet accounting (OBSA) methods
Any assets that do not qualify as current assets, including property, plant, and equipment.
Noncurrent assets
All the items that cannot be included in product costs and must be expensed in the period in which they occur.
Nonmanufacturing costs
The sales price of an asset, usually inventory, less the costs of completion and transportation or disposal that can be predicted within reason.
Net realizable value (NRV)
Making choices that are free from bias toward a predetermined result and that place the relevance and reliability of information above other concerns.
Neutrality
A transfer pricing model that sets the transfer price through negotiation between the buyer and the seller (managers of different business units).
Negotiated price model
Capital investment decision model in which the present value of a project’s cash inflows is compared to the present value of the project’s cash outflows; the difference between these values determines whether or not the project is an acceptable investment.
Net present value (NPV) method
Bonds secured by real estate.
Mortgage bonds
Notes issued by local or state governments; can be exempt from some taxes and are liquid but not risk-free.
Municipal bonds
A type of risk that involves having no model for monitoring or identifying risk levels.
Model risk
Short-term, highly liquid instruments issued by a borrower who has outstanding credit.
Money market instruments
A computer network of local-area networks for a city, campus, or other medium-sized area.
Metropolitan-area network (MAN)
Theft of a material amount of an organization’s assets.
Misappropriation of assets
A method of mitigating risks by matching the maturities of liabilities to the maturities of assets.
Maturity matching
A type of budget that shows the amount of merchandise an organization needs to purchase during a period.
Merchandise purchases budget
An accounting principle that states that when practical to do so, expenses should be recognized in the period in which the corresponding revenues are recognized.
Matching principle
A threshold level above which items would make a difference to a decision-maker (material) and below which the items are insignificant (immaterial).
Materiality
The amount of money an organization can raise before increasing the cost of capital.
Marginal cost of capital
A transfer pricing model that sets the internal transfer price for a good or service at the going market price.
Market price model
A type of budget that includes all production costs other than direct materials and direct labor.
Manufacturing overhead budget
The change in total cost divided by the change in quantity, or the extra cost of one more output unit.
Marginal cost
An inventory valuation method in which cost is the original cost and market refers to the market-determined cost to reproduce or replace the item, the lower of which becomes the new value.
Lower of cost or market (LCM)
Those costs associated with the manufacture of goods or the provision of services.
Manufacturing costs
Any liabilities not qualifying as current.
Long-term liabilities
Decreases in net assets (equity) due to incidental or peripheral transactions except those resulting from investments by or distributions to owners.
Losses
Dividends that are paid as a return of the stockholders’ investment rather than from retained earnings (e.g., a liquidation).
Liquidating dividends
An organization’s ability to pay its current and future obligations efficiently and on time without undue hardship. They measure an organization’s solvency by comparing assets to liabilities.
Liquidity
Direct financing leases where there is an intermediary between the lessor and the lessee (long-term creditor).
Leveraged leases
A cost management method that considers the entire cost life cycle of a product or service.
Life-cycle costing
Contract that provides a lessee (the renter) less than total interest in a property or good owned by the lessor (the lender of the item).
Lease
Bank-issued documents that guarantee payment of an amount given that specified conditions are met.
Letters of credit (L/Cs)
A budgeting method that incorporates continuous improvement by focusing on planned future operating processes rather than current operating practices.
Kaizen budget
An accounting assumption that the newest purchases are used or sold first; ending inventory consists of the oldest purchases, including purchases possibly made years ago, so this method undervalues held inventory, assuming inflation.
Last-in, first-out (LIFO) inventory valuation method
A costing system that assigns costs to a specific job (a distinct unit, batch, or lot of a product or service).
Job costing
A costing system that assigns costs to a specific job (a distinct unit, batch, or lot of a product or service).
Job-order costing
A set of standards required or permitted for use by over 115 countries (including supranational bodies such as the European Commission), created to provide harmony among the regulations and accounting standards related to financial reporting across national boundaries.
International financial reporting standards (IFRS)
Those costs associated with the manufacture of goods or the provision of services.
Inventoriabe costs
Assets that have no physical substance; exclude financial instruments by definition.
Intangibles
The rate of return promised by an investment project over its useful life; takes into account the opportunity cost of projects as well as the time value of money.
Internal rate of return (IRR)
Bonds issued by tax-exempt state or local governments to finance public projects.
Industrial revenue bonds
A revenue deferral method that recognizes revenue as cash is collected from prior sales; used for sales on installment where title for the goods is held until the final payment is collected.
Installment sales method
The increase or decrease in costs as a result of one more or one less unit of output.
Incremental costs
Any costs that are related to a cost object but cannot be easily and accurately traced to the product (such as overhead).
Indirect costs
Bonds that pay interest only when the organization has profits.
Income bonds
A summary of the profitability or success of an organization over a period of time, such as a year.
Income statement
A combination of traditional debt or equity financing with an embedded derivative, such as a convertible bond or convertible preferred stock.
Hybrid instruments
Accounts that are restricted as to what cash in the account can be used for, such as for clearing large amounts of checks or for specific disbursements such as payroll, dividends, or travel expenses.
Imprest accounts
The party in a derivative transaction who is attempting to reduce an underlying business risk (usually loss of profitability).
Hedger
The principle that using the values actually paid or received is more reliable than estimates of current value.
Historical cost
The money remaining from sales revenues after deductions for the cost of goods sold.
Gross profit
The ratio of gross profit (or net sales minus cost of goods sold) to sales.
Gross profit margin
The excess of the price paid for a subsidiary over the fair value of the subsidiary’s net assets.
Goodwill
Bonds issued by government entities; repaid either through general tax revenues (general obligation bonds) or through revenues of the item financed (revenue bonds).
Government bonds
The primary ledger for an organization, containing all asset, liability, equity, revenue, and expense accounts.
General ledger
The broad guidelines and specific procedures for accounting that have substantial authoritative support in the business community.
Generally Accepted Accounting Principles (GAAP)
Forwards traded on an established exchange or its clearinghouse.
Futures
Increases in net assets (equity) due to incidental or peripheral transactions except those resulting from investments by or distributions to owners.
Gains
The currency of a subsidiary’s primary economic environment.
Functional currency
The value of an investment at a particular date in the future assuming that compound interest is applied.
Future value
A method of inventory costing in which all variable and fixed manufacturing costs are included as inventoriable costs; thus inventory “absorbs” all manufacturing costs.
Full costing
A principle that recognizes that statement preparers must make compromises between a level of detail sufficient to help users with their decisions while condensing that information enough to keep it understandable.
Full disclosure principle
Binding contracts that fix the price of an asset in advance and give the buyer the risks of asset ownership at a fraction of the asset’s cost; usually settled in cash prior to the settlement date.
Forward-type contracts
Falsified reporting designed to mislead financial statement users, usually by understating or overstating assets/liabilities or revenues/expenses.
Fraudulent financial reporting
An over-the-counter contract between a buyer and a seller who agree today on a price and delivery date for the future.
Forward
An agreement to buy foreign currency in the future at a price determined by the forward market, often as a fair value hedge against the cash flow variability from changes in exchange rates.
Forward exchange contract
A government’s use of taxes and spending to achieve its macroeconomic goals.
Fiscal policy
Portions of the total cost that remain constant regardless of changes in the level of activity over the relevant range.
Fixed costs
Bonds secured by real estate.
First mortgage bonds
An accounting assumption that the oldest goods are used or sold first; calculates the unit cost using only the costs incurred and work performed during the current accounting period.
First-in, first-out (FIFO) inventory valuation method
The use of fixed interest in the form of debt or preferred equity stock with the expectation of earning a greater return than the cost of the fixed interest.
Financial leverage
Any lease that transfers substantially all of the risks and rewards of owning an asset, whether title is or is not eventually transferred.
Financing lease
The ability of an organization to respond to unexpected opportunities by changing amounts and timing of cash flows.
Financial flexibility
Cash, ownership interests, and rights or obligations set by contract to receive or remit cash or other financial instruments.
Financial instruments
The amount an asset could be acquired for (or sold) or a liability incurred (or settled), assuming willing parties that are not involved in a liquidation.
Fair value
An independent, nonprofit group under authority of the US Securities and Exchange Commission that sets accounting standards.
Financial Accounting Standards Board (FASB)
The amount of a bond owed at maturity.
Face value
The amount an asset could be acquired for (or sold) or a liability incurred (or settled), assuming willing parties that are not involved in a liquidation.
Fair market value
A specific cash amount levied on a particular commodity, such as liquor.
Excise tax
Depletion or outflows of assets and/or incurrence of liabilities resulting from an organization’s production or delivery of goods or services as part of its primary ongoing operations.
Expenses
The volatility of exchange rates between an organization’s primary currency and any currencies used by its subsidiaries and trading partners.
Exchange rate risk
Securities traded on an organized exchange with standardized contracts.
Exchange-traded securities
The residual ownership interest in an organization’s assets after deducting all of its liabilities.
Equity (shareholders’ equity or net assets)
A measure of work done on partially completed units expressed in terms of how many completed units could have been created with the same amount of work in the period under consideration.
Equivalent unit (EU)
The risk that fluctuations in exchange rates will affect the future cash flows or value of an organization.
Economic exposure
Determined by deducting the weighted average cost of capital from after-tax net income plus interest expense.
Economic value added (EVA)
The ratio of total earnings to number of shares outstanding; a commonly used measure of a company’s value to investors
Earnings per share
Any entity that has separately identifiable accounting and accountability; could be an individual, type of corporation, or business unit.
Economic entity
A method of estimating the stock value of constantly growing dividends that assumes that the dividend will grow at a constant rate g, based either on historical growth rates or on an analyst’s forecasts.
Dividend growth model
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.
Dual-entry accounting
A type of budget that is concerned with direct purchases of material components and finished goods.
Direct materials purchase budget
A type of budget that specifies the material components and the cost of the materials in the direct materials budget.
Direct materials usage budget
A type of budget that can help an organization plan production processes to smooth out production and keep a consistent workforce size throughout the year.
Direct labor budget
A type of budget that determines the required materials and the quality level of the materials used to meet production.
Direct materials budget
Any costs that can be easily and accurately traced to a cost object (usually direct labor and direct materials).
Direct costs
A type of lease in which the lessee uses the lease to finance the purchase of an asset.
Direct financing lease
The increase or decrease in costs as a result of one more or one less unit of output.
Differential costs
A method of inventory costing in which all variable manufacturing costs are included as inventoriable costs except for fixed manufacturing costs, which are treated as costs of the period in which they are incurred.
Direct costing
Contracts requiring one party to pay another party some amount based on an underlying price or value.
Derivative instruments
(1) The use of research to develop new processes and products or significantly improve existing ones; (2) the process of employees gaining new capabilities that are useful for both present and future jobs.
Development
An asset’s original cost less its salvage value.
Depreciable base
A method of allocating the cost of tangible assets over the periods of expected use.
Depreciation
A type of pension plan that defines the required annual contribution to the plan but makes no guarantee of the ultimate benefit level paid.
Defined contribution plan
A report that tracks the number of units moving through a department, provides a computation of unit costs, and shows how costs were charged to that department.
Departmental production report
The risk that a lender will not recoup the interest and/or principal when payments on debt become due.
Default risk
A type of pension plan in which the employer promises a specific level of benefits starting at retirement.
Defined benefit plan
The ratio of all an organization’s debts to all of its assets; provides a general measure of ability to repay creditors.
Debt ratio
A ratio that measures an organization’s ability to cover long-term liabilities from owners’ equity.
Debt to equity ratio
Data regarding customers, such as customer lists and contracts with customers.
Customer intangibles
Bonds that have no collateral (are unsecured).
Debenture bonds
Liabilities that are expected to be settled within the normal operating cycle or one year of the balance sheet date.
Current liabilities
A measure of an organization’s potential for paying down current liabilities; a larger number indicates more assets in relation to debt and therefore greater ability to pay holders of short-term debt.
Current ratio
The risk that the other party to a transaction will not fulfill their obligations; includes settlement risk and credit risk.
Counterparty risk
Cash and cash equivalents and assets held for sale or expected to be realized in the current operating cycle or within one year of the balance sheet date.
Current assets
A budget that includes the total and per unit production cost for a period.
Cost of goods sold budget
A revenue deferral method that defers all profit recognition until cash collections exceed cost of goods sold.
Cost recovery method
Any factor that has a cause-and-effect relationship with costs, such as a rise in sales volume that affects a rise in sales commissions.
Cost driver
Any object that can have a cost applied to it and can be used to determine how much a particular thing or activity costs.
Cost object
Government protection granted to authors and artists of all types.
Copyright
Any resource that must be given up to obtain some objective.
Cost
A type of account that reduces an asset, liability, or equity account, such as discount on bonds payable.
Contra account
The amount remaining from sales revenue after variable expenses are deducted.
Contribution margin
Liabilities that satisfy two criteria: the amount of the loss can be estimated reasonably, and all available information implies that it is probable a liability will exist on or before the financial statement date.
Contingent liabilities
A 12-to 18-month budget system that rolls forward one month (or quarter) as the current month (or quarter) is completed.
Continuous budgeting
Prudence and adequate consideration of the risks and uncertainty in business situations when presented with situations that require judgment.
Conservatism
Existing situations or circumstances with an uncertain potential for gain or loss; tied to certain future events that may or may not occur.
Contingencies
The default classification for an organization’s public shares granting a portion of ownership.
Common stock
Minimum balance requirements set by banks as partial compensation for their services.
Compensating balances
The process of reducing all temporary or nominal accounts to zero so they are ready to be used in the next period.
Closing
Unsecured promissory notes issued by nonfinancial corporations and bank holding companies.
Commercial paper (CP)
Bank-issued time deposits for large sums with a fixed maturity; can be negotiable or nonnegotiable.
Certificates of deposits (CDs)
The practice of inflating sales figures by forcing more products through a distribution channel than the channel can actually sell.
Channel stuffing
The par value of issued shares of stock.
Capital stock
An accounting system in which an organization recognizes revenue only when cash is received and expenses only when cash is paid out.
Cash basis accounting
The accumulated resources of an organization raised through debt and equity financing and through the organization’s productive efforts.
Capital
Tax levied on the profit released upon the sale of a capital asset.
Capital gains tax
A type of merger in which operations of two or more organizations are brought under common control.
Business combination
Bonds that the issuer can call and retire before maturity, such as during periods of high interest rates.
Callable bonds
A promise to pay a sum of cash at a set maturity rate plus a specific rate of periodic interest on the face value.
Bond indenture
The output level at which total revenues and total costs are equal.
Break-even point
A schedule to explain any differences between a bank statement and cash on the books.
Bank reconciliation
The comparison of an organization or project to similar internal or external organizations or projects, for the purpose of determining areas for potential improvement and to identify best practices. May also be used to assess likelihood and impact of potential events across an industry.
Benchmarking
Resources obtained or controlled by an organization as a result of past transactions or events that will probably result in future economic benefits to the organization.
Assets
A financial statement that shows what an organization owns and owes and where the money for the ownership originated.
Balance sheet
A method of theoretically making a risk-free profit from the price differences between markets through the simultaneous purchase of an investment in one market and sale in another.
Arbitrage
A theory that states that multiple factors (rather than just one factor, beta) affect a security’s return, such as unexpected earnings announcements or a change in interest rates.
Arbitrage pricing theory
A type of review that examines relationships among information.
Analytical review
A security that requires periodic payments in equal amounts per equal length periods and in which the interest is compounded over the same interval.
Annuity
Any factor that has a cause-and-effect relationship with costs, such as a rise in sales volume that affects a rise in sales commissions.
Allocation base
A type of review that examines relationships among information.
Analytical auditing
An account that increases an asset, liability, or equity account, for example, premium on bonds payable.
Adjunct account
Assigning costs to a cost object.
Allocation
The historical costs paid for goods or services.
Actual costs
Any tax for which the tax base is the value of a good, service, or property.
Ad valorem tax
A method of assigning costs to products, services, and customers based on the consumption of resources caused by activities.
Activity-based costing (ABC)
A cost measurement system that records the actual costs incurred for direct materials, direct labor, and overhead (by allocating actual amounts).
Actual costing system
A logical grouping of activities, actions, movements, or sequences of work.
Activity center
A measurement of the amount of an activity used by a cost object.
Activity cost driver
Costing systems that accumulate costs and assign them to a particular cost object such as a product or service.
Accumulation costing systems
Any type of action, work, or movement performed within an entity.
Activity
Either accrued revenues, which are earned revenues yet to be received as cash or recorded, or accrued expenses, which are incurred but unpaid expenses yet to be recorded.
Accruals
Unpaid expenses that accrue as a liability until paid, including salaries, rents, etc.
Accrued expenses
A capital budgeting method that measures the return on a project in terms of net operating income.
Accounting rate of return (ARR) method
An accounting system that records transactions as they occur, recognizing revenue when earned and expenses when incurred, regardless of when the cash is actually paid.
Accrual basis accounting
A method of inventory costing in which all variable and fixed manufacturing costs are included as inventoriable costs; thus inventory “absorbs” all manufacturing costs.
Absorption costing
A record of transactions that fit within a specific category.
Account
