Terms

Question 1

A monetary reporting system used to inform interested parties about a firm’s business transactions.

Answer 1

Accounting

Question 2

Revenues recorded when earned and expenses recorded when incurred.

Answer 2

Accrual basis accounting

Question 3

The systematic reduction of a lump-sum amount; the expense applies to intangible assets, such as patents, franchises, leaseholds and goodwill, just as depreciation applies to physical assets.

Answer 3

Amortization

Question 4

An object that retains value for a period of time after purchase such as a building or a piece of equipment.

Answer 4

Asset

Question 5

Ratio in which the present value of an investment or project is divided by the investment’s or project’s initial cost; a ratio of greater than one indicates that the investment or project is viable.

Answer 5

Benefit-Cost Ratio

Question 6

A formal, numerical expression of how an organization expects to operate for a defined period of time. Identifies the resources and commitments needed to set and achieve specific goals over a period, as well as the sources of the funding to provide those resources.

Answer 6

Budget

Question 7

Shows financial impacts resulting from major, long-term, non-routine expenditures for items like property, plant, and equipment.

Answer 7

Capital budget

Question 8

Recording accounting transactions for revenue and expenses when corresponding cash is received or payments made. Cash basis differs from accrual in that, accrual focuses on anticipated revenue and expenses. The main difference is the timing of when revenue and expenses are recognized.

Answer 8

Cash basis accounting

Question 9

Net cash before financing, including acquisitions.

Answer 9

Cash flow

Question 10

Numerical list of all standard items that an accounting system tracks: assets, liabilities, net assets, revenues, expenses.

Answer 10

Chart of accounts

Question 11

Process of transferring account balances from sub-ledgers to trial balance account at the end of an accounting period. It is typically associated with income statement accounts.

Answer 11

Closing fiscal period

Question 12

The amount paid or charged for the acquisition, maintenance, production or use of materials or services.

Answer 12

Cost

Question 13

An organizational unit in which budgetary funding is used to sustain operations.

Answer 13

Cost Center

Question 14

The total costs associated with the daily operation of a facility. It includes all maintenance and repair costs, both fixed and variable, administrative costs such as, clerical and timekeeping, general supervision such as, labor costs, janitorial, housekeeping and other cleaning costs, utility costs and indirect costs for example, all costs associated with roadways and grounds. Could also include the amortized or depreciation costs of capital assets.

Answer 14

Cost of Operation

Question 15

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.

Answer 15

Cost of ownership

Question 16

A financial accounting term, not to be confused with debt. Credit is a positive cash entry in a bank account; an amount due to be paid to or already residing in an account. The opposite of debit.

Answer 16

Credit

Question 17

A lender of money or one to whom funds are owed.

Answer 17

Creditor

Question 18

The net rate at which the demand organization converts revenues and expenses from one currency into another. 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; almost never the same as the nominal exchange rate.

Answer 18

Currency conversion factor

Question 19

An amount due to be paid from or already paid from an account. The opposite of credit.

Answer 19

Debit

Question 20

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.

Answer 20

Debtor

Question 21

A noncash charge against assets, such as cost of property, plant and equipment over the asset’s useful life. An expense associated with spreading or allocating the cost of a physical asset over its useful life.

Answer 21

Depreciation

Question 22

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.

Answer 22

Discount rate

Question 23

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.

Answer 23

Double-entry accounting

Question 24

A measure of an organization’s earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes.

Answer 24

Earnings before interest and taxes (EBIT)

Question 25

An approximate measure of an organization’s operating cash flow based on data from the demand organization’s income statement. Calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation and amortization.

Answer 25

Earnings before interest, tax, depreciation and amortization (EBITDA)

Question 26

The ownership interest in an organization’s assets after deducting all of its liabilities or the difference between the assets and the liabilities or net worth. Also referred to as shareholder's equity or net assets.

Answer 26

Equity

Question 27

The cost per year of owning and operating an asset over its entire life span. This measure facilitates comparisons of the cost-effectiveness of various assets.

Answer 27

Equivalent annual cost (EAC)

Question 28

Money outflow that represents goods and services consumed in the course of business operations.

Answer 28

Expenses

Question 29

Study of a planned scheme or development, the practicality of its achievement and its projected financial outcome.

Answer 29

Feasibility Study

Question 30

Relates to the preparation of financial statements for the demand organization as a whole. May be used by owners and other internal parties but primarily intended for external parties such as creditors, investors, government agencies, unions and suppliers. Information is developed according to specific accounting standards.

Answer 30

Financial accounting

Question 31

The primary financial reporting standard-setting body in the United States; an independent, nonprofit group under the authority of the U.S. Securities and Exchange Commission (SEC).

Answer 31

Financial Accounting Standards Board (FASB)

Question 32

Refers to the use of borrowed money in acquiring an asset.

Answer 32

Financial leverage

Question 33

Analytical tools examining the relationship of one quantity to another. Used to show underlying financial conditions and to help judge the financial health of an organization.

Answer 33

Financial ratios

Question 34

The process of presenting information about an entity’s financial position, operating performance and cash flow for a specified period.

Answer 34

Financial reporting

Question 35

Documents, for example, balance sheet, income statement, statement of cash flows, statement of retained earnings, which report financial information about an organization.

Answer 35

Financial Statements

Question 36

An asset, such as property, plant or equipment, which has a long life and cannot be expensed in a single year or cannot be easily converted into cash.

Answer 36

Fixed asset

Question 37

Costs that remain unchanged in total for a given time period, despite wide changes in the related level of total activity, for example, a licensing fee or taxes.

Answer 37

Fixed Costs

Question 38

Expenses over which a company has little control.

Answer 38

Fixed expenses

Question 39

Comprehension of and the ability to display, how a unit will affect the cash flow of an organization.

Answer 39

Forcast

Question 40

In the United States, rules, procedures and conventions used to help govern an organization’s accounting operations and the preparation of financial statements.

Answer 40

Generally accepted accounting principles (GAAP)

Question 41

A company's profit before operating expenses, interest payments and taxes. Gross profit is also referred to as gross margin.

Answer 41

Gross profit

Question 42

Accounting document that represents the company’s revenue and expense transactions for the reporting period.

Answer 42

Income statement

Question 43

A budget method that extrapolates from historical data; next year’s budget is constructed by starting with the current year’s budget as a baseline and then adjusting each line item for expected changes.

Answer 43

Incremental budgeting

Question 44

A system to protect persons, groups or businesses against large financial loss by transferring the risks to an insurance company or other large group who agrees to share the financial losses in exchange for premium payments.

Answer 44

Insurance

Question 45

Assets that have no physical substance. Intellectual property, items such as patents, trademarks, copyrights, business methodologies, goodwill and brand recognition are all common intangible assets.

Answer 45

Intangible assets

Question 46

The interest rate at which lifetime dollar savings equal lifetime dollar costs, after the time value of money is taken into account. This rate is then compared to the minimum acceptable corporate rate of return to determine if the investment is desirable. This is one of the most important tools for facility managers as it is used frequently to compare competing investment proposals.

Answer 46

Internal rate of return (IRR)

Question 47

A set of international accounting and reporting guidelines and rules that organizations can follow when compiling financial statements.

Answer 47

International Financial Reporting Standards (IFRS)

Question 48

A daily, chronological record of business transactions.

Answer 48

Journal

Question 49

A contract between the owner of real property, the lessor and another party, the lessee, for the possession and use of the property for a specified term in return for rent or other valuable consideration.

Answer 49

Lease

Question 50

Accounting book of final entry, recording journal transactions under separate accounts. Sub-ledgers provide detailed information about individual accounts.

Answer 50

Leger

Question 51

Debts a business incurs that are expected to result in future negative cash flows to the firm, for example, salaries and tax liabilities. Can also include an assessment of net risk items, for example, bad debts.

Answer 51

Liabilities

Question 52

Distinguished from a lease, a license is the degree of real property interest the signer has in a property. A lease provides a higher level of legal interest in the property than a license.

Answer 52

License

Question 53

The useable life span of a product, process, facility, tool, system, technology, natural resource and the like. It is based on the presumption that all things go through a continuous cycle beginning with creation, use and disposal and then ideally start all over again.

Answer 53

Life-cycle

Question 54

Process of determining, in present-value terms, all costs incident to the planning, design, construction, operation and maintenance, and disposition of a structure over time.

Answer 54

Life-cycle costing

Question 55

Cash or assets that can be immediately converted to cash or are easily convertible to cash.

Answer 55

Liquid assets

Question 56

Relates to the provision of accounting information for an organization’s internal users, designed to support the information needs of managers. Unlike financial accounting, management accounting is not bound by any specific accounting standards. Also referred to as managerial accounting.

Answer 56

Management accounting

Question 57

An organization's final worth. They are value that remains from the assets minus the liabilities.

Answer 57

Net assets

Question 58

The difference between the present value of cash inflows and the present value of cash outflows over a period of time that occur as a result of undertaking an investment project.

Answer 58

Net present value (NPV)

Question 59

A short-term budget projecting all estimated income and expenses during a given period, usually one year. Excludes capital expenditures, they are long-term costs.

Answer 59

Operating budget

Question 60

Represent “lost” opportunities, measured in monetary units, which could have accrued to the entity by pursuing an alternate course of action.

Answer 60

Opportunity costs

Question 61

Refers to the length of time it will take to recoup the initial investment cost. In other words, how long it takes to earn back the funds spent on a project.

Answer 61

Payback period

Question 62

Time interval covered by a financial statement; typically, one year for external statements but can be less, month or quarter, for internal statements.

Answer 62

Period

Question 63

This method is used to compare costs; all cash flows are converted to their present value or the value of past and future dollars corresponding to today’s value.

Answer 63

Present value (PV)

Question 64

The ratio of the present value of the cash inflows to the initial investment cost.

Answer 64

Profitability index (PI)

Question 65

A document provided in advance of shipment, showing the description and quantity of items without terms of payment, in order to initiate a purchase order.

Answer 65

Proforma

Question 66

A financial statement prepared as a projection of the future. Attempts to present a reasonably accurate idea of a financial situation if present trends continue or certain assumptions hold true.

Answer 66

Proforma statement

Question 67

The loss in the book, balance sheet, capital value of an asset due to changes in market conditions, requiring a devaluation in the asset values and thus a reduction in the value of the balancing equity value.

Answer 67

Property Loss

Question 68

A tax levied against owner, lessor or occupier of any property based on an assessment of the value of the property, its public infrastructure requirements or some other determining factor.

Answer 68

Property Tax

Question 69

Cash or properties received in exchange for goods or services.

Answer 69

Revenues

Question 70

A financial statement used to show cash levels across the operating period so as to ensure that predicted liabilities due to be paid at any given time do not exceed the ability to pay

Answer 70

Statement of cash flows

Question 71

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.

Answer 71

Statement of shareholders’ equity

Question 72

A dollar in hand is worth more than a dollar to be received in the future because it can either be consumed immediately or put to work to earn a return.

Answer 72

Time value of money principle

Question 73

Total of all debits and credits; if debits do not equal credits, an error has occurred for example, mistake in entry, omission, double posting.

Answer 73

Trial Ballance

Question 74

Costs that change in total in proportion to changes in the related level of total activity. For example, fuel costs depend on mileage driven.

Answer 74

Variable Costs

Question 75

Expenses that fluctuate and may be influenced by factors such as occupancy levels.

Answer 75

Variable expenses

Question 76

The funds required to service the worst cash flow position plus any contingency provision deemed necessary.

Answer 76

Working capital

Question 77

A budget method in which the continued existence of items must be justified both financially and operationally before they are included in the new budget.

Answer 77

Zero-based budgeting