Terms Flashcards
A monetary reporting system used to inform interested parties about a firm’s business transactions.
Accounting
Revenues recorded when earned and expenses recorded when incurred.
Accrual basis accounting
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.
Amortization
An object that retains value for a period of time after purchase such as a building or a piece of equipment.
Asset
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.
Benefit-Cost Ratio
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.
Budget
Shows financial impacts resulting from major, long-term, non-routine expenditures for items like property, plant, and equipment.
Capital budget
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.
Cash basis accounting
Net cash before financing, including acquisitions.
Cash flow
Numerical list of all standard items that an accounting system tracks: assets, liabilities, net assets, revenues, expenses.
Chart of accounts
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.
Closing fiscal period
The amount paid or charged for the acquisition, maintenance, production or use of materials or services.
Cost
An organizational unit in which budgetary funding is used to sustain operations.
Cost Center
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.
Cost of Operation
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 of ownership
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.
Credit
A lender of money or one to whom funds are owed.
Creditor
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.
Currency conversion factor
An amount due to be paid from or already paid from an account. The opposite of credit.
Debit
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.
Debtor
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.
Depreciation
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.
Discount rate
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.
Double-entry accounting
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 and taxes (EBIT)
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.
Earnings before interest, tax, depreciation and amortization (EBITDA)
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.
Equity
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.
Equivalent annual cost (EAC)
Money outflow that represents goods and services consumed in the course of business operations.
Expenses
Study of a planned scheme or development, the practicality of its achievement and its projected financial outcome.
Feasibility Study
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.
Financial accounting
