Accounting and management terminologies
Accounting and management terminologies
20 terms
Accounting and management is a program where you learn how to drive or build a company, small or bigger. You learn how to keep the books of the company and use those data to take financial decisions. Manage human resources, marketing and all the financial planning and control parts. In this glossary I listed twenty (20) terms that we used to say very often. With these words you'll be able to understand many accountant's conversations that you couldn't understand otherwise.
- absorption costing
- Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial statements.
- accelerated depreciation
- The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will be less in the later years.
- accounting net income flows
- The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
- accounting rate of return definition
- An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
- accounts receivable turnover ratio
- The financial ratio which indicates the speed at which a company collects its accounts receivable.
- accounts written off
- Usually refers to one of the accounts receivable that was deemed to be uncollectible or worthless and was removed from the general ledger account Accounts Receivable.
- bank overdraft
- A negative balance in the bank’s records for the company’s checking account.
- board of directors
- Individuals elected by the common stockholders of a corporation to represent the stockholders and to establish the policies of the corporation. The board of directors appoints the officers of the corporation and declares dividends for the common and preferred stock.
- budgetary slack
- Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than expected and/or entering budget revenue amounts that are smaller than expected.
Budgetary slack is also known as budget slack, a controller’s reserve, or a controller’s cushion.
- capital budgeting
- The formal planning for significant expenditures, such as property, plant and equipment.
- common costs
- Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine the cost of each.
- cost of capital
- A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock,
common stock, retained earnings, and other components of stockholders’ equity. The cost of
capital is usually the minimum return that a company should accept on its investments.
- debt ratio
- The ratio of total liabilities to total assets.
- Example: For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
- debt to equity ratio
- The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It indicates the proportion of the company’s assets provided by creditors versus owners.
- depreciable cost
- The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value.
- Example: For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the depreciable cost is $27,000.
- economic life
- Also referred to as the useful life. This differs from the physical life of an asset.
- Example: For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
- expired costs
- Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
- financial leverage
- Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
- financial statements of nonprofits
- The financial statements of nonprofits include the statement of financial position, the statement of activities, the statement of cash flows, notes to the financial statements, and the statement of functional expenses.
- fixed overhead budget variance
- Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.