The document defines various accounting and finance terms. Some key terms defined include: - Packing credit is a loan or advance provided by a bank to an exporter to finance goods prior to shipment based on a letter of credit or export order. - A packing list/slip is a statement of container contents so the quantity of merchandise can be counted upon opening. - Paid-in capital is capital received from investors for stock, not including capital from earnings or donations. - Partnership is an unincorporated business with more than one owner, different from a sole proprietorship which can only have one owner.

1. “Accounting Dictionary”
PACKING CREDIT is any loan or advance granted or any other credit provided by a bank to
an exporter for financing the purchase, processing, manufacturing or packing of goods prior to
shipment, on the basis of letter of credit opened in his favor or in favor of some other person,
by an overseas buyer or a confirmed and irrevocable order for the export of goods from the
producing country or any other evidence of an order for export from that country having been
placed on the exporter or some other person, unless lodgment of export orders or letter of
credit with the bank has been waived.
PACKING LIST is a statement of the contents of a container, usually put into the container so
that the quantity of merchandise may be counted by the person who opens the container. Also
known as a packing slip.
PACKING SLIP see PACKING LIST.
PAID-IN-CAPITAL is capital received from investors for stock, equal to capital stock plus
paid-in capital, NOT that capital received from earnings or donations. Also called contributed
capital.
PAID IN SURPLUS see PAID IN CAPITAL.
PAID-UP CAPITAL is the total amount paid by shareholders for their shares of capital stock.
P&A, dependent upon usage, can be: Parts & Accessories, Pay & Allowances, Personnel &
Administration, or Price & Availability.
P&L see PROFIT AND LOSS STATEMENT.
PAPER is: a. amount received, by a seller of real estate, in the form of a mortgage or note
rather than cash; b. a short-term debt security; c. customer buy and sell orders coming to a
trading pit; d. money market instruments, commercial paper.
PAPER GAIN (LOSS) is an unrealized capital gain (loss) in an investment or portfolio.
PARENT COMPANY is a company of which others are subsidiaries.
PARENT ENTITY see PARENT COMPANY.
PARETO PRINCIPLE/LAW see 80-20 RULE.

2. PARI PASSU is to do or apply something at an equal pace or rate. In finance, it is used in
reference to two class of securities or obligations that have equal entitlement to payment.
PARTNERSHIP is an unincorporated business that has more than one owner. It is different
from a sole proprietorship in that a sole proprietorship can have only one owner.
PAR VALUE is a. the maturity value or face value, i.e., the amount that an issuer agrees to
pay at the maturity date; b. the official exchange rate between two countries' currencies; or,
c. the value of a security that is set by the company issuing it; unrelated to market value.
PAS could mean: Personal Accounting System, Personnel Accounting System, or Personnel
Accounting Symbol.
PASSIVE ACTIVITY is defined in the US Tax Code as one or more trades, business or rental
activity, that the taxpayer does not materially participate in managing or running. All income
and losses from passive activities are grouped together on an income tax return and,
generally, loss deductions are limited or suspended until the passive activity that generated
them is disposed of in its entirety.
PASS-THROUGH GRANTS as defined under GASB Statement 24 are grants "received by a
recipient government to transfer to or spend on behalf of a secondary recipient" and should be
recognized as revenues and expenditures/expenses in a governmental, proprietary or trust
fund. The only exception to this requirement is if the recipient government serves only as a
cash conduit (i.e., has no administrative or direct financial involvement in the program) in
which case the grant should be reported in a GAAP agency fund.
PATENT is a legal form of protection that provides a person or legal entity with exclusive
rights to exclude others from making, using, or selling a concept or invention for the duration
of the patent. There are three types of patents available: design, plant, and utility.
PAYABLE is an amount awaiting payment to be made, e.g. interest payable or taxes payable.
PAYABLES TURNOVER is calculated: Payables Turnover = Purchases / Payables.
PAYABLE TO SHAREHOLDERS normally refers to distribution of dividends to shareholders
and / or repayment of notes held by shareholders.
PAYBACK PERIOD, in capital budgeting, is the length of time needed to recoup the cost of
CAPITAL INVESTMENT. The payback period is the ratio of the initial investment (cash outlay,
regardless of the source of the cash) to the annual cash inflows for the recovery period. The
major shortcoming for the payback period method is that it does not take into account cash
flows after the payback period and is therefore not a measure of the profitability of an
investment project. For this reason, analysts generally prefer the DISCOUNTED CASH FLOW
methods of capital budgeting; primarily, the INTERNAL RATE OF RETURN and the NET
PRESENT VALUE methods.

3. PAY CYCLE is a set of rules that defines the criteria by which scheduled payments are
selected for payment creation, e.g., payroll may be on a weekly, bi-weekly, or monthly pay
cycle.
PAYMENT is the satisfaction of a debt or claim; primarily money paid to fulfill an obligation.
PAYMENT DUE DATE is the date on which a payment is due and payable.
PAYMENT ON ACCOUNT see ON ACCOUNT.
PAYOUT RATIO is dividends paid divided by company earnings over some period of time,
expressed as a percentage.
PAYROLL, dependent upon usage, can mean a. the total amount of money paid in wages; b.
a list of employees and their salaries; or, c. the department that determines the amounts of
wage or salary due to each employee.
PAYROLL BURDEN, in the U.S., includes the cost of your payroll administration, FICA, FUTA,
SUTA, workers’ compensation, etc., based on each $100.00 of payroll. For example: $100.00
of payroll earned + 37.56 payroll burden = $137.56 total payroll.
PAYROLL VARIANCE is the difference between actual salaries and “unloaded” labor
expenditures. The largest contributing factor to payroll variance is usually employees not
submitting project oriented timesheets, or supervisors failing to approve those submitted
timesheets. The effect being wages being paid without direct assignment of labor charges to
those areas or projects to which the labor hours were expended. Thereby causing a variance
between recorded labor costs and actual payroll, e.g., project costs are not recorded,
reimbursable costs are not billed, and program and project managers are unable to accurately
monitor their budgets or do projections.
PBC LIST (PROVIDED BY CLIENT LIST) is a request by external auditors of items that will
be required from the client by the auditor prior to the commencement of fieldwork. Such PBC
lists are preliminary and will likely be expanded once the audit commences.
PBT see PROFIT BEFORE TAXES.
PC is an acronym for Professional Corporation (business legal entity).
PDI can mean Personal Disposable Income or Past Due Interest.
PEACHTREE is commercial accounting software developed and owned by Sage Software.

4. PEAK is the period of maximal use or demand or activity; for example, at peak commute
hours, street traffic can be unbelievable. See OFF-PEAK.
PEGBOARD SYSTEM see ONE-WRITE SYSTEM.
PEG RATIO compares earnings growth and the Price Earnings Ratio. The PEG Ratio (formula)
is the current Price Earnings Ratio divided by the expected long-term growth rate (per the
earnings per share).
PENDING usually refers to either: 1. Not yet decided; or, 2. Being in continuance.
PENSION is a regular payment to a person that is intended to allow them to subsist without
working, e.g. a retirement fund for employees paid for or contributed to by an employer as
part of a package of compensation for the employees' work.
PENSION FUND is a fund reserved to pay workers' pensions when they retire from service.
Also known as SUPERANNUATION FUND.
PENSION MAXIMIZATION is a controversial strategy, often espoused by life insurance
agents, of using insurance to augment a company benefit plan. Under this arrangement, a
retiree takes pension payments for his or her own life only and buys life insurance to provide
for a surviving spouse. Also known as pension max.
PEP see PERSONAL EQUITY PLAN.
P/E RATIO (PRICE/EARNINGS RATIO) is a stock analysis statistic in which the current
price of a stock (today's last sale price) is divided by the reported actual (or sometimes
projected, which would be forecast) earnings per share of the issuing firm; it is also called the
"multiple".
PER CAPITA INCOME is the mean income computed for every man, woman, and child in a
particular group. It is derived by dividing the total income of a particular group by the total
population in that group.
PERCENTAGE DESIGN, in construction, is the percentage expended for design and
construction management services in proportion to total construction.
PERCENTAGE LEASE is a type of lease where the landlord charges a base rent plus an
additional percentage of any profits realized by the business tenant.
PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING is instituted if your revenues
exceed $10,000,000 (3-year average) or your contracts will not be completed within a two-

5. year period, you are generally required to use the percentage of completion accounting for
contracts. There are many advantages to using to percentage of completion method including:
• It is the best measurement of income.
• Percentage of completion normally needs to be computed for financial statement
purposes eliminating confusing timing differences from tax to financial statements.
• There is no increase in alternative minimum taxable income.
• Losses can be recognized on contracts before the job is complete.
• It is useful in leveling taxable income, permitting use of lower tax brackets each year.
• When using the percentage of completion method, it is important to carefully compute
the percent complete, for it may have a great impact on your taxable income.
• Estimated costs to complete the contract, a component of calculating the percent to
complete, determine what your taxable income will be. Also, carefully reviewing the
over-head allocation may result in lower tax.
PER DIEM is a. one every day (e.g., save 10 man-hours per diem); or, b. payment of daily
expenses and/or fees of an employee or an agent.
PERFORMANCE BUDGET is a budget format that relates the input of resources and the
output of services for each organizational unit individually. Sometimes used synonymously
with program budget.
PERFORMANCE INDICATORS are those empirical data points that indicate how well, or
poorly, an entity is performing against preset goals and objectives. Normally, in business or
strategic planning, a company will set targets over a specified period that the business
believes are attainable and track performance over time to those targets or objectives.
PERFORMING ASSET is an asset that provides a dependable annual financial return; for
example, production machinery or, in transportation, an airliner.
PERIOD COST is an expense that is not inventoriable; it is charged against sales revenues in
the period in which the revenue is earned (e.g., SG&A is a period cost). Also called period
expense.
PERIODICITY CONCEPT is the concept that each accounting period has an economic activity
associated with it, and that the activity can be measured, accounted for, and reported upon.
PERIODIC VALUATION allows for the determination on future dates the value of assets,
portfolios, etc. with the idea of setting a new standard cost or value to those assets. Such
revaluations up or down, are then posted as the new standard cost or value. See
REVALUATION.

6. PERMANENCE is the quality or state of being permanent; primarily judged by durability and
useful life. See ORDER OF PERMANENCE.
PERMANENT ACCOUNTS see REAL ACCOUNTS.
PERPETUAL INVENTORY is an inventory accounting system whereby book inventory is kept
in continuous agreement with stock on hand. A daily record is maintained of the dollar amount
and physical quantity. There are periodic physical inventories taken to reconcile at short
intervals.
PERPETUAL SUCCESSION is one of the legal distinctions between a business and a
company. A company has perpetual succession meaning that a change in the membership
does not affect the existence of the company whereas a business does not enjoy this perpetual
succession. For example, in the case of a partnership, which is one form of business
registration, a change in the membership affects the partnership.
PERPETUAL VALUATION see MARKET VALUE.
PERPETUITY, in finance, is an annuity payable forever.
PERSISTENT EARNINGS is the level of earnings, from accounting to accounting period, that
are continually recurring.
PERSONAL ACCOUNTS represents money due to or due from a person or group of persons.
For example, Accounts Payable - Suppliers is a personal account since this amount is payable
to a supplier/suppliers.
PERSONAL EQUITY is that portion of equity ownership that is held to ones own benefit or
invested as an integral part of the assets of a legal entity.
PERSONAL EQUITY PLAN (PEP) was an investment plan in the U.K. that used to allow
people over the age of 18 to invest in shares of U.K. companies. The plan encouraged
investment by individuals. Discontinued in 1999, it was replaced by Individual Savings
Accounts (ISA). It was done through an approved plan, qualifying unit trust, or investment
trust. Investors received both income and capital gains free of tax.
PERSONAL LOAN is a short-term loan that is extended based on the personal integrity of the
borrower.
PERSONAL PROPERTY means property of any kind except real property. It may be tangible
(having physical existence) or intangible (having no physical existence, such as patents,
inventions, and copyrights).

7. PERVASIVENESS OF ESTIMATES means that the estimates have to be complete, of high
quality and in depth, i.e., they have to adequately cover the whole accounting entity.
PETTY CASH, normally, is an account and location where tangible cash is stored for usage in
purchasing or the reimbursing of inexpensive out-of-pocket expenditures.
PHANTOM PROFIT is hypothetical profit, i.e., no cash flow is generated. Appreciation on any
asset, e.g. stock, is considered phantom profit unless or until the asset is sold, thereby
generating cash flow.
PHYSICAL INVENTORY is the counting of all merchandise or equipment on hand.
PHYSICAL STOCK-TAKE see PHYSICAL INVENTORY.
PICPA is Pennsylvania Institute of Certified Public Accountants or Philippine Institute of
Certified Public Accountants.
PIERCING THE CORPORATE VEIL is a legal concept through which a corporation's
shareholders, who generally are shielded from liability for the corporation's activities, can be
held responsible for certain actions.
PIGGYBACK, dependent upon usage, can mean: 1. On the back or shoulder or astraddle on
the hip; 2. Two lenders participating in the same loan (piggyback loan); 3. Unauthorized
access to a data processing system via an authorized user's legitimate connection (piggyback
entry); 4. Haul by railroad car; 5. SEC registration of existing holdings of shares in a
corporation combined with an offering of new public shares (piggyback registration); 6. Rights
that entitle an investor to register and sell his or her stock whenever the company conducts a
public offering (piggyback rights).
PINK PEARL is a type of a pencil-lead eraser that auditing companies use.
PIPE (Private Investment in Public Equity) refers to any private placement of securities of an
already-public company that is made to selected accredited investors (usually to selected
institutional accredited investors) wherein investors enter into a purchase agreement
committing them to purchase securities and, usually, requiring the issuer to file a resale
registration statement covering the resale from time to time of the securities the investors
purchased in the private placement. PIPE transactions may involve the sale of common stock,
convertible preferred stock, convertible debentures, warrants, or other equity or equity-like
securities of an already-public company. There are a number of common PIPE transactions,
including:

8. • the sale of common stock at a fixed price;
• the sale of common stock at a fixed price, together with fixed price warrants;
• the sale of common stock at a fixed price, together with resettable or variable priced
warrants;
• the sale of common stock at a variable price;
• the sale of convertible preferred stock or convertible debt; and
• a venture-style private placement for an already-public company.
PISCAN DOCUMENT, a precursor of double entry bookkeeping, dates from the early 12th
century. Records indicate that primitive bookkeeping with sequential transactions using Roman
numerals was presented in paragraph form. Some of the record fragments are from an
unknown Florentine banking firm dated from 1211. It was not yet double entry bookkeeping,
but advancing in that direction. Other fragments include the Castra Gualfred and the
Borghesia Company from 1259-67; Gentile de' Sassetti and Sons, 1274-1310; and Bene
Bencivenni, 1277-96. The most complete records are from Rinieri Fini & Brothers, 1296-1305,
and Giovanni Farolfi & Co., 1299-1300.
PITI is an acronym for Principal, Interest, Taxes and Insurance when dealing with property
mortgages.
PLACEMENT is bank depositing Eurodollars with (selling Eurodollars to) another bank is said
to be making a placement.
PLANT ASSET is a non-current physical asset applicable to manufacturing activities.
PLEDGE is a. the transfer or assignment of assets as collateral to secure payment of a debt
obligation as when securities are pledged to a lender for a loan secured by the owner of the
securities. When securities a pledged, the lender frequently requires the physical transfer of
the collateral to preclude possibility of using the same asset for additional pledging; b. the
deposit or placing of personal property as security for a debt or other obligation with a person
called a pledgee. The pledgee has the implied power to sell the property if the debt is not paid.
If the debt is paid, the right to possession returns to the pledgor; or, c. a written or oral
agreement to contribute cash or other assets.
PLEDGE BOND see PLEDGED REVENUES.
PLEDGED ACCOUNTS RECEIVABLE is short-term borrowing from financial institutions where
the loan is secured by accounts receivable. The lender may physically take the accounts
receivable but typically has recourse to the borrower; also called discounting of accounts
receivable.

9. PLEDGED ASSET is an asset that is transferred to a lender as security for debt. The lender of
the debt takes possession of the pledged asset, but does not have ownership unless default
occurs.
PLEDGED REVENUES is funds generated from revenues and obligated to debt service or to
meet other obligations specified by the bond contract.
PLS see Profit and Loss Sharing.
PLUG is a variable that handles financial slack in the financial plan.
PLUG NUMBER see COST OF GOODS SOLD.
PLUM is an investment with a healthy rate of return.
PNL is Profit and Loss (statement/analysis; business/accounting). See also PROFIT AND LOSS
STATEMENT.
POINT OF is a positional determinant or modifier in that it is either the starting or ending
position, e.g. point of sales, point of delivery, point of collection, or point of completed
production.
POINTS are additional fee paid to a lender. Points are generally stated as a percent of the
total amount borrowed and are in essence prepaid interest. Points paid can be deducted over
the life of the loan.
POISON PILL is where the targeted company defends itself by making its stock less
attractive to an acquirer.
POLITICAL COSTS HYPOTHESIS predicts that firms with low agency and political costs and
effective shareholders' monitoring will distribute cash dividend and those with moderate
agency and political costs may use stock dividends in lieu of cash dividends to separate
themselves from firms having high agency and political costs. This indicates that cash dividend
firms will face better long-term stock market valuation of their shares than stock dividend
firms.
POOL is: 1. a group of people organized for a specific purpose or any communal combination
of funds; 2. in capital budgeting, the concept that investment projects are financed out of a
pool of bonds, preferred stock, and common stock, and a weighted-average cost; 3. in
insurance, a group of insurers who share premiums; and 4. in investments, the combination of
funds for the benefit of a common project, or a group of investors who use their combined
influence to manipulate prices.

10. POOLING-OF-INTERESTS, in the US, is the method of accounting used in a business
combination in which the acquiring company has issued voting common stock in exchange for
voting common stock of the acquired company. The features of the method are that the
acquired company's net assets are brought forward at book value, retained earnings and paid-
in capital are brought forward, the net income is recognized for the full financial year
regardless of the date of acquisition, and the expenses of pooling are immediately charged
against earnings. In order to use the method there are a number of criteria to be met
concerning the prior independence of the companies and the nature and timing of the
acquisition. See POOLING OF INTEREST METHOD.
POOLING OF INTEREST METHOD is an accounting method for reporting acquisitions
accomplished through the use of equity. The combined assets of the merged entity are
consolidated using book value, as opposed to the PURCHASE METHOD, which uses market
value. The merging entities` financial results are combined as though the two entities have
always been a single entity. See POOLING-OF-INTERESTS.
POP see PROOF OF POSTING and the below.
POP is an acronym for, among others, Point Of Presence or Post Office Protocol (Internet e-
mail protocol).
PORTFOLIO is a term for describing all the investments that an entity owns. A diversified
portfolio contains a variety of investments.
POSITIVE ACCOUNTING THEORY is where theorists tend to explain why some accounting
practices are more popular than others (e.g., because they increase management
compensation). They tend to support their conclusions with inductive theory and empirical
evidence as opposed to deductive methods. Generally avoid advocacy of one accounting rule
as being better or worse than its alternatives. Positivists are inspired by anecdotal evidence,
but anecdotal evidence is never permitted without more rigorous and controlled scientific
investigation.
POST it the transfer of accounting entries from a journal of original entry into a ledger book,
in chronological order according to when they were generated.
POST DATE is placing on a document or a check a date that follows the date of the initiation
or execution of the document. For example, a post dated check cannot be cashed until the
date written on the check.
POSTING, in bookkeeping, is to list on the company's records, such as to list the detail of
sales and purchases on the accounts receivable or payable records.

11. POSTULATE, in logic, is a proposition that is accepted as true in order to provide a basis for
logical reasoning.
PPE can mean either Property, Plant, and Equipment, or Pay Period Ending.
PPI see PRODUCER PRICE INDEX.
PPV is Purchase Price Variance.
PR is an acronym for, among others, 'public relations', 'payroll' and 'purchase request'.
PRACTICAL CAPACITY is where the cost of production is based on the 'practical capacity' of
production facilities. Therefore, the proportion of overheads allocated to a unit of production is
not to be increased as consequence of idle capacity of the plant.
PREDICTOR RATIOS: Most ratios are descriptive in nature; that is, they describe the firm as
it is now. As you might expect, Predictor Ratios provide suggestions about likely future
conditions for the firm. VentureLine provides two industry standard Predictor Ratios:
1. Altman Z-Score - a valid predictor or bankruptcy, and,
2. Sustainable Growth Rate - shows the degree to which a concern can grow using their
retained earnings to fund growth.
PREEMPTIVE RIGHT is the right of a current stockholder to maintain the percentage
ownership interest in the company by buying new shares on a pro rata basis before they are
issued to the public.
PREFERRED BIDDER is the bidder who is selected by the vendor, usually to some
predetermined criteria, as being the party to whom it intends to sell the business, or award a
contract, subject to the completion of negotiations and legal arrangements.
PREFERENCE SHARE see PREFERRED STOCK.
PREFERENCE SHARE CAPITAL is capital raised by an entity through the sale of preferred
shares.
PREFERRED CREDITOR is a creditor whose account takes legal preference for payment over
the claims of others.
PREFERRED STOCK, usually, non-voting capital stock that pays dividends at a specified rate
and has preference over common stock in the payment of dividends and the liquidation of
assets.

12. PREMIUM ON CAPITAL STOCK is excess received over the par value of stock issued. The
premium account is shown under the paid-in capital section of stockholder's equity because it
resulted from the issuance of stock. It is not an income statement account since the company
earns profit by selling goods and services to outsiders, not by issuing shares of stock to
owners.
PRE-OPERATING COSTS are costs that are deferred until the related assets are ready for
revenue service at which time the costs are charged to operations.
PREPAID EXPENSES are amounts that are paid in advance to a vender or creditor for goods
and services. Typically, insurance premiums are paid in advance of the coverage contained in
the policy. Prepaid Expenses is a Current Asset for your business. This is because you have
paid for something and someone owes you the service or the goods for which you prepaid.
PREPAYMENT is the payment of all or part of a debt prior to its due date.
PRESCRIBED SECURITY generally means any bond, debenture, stock, stock certificate,
treasury bill or other like security, or any coupon, warrant or other document for the payment
of money in respect of such a security, issued by a government authority.
PRESENT VALUE is the discounted value of a payment or stream of payments to be received
in the future, taking into consideration a specific interest or discount rate. Present Value
represents a series of future cash flows expressed in today's dollars. A given amount of money
is almost always more valuable sooner than later, so present values are generally smaller than
corresponding future values.
PRE-TAX INCOME/PROFIT see PROFIT BEFORE TAXES.
PRICE is the property of having material worth. Price is usually indicated by the amount of
money something would bring if or when sold.
PRICE CEILING is a government-imposed limit on how high a price can be charged on a
product.
PRICE EARNINGS MULTIPLE: The price-earnings ratio (P/E) is simply the price of a
company's share of common stock in the public market divided by its earnings per share.
Multiply this multiple by the net income and you will have a value for the business. If the
business has no income, there is no valuation. If the common stock in not publicly traded,
valuation of the stock is purely subjective. This may not be the best method, but can provide a
benchmark valuation.
PRICE EARNING RATIO see PRICE EARNINGS MULTIPLE.

13. PRICE ELASTICITY is the degree to which customers respond to price changes (calculation:
% change in quantity divided by % change in price). A value greater than 1 = customers
exhibit a good sensitivity to price. A value less than 1 = customers are insensitive to price.
Price Elasticity is if a small change in price is accompanied by a large change in quantity
demanded, the product is said to be elastic (or responsive to price changes). A product is
inelastic if a large change in price is accompanied by a small amount of change in demand.
PRICE FIXING is an illegal practice where competing companies agree, informally or
formally, to jointly restrict or control prices within a specified range.
PRICE MIX is the value of the product determined by the producers. Price mix includes the
decisions as to: Price level to be adopted; discount to be offered; and, terms of credit to be
allowed to customers.
PRICE TO BOOK is a financial ratio that is derived by dividing a stock’s capitalization by its
book value. Also called Market-to-Book.
PRICE TO CASH FLOW is a measure of the market's expectations of a firm's future financial
health. It is calculated by dividing the price per share by cash flow per share.
PRICE TO EARNINGS RATIO (P/E) is a performance benchmark that can be used as a
comparison against other companies or within the stock's own historical performance. For
instance, if a stock has historically run at a P/E of 35 and the current P/E is 12, you may want
to explore the reasons for the drastic change. If you believe that the ratio is too low, you may
want to buy the stock. You will generally find a P/E ratio based on either the prior reporting
year's earnings, or the earnings of the prior four quarters added together (LTM or Latest
Twelve Months)
PRICE TO REVENUE is a financial ratio derived by dividing current stock price by revenue per
share (adjusted for stock splits).
PRICE TO SALES see PRICE TO REVENUE.
PRIMARY DEALER is a designation given by the Federal Reserve System to commercial
banks or broker/dealers who meet specific criteria, including capital requirements and
participation in Treasury auctions. A primary dealer is entitled and obligated to purchase and
sell government securities with the Federal Reserve directly. They serve as the conduits for
Federal Reserve open market activities. There are approximately 30-40 such dealers.
PRIMARY MARKET is the first sale of a newly issued security. Those securities are purchased
in the primary market. All subsequent trading of those securities is done in the secondary
market.

14. PRIME BROKERS are providers of back-office administration and stock lending for hedge
funds.
PRIME COST is equal to the sum of DIRECT MATERIAL plus DIRECT LABOR.
PRIME RATE is the interest rate that banks charge to their preferred customers. Changes in
the prime rate influence changes in other rates; mortgage interest rates for example.
PRINCIPAL is: a. a person who has controlling authority (e.g. the CEO or owner of a
company) or is in a leading position (part owners of a legal entity); or, b. a matter or thing of
primary importance, e.g. is the amount of a loan, excluding interest, or the amount you
invest, excluding income.
PRINCIPLES-BASED ACCOUNTING provides for few exact rules and little implementation
guidance. Instead, general principles are put forward and companies must ensure that their
financial statements fairly and accurately represent these principles. Proponents argue that
this type of system does not allow for less than ethical financial engineering, where complex
transactions are undertaken in order to get around following specific rules-based accounting
standards. Critics believe a principles-based system allows too much leeway for companies,
because they generally do not have to follow specific rules, only wide-arching principles. See
also RULES-BASED ACCOUNTING.
PRIOR PERIOD refers to accounting periods that have occurred in the past. See also
ACCOUNTING PERIOD.
PRIVATE CORPORATION is a corporation that ownership is held by the private sector, i.e.
individuals or companies.
PRIVATE EQUITY is equity securities of unlisted (non-publicly traded) companies. Private
equities are generally illiquid and thought of as a long-term investment. Private equity
investments are not subject to the same high level of government regulation as stock offerings
to the general public. Private equity is also far less liquid than publicly traded stock.
PRIVATE LEDGER see LEDGER.
PRIVATE PLACEMENT is investments in companies that are privately owned; i.e, they are
companies that are not traded on a public stock exchange (e.g., NYSE, NASDAQ, and AMEX).
PRIVATE PLACEMENT (DEBT) is the sale of a bond or other security directly to a limited
number of investors; used in the context of general equities. For example, sale of stocks,
bonds, or other investments directly to an institutional investor like an insurance company,

15. avoiding the need for the registration with the regulator if the securities are purchased for
investment as opposed to resale.
PROCEEDS, generally in business, is the total amount brought in, e.g. the proceeds of a sale.
In insurance, it is the net amount received (as for a check or from an insurance settlement)
after deduction of any discount or charges.
PROCESS ACCOUNTING see PROCESS COSTING.
PROCESS COSTING is a method of cost accounting applied to production carried out by a
series of chemical or operational stages or processes. Its characteristics are that costs are
accumulated for the whole production process and that average unit costs of production are
computed at each stage.
PROCUREMENT, from a business perspective, is the purchasing of services or materials.
PRODUCER PRICE INDEX (PPI) measures the average change over time in the selling
prices received by domestic producers for their output. The prices included in the PPI are from
the first commercial transaction for many products and some services.
PRODUCT is: a. the end result of the manufacturing process, b. commodities offered for sale,
or c. an artifact that has been created by someone or some process.
PRODUCT COST is cost of inventory on hand, also called Inventoriable Cost. They are assets
until the products are sold. Once they are sold, they become expense, i.e. Cost of Good Sold
(COGS). All manufacturing costs are product costs, e.g., direct material, direct labor, and
factory overhead.
PRODUCT INVOICE is an invoice associated with a tangible or physical item as opposed to a
service or professional invoice. See PROFESSIONAL INVOICE and SERVICE INVOICE.
PRODUCTION BUDGET is used to propose how much you will manufacture (or buy in from
suppliers) so that you can compensate for the demand (identified on your sales budget). If
your maximum capacity for producing stock was 100 units for the month (due to available
resources), it may not be necessary to produce this maximum (due to a lower demand) each
month because it adds to expense and ties up finance. If you expect a high demand during a
certain month(s), it may be that your manufacturing capacity cannot compensate. In which
case, you may budget to manufacture excess in the months where you do not manufacture
the maximum so that you can build up your supplies for the expected months with high
demand. Alternatively, it may be a call to buy/hire more machinery/staff in that particular
month to allow an increased capacity for production. See OPERATING BUDGET.

16. PRODUCTIVE ACTIVITY usually is defined as including activities that have economic value in
the marketplace. A more contemporary definition of productive activity includes any activity
that produces a valued good or service, even if it is not actually paid for.
PRODUCTIVITY is a measured relationship of the quantity and quality of units produced and
the labor required per unit of time.
PRODUCTIVITY RATIO is the ratio of outputs to inputs. The closer the ratio is to 1.0, the
higher the productivity; the closer the ratio is to 0.0, the lower the productivity. Productivity is
important because it relates to an organization's ability to compete, and to the overall wealth
and standard of living of a nation. Productivity is affected by work methods, capital, quality,
technology, and management.
PRODUCT MIX involves planning and developing the right type of product that will satisfy
fully the needs of customers. A product has several dimensions. These dimensions are
collectively called 'product mix'. Product mix for example may consist of size and weight of the
product, volume of output, product quality, product design, product range, brand name,
package, product testing, warranties and after sales services and the like.
PROFESSIONAL FEE is that fee charged for services from university trained professionals;
primarily doctors, lawyers and accountants. The term is often expanded to include other
university trained professions, e.g. pharmacists charging to maintain a medicinal profile of a
client or customer.
PROFESSIONAL INVOICE is an invoice associated with professional services rendered, i.e.
medical, legal or accounting services. See SERVICE INVOICE and PRODUCT INVOICE.
PROFESSIONAL SERVICES are those services offered by university trained professionals,
e.g. doctors, lawyers, and accountants for, normally, a professional fee.
PROFESSIONAL SUBSCRIBER means all other persons who do not meet the definition of
Non-Professional Subscriber. SEE NON-PROFESSIONAL SUBSCRIBER.
PROFIT is the excess of revenues over outlays in a given period of time (including
depreciation and other non-cash expenses).
PROFITABILITY is company's ability to generate revenues in excess of the costs incurred in
producing those revenues.
PROFITABILITY RATIOS are measures of performance showing how much the firm is
earning compared to its sales, assets or equity.

17. PROFIT AFTER TAX (PAT) is the net profit earned by the company after deducting all
expenses like interest, depreciation and tax. PAT can be fully retained by a company to be
used in the business. Dividends, if declared, are paid to the share holders from this residue.
PROFIT & LOSS ACCOUNT shows the net profit which is left after all relevant business
expenses have been deducted.
PROFIT AND LOSS SHARING (PLS) is the method utilized in Islamic banking to comply with
the prohibition of interest. The Islamic solution, commonly referred to as Profit & Loss Sharing
(PLS), suggests an equitable sharing of risks and profits between the parties involved in a
financial transaction. In the banking business, there are three parties - the entrepreneur or
the actual user of capital, the bank which serves as a partial user of capital funds and as a
financial intermediary, and the depositors in the bank who are the suppliers of savings or
capital funds. There are two different partnerships of the type mentioned in Islam: the
partnership between the depositors and the bank, and the partnership between the
entrepreneur (or the borrower) and the bank. Under this proposal, financial institutions will
not receive a fixed rate of interest on their outstanding loans, rather, they share in profits or
in losses of the business owner to whom they have provided the funds. Similarly, those
individuals who deposit their funds in a bank will share in the profit/loss of the financial
institution.
PROFIT AND LOSS STATEMENT (P&L) is also known as an income statement. It shows
your business revenue and expenses for a specific period of time. The difference between the
total revenue and the total expense is your business net income. A key element of this
statement, and one that distinguishes it from a balance sheet, is that the amounts shown on
the statement represent transactions over a period of time while the items represented on the
balance sheet show information as of a specific date (or point in time).
PROFIT BEFORE TAXES (PBT) is a profitability measure that looks at a company's profits
before the company has to pay income tax. This measure deducts all expenses from revenue
including interest expenses and operating expenses, but it leaves out the payment of tax.
PROFIT CENTER is a section of an organization that is responsible for producing profit, e.g.,
a division of a corporation that is not a stand-alone entity but is required to produce profits
within the corporation.
PROFIT MARGIN ON SALES is: a. Gross Profit Margin on Sales = Gross Profit/Sales * 100;
or, b. Net Profit Margin on Sales = Net Profit After Tax/Sales * 100. See also GROSS PROFIT
MARGIN ON SALES.
PROFIT MULTIPLE: Profit and sales multiples are the most widely used valuation
benchmarks used in valuing a business. The information needed are pretax profits and a
market multiplier, which may be 1, 2, 3, or 4 and usually a ceiling of 5. The market multiplier

18. can be found in various financial publications, as well as analyzing the sale of comparable
businesses. This method is easy to understand and use. The profit multiple is often used as
the valuation ceiling benchmark.
PRO-FORMA is to provide in advance to a prescribed form or to describe item, e.g. pro forma
financial statement or pro forma invoice.
PRO-FORMA FINANCIAL STATEMENT is a financial statement projection that shows how an
actual financial statement will look if certain specified assumptions are realized.
PRO-FORMA INVOICE is a price quote. It is written as an invoice, and, in effect, says: 'This
is the purchase price and terms we are offering.'
PROGRAM BUDGET is a budget wherein inputs of resources and outputs of services are
identified by programs without regard to the number of organizational units involved in
performing various aspects of the program.
PROGRESSIVE TAX is an income tax system to where the more income that is made the
higher the tax percentage that must be paid.
PROGRESS BILLINGS are interim billings for construction work or government contract
work. The entry is to debit progress billings receivable and credit progress billings on
construction in progress. Progress billings is a contra account to CONSTRUCTION-IN-
PROGRESS.
PROJECTION is an approximation of future events. Usually a projection is made by
extrapolating known information into the future period, considering events that could affect
the outcome. See FORECAST, BUDGET.
PROMISES FOR THE FUTURE is not a standard term, but is sometimes used in contracts to
delineate what orders/commitments may exist in the future. Dependent upon the contractual
language, it may or may not be binding.
PROMISSORY NOTE, usually just called a 'note', is a NEGOTIABLE INSTRUMENT wherein the
maker agrees to pay a specific sum at a definite time.
PROMOTIONAL ALLOWANCES are offered by manufacturers to support the additional
promotional activities undertaken by channel members (retailers) on their behalf, e.g.
discounts given as part of promotional programs, such as when products are put on sale to
increase traffic in a retail store.

19. PROOF OF POSTING (POP) is: a. to prove by acceptable methods the accuracy of any posts
made within accounting ledgers; or b. details confirming the shipment of mail with a postal
organization.
PROPORTIANATE UNIT CONCEPT is where a value or distribution is agreeing in amount,
magnitude, or degree, e.g. a shareholder holding 1% outstanding shares of an entity is
entitled to receive 1% of that entities declared dividend, i.e. it is in proportion.
PROPRIETARY is an account, item, or information belonging to a company or individual. See
PROPRIETARY ASSET.
PROPRIETARY ASSET, usually, is any asset that is considered in the realm of intellectual
property that should not be disclosed, e.g., all information having to do with
clients/customers, including but not limited to names, addresses, telephone numbers and
other contact information, as well as any other personal or business related information, as it
may exist from time to time is a valuable, and unique proprietary asset to a company.
Proprietary assets would also include trade secrets and undisclosed inventions.
PROPRIETARY THEORY is where no fundamental distinction is drawn between a legal entity
and its owners, i.e. the entity does not exist separately from the owners for accounting
purposes. The primary focus is to report information useful to the owners, and therefore the
financial statements are prepared from their perspective. See ENTITY THEORY.
PROPRIETORS DRAW is when a business proprietor draws money for personal needs, but is
taxed on business results (at individuals’ marginal rate) regardless of drawings.
PROPRIETORS FUNDS is owner's capital plus net profit minus owners drawings.
PROPRIERTORSHIP see SOLE PROPRIERTORSHIP.
PRO RATA is the basis for allocating an amount proportionally to the items involved. An
amount may be proportionally distributed to assets, expenses, funds, etc.
PROSPECTIVE PAYMENT SYSTEM (PPS), in healthcare, is a Medicare administered
payment plan where providers are paid a predetermined sum for caring for a given number of
consumers. The built in incentive is for providers to control costs, theoretically leading to more
cost effective care.
PROSPECTIVE REIMBURSEMENT, in healthcare, is a reimbursement method where the
third party payer set the amount of money for a particular service to be delivered to clients in
agreement with the organization before the service is delivered.

20. PROSPECTUS is the disclosure document for an offering registered with the SEC. The final
prospectus is issued on the effective date, i.e., when the offering is released by the SEC.
PROVISION, generally, is to prepare in advance for an event that is projected to take place
in the future. In accounting, it is an amount charged against profits for a specific liability (for
example: bad debts, depreciation or taxes). A liability may be known, but the amount is often
uncertain. This uncertainty may lead to an adjustment in a later income statement once the
final amount of the liability is ascertained.
PROVISION FOR CREDIT LOSSES, in lending institutions, is a charge to income which
represents an expense deemed adequate by management given the composition of a bank’s
credit portfolios, their probability of default, the economic environment and the allowance for
credit losses already established. Specific provisions are established to reduce the book value
of specific assets (primarily loans) to establish the amount expected to be recovered on the
loans. See also PROVISION.
PROX see PROXIMO.
PROXIMO (usually abbreviated to 'PROX') means of or in the following month.
PROXY is a person authorized to act for another, e.g. a power of attorney document given by
shareholders of a corporation authorizing a specific vote on their behalf at a corporate
meeting.
PRUDENCE is having foresight and caution along with discretion, and to not act recklessly.
PRUDENCE CONCEPT, otherwise known as conservatism, says that whenever there are
alternative procedures or values, the accountant will choose the one that results in a lower
profit, a lower asset value and a higher liability value.
PTI is Pretax Income.
PUBLIC ACCOUNTING means the performance of or offering to perform any engagement
that will result in the issuance of an attest report that is in accordance with professional
standards. "Practice of public accounting" also means the performance of or offering to
perform services other than those described above, such as consulting services, personal
financial planning services, or the preparation of tax returns or the furnishing of advice on tax
matters by a sole proprietorship, partnership, limited liability company, professional
association, corporation, or other business organization, that advertises to the public as a
"certified public accountant" or "public accountant."

21. PUBLIC CORPORATION is a corporation formed by federal, state or local governments for
specific public purposes.
PUBLIC DEBT OFFICE, in the U.S., is a part of the Department of Treasury and is
responsible for the issuance, control, and payment of government issued securities in
compliance to existing regulations.
PUBLIC FUNDS is money funded in government securities or through the levy of taxes from a
governmental entity.
PUBLIC OFFERING is the sale of a new securities issue to the public by way of an
underwriter, a transaction that must be registered with the Securities and Exchange
Commission.
PUBLIC OWNERSHIP is either: a. Government ownership and operation of a productive
facility for the purposes of providing some goods or services to citizens; or, b. In investments,
portion of a corporations stock that is publicly traded and owned in the open market.
PURCHASE ACCOUNT is an account in which all inventory purchases are recorded; used with
the periodic inventory method.
PURCHASE AGREEMENT is a contract stating the terms of a purchase.
PURCHASE DISCOUNT is a reduction in the purchase price, allowed if payment is made
within a specified period.
PURCHASE METHOD is accounting for an acquisition using market value for the consolidation
of the two entities` net assets on the balance sheet. Generally, depreciation/amortization will
increase for this method (due to the creation of goodwill) compared to the POOLING OF
INTEREST METHOD resulting in lower net income.
PURCHASE MONEY AGREEMENT is an agreement under which a person pledges the
property or item bought as security.
PURCHASE MONEY INTEREST is that interest associated with the purchase money
mortgage.
PURCHASE MONEY MORTGAGE (PMM) is seller financing as a part of the purchase price.
PURCHASE ORDER is a written authorization for a vendor to supply goods or services at a
specified price over a specified time period. Acceptance of the purchase order constitutes a
purchase contract and is legally binding on all parties.

22. PURCHASE REQUISITION is a written request for goods to be purchased. It is usually
prepared by a department head or manager and sent to a firm's purchasing department.
PURCHASE RETURNS is a contra purchase account that records all credits from returned
inventory purchases.
PURCHASES BUDGET is a budget of the expected usage of materials in production and the
purchase of the direct materials required. See OPERATING BUDGET.
PURCHASES LEDGER see LEDGER.
PURCHASING POWER is the value of a particular monetary unit in terms of the amount of
goods or services that can be purchased with it, i,e, the ability to purchase, generally
measured by income.
PURE COST is any direct readily verifiable cost assignable to the subject or item, e.g., the
direct cost of producing a product.
PURE RESEARCH is motivated exclusively by the search for knowledge for its own sake.
PUSH-DOWN ACCOUNTING, in acquisitions, is an exception to the general rule that the
acquiree’s carrying values are unaffected by the purchase may arise when substantially all of
the acquiree’s shares are purchased by the acquirer. In that case, the acquirer may direct the
acquiree to revalue its assets in accordance with the fair values attributed to those assets by
the acquirer. This practice is known as push-down accounting, because the fair values are
“pushed down” to the acquiree’s books. The net effect is the same as if the acquirer had
formed a new subsidiary, which then purchased all of the assets and liabilities of the acquiree.
There are two advantages to push-down accounting: a. The first is that the financial position
and results of operations of the acquiree will be reported on the same economic basis in both
the consolidated statements and its own separate entity statements. Without push-down
accounting, for example, it would be possible for the subsidiary to report a profit on its own
and yet contribute an operating loss to the parent’s consolidated results, if the consolidation
adjustments are sufficient to tip the balance between profit and loss; and, b. The second
advantage is that the process of consolidation will be greatly simplified for the parent. Since
the carrying values will be the same as the acquisition fair values, there will be no need for
many of the consolidation adjustments that otherwise will be required every time consolidated
statements are prepared.
PUSH-PULL STRATEGY is the effective simultaneous use of a combination of two marketing
strategies: PUSH = 1. (physical distribution definition) A manufacturing strategy aimed at
other channel members rather than the end consumer. The manufacturer attempts to entice

23. other channel members to carry its product through trade allowances, inventory stocking
procedures, pricing policies, etc. 2. (sales promotion definition) The communications and
promotional activities by the marketer to persuade wholesale and retail channel members to
stock and promote specific products. PULL = 1. (physical distribution definition) A
manufacturing strategy aimed at the end consumer of a product. The product is pulled
through the channel by consumer demand initiated by promotional efforts, inventory stocking
procedures, etc. 2. (sales promotion definition) The communications and promotional activities
by the marketer to persuade consumers to request specific products or brands from retail
channel members.
PUT is (1) A stipulated privilege of buying or selling a stated property, security, or commodity
at a given price (strike price) within a specified time (for an American-style option, at any time
prior to or on the expiration date). A securities option is a negotiable contract in which the
seller (writer), for a certain sum of money called the option premium, gives the buyer the
right to demand within a specified time the purchase (call) or sale (put) by the option seller of
a specified number of bonds, currency units, index units, or shares of stock at a fixed price or
rate called the strike price. Many options are settled for cash equal to the difference between
the aggregate spot price and the aggregate strike price rather than by delivery of the
underlying. In the U.S. and many other countries, stock options are usually written for units of
100 shares. Other units of underlying coverage are standard in other option markets. Options
are ordinarily issued for periods of less than one year, but longer-term options are increasingly
common. (2) Any financial contract that changes in value like an option (asymmetrically),
even if the terms of the contract do not state the price relationship in terms of a right or
privilege or in other language usually associated with options.
PUT OPTION is the right but not the obligation to sell an underlying at a particular price
(strike price) on or before the expiration date of the contract. Alternatively, a short forward
position with an upside insurance policy.
PUT WARRANT is a security that, in contrast to a conventional warrant, gives the holder the
right to sell the underlying or to receive a cash payment that increases as the value of the
underlying declines. Put warrants, like their call warrant counterparts, generally have an initial
term of more than one year.

24. AAA is American Accounting Association, Association of Accounting Administrators, or see
ACCUMULATED ADJUSTMENT ACCOUNT.
AAA-CPA is American Association of Attorney-Certified Public Accountants.
AACSB is American Assembly of Collegiate Schools of Business.
AAFI is Associated Accounting Firms International.
AAHCPA is American Association of Hispanic CPAs.
A&E can mean either Appropriation & Expense or Analysis & Evaluation.
A&G is Administrative & General.
A&M is Additions and Maintenance.
A&P is an acronym for Administrative and Personnel.
AAT, in Great Britain, is Association of Accounting Technicians.
ABA is the American Bar Association. See below also.
ABA (Accredited Business Accountant or Accredited Business Advisor), in the US, is a national
credential conferred by Accreditation Council for Accountancy and Taxation to professionals
who specialize in supporting the financial needs of individuals and small to medium sized
businesses. ABA is the only nationally recognized alternative to the CPA. Most accredited
individuals do not perform audits. Generally, they are small business owners themselves. In
addition to general accounting work, CPAs are also heavily schooled in performing audits;
however, only a small fraction of America's businesses require an audit. In general, a CPA has
majored in accounting, passed the CPA examination and is licensed to perform audits. An ABA
has majored in accounting, passed the ABA comprehensive examination and in most states is
not licensed to perform audits.
ABATEMENT, in general, is the reduction or lessening. In law, it is the termination or
suspension of a lawsuit. For example, an abatement of taxes is a tax decrease or rebate.
ABC see ACTIVITY BASED COSTING.
ABM see ACTIVITY BASED MANAGEMENT.
ABNORMAL EXPENSE see EXTRAORDINARY ITEMS.

25. ABNORMAL GAIN see NORMAL LOSS.
ABNORMAL ITEMS see EXTRAORDINARY ITEMS.
ABNORMAL LOSS see NORMAL LOSS.
ABNORMAL RETURNS is the difference between the actual return and that is expected to
result from market movements (normal return).
ABNORMAL SPOILAGE is spoilage that is not part of everyday operations. It occurs for
reasons such as the following: out-of-control manufacturing processes, unusual machine
breakdowns, and unexpected electrical outages that result in a number of spoiled units. Some
abnormal spoilage is considered avoidable; that is, if managers monitor processes and
maintain machinery appropriately, little spoilage will occur. To highlight these types of
problems so that they can be monitored, abnormal spoilage is recorded in a Loss from
Abnormal Spoilage Account in the general ledger and is not included in the job costing
inventory accounts (work in process, finished goods, and cost of goods sold).
ABOVE THE LINE, in accounting, denotes revenue and expense items that enter fully and
directly into the calculation of periodic net income, in contrast to below the line items that
affect capital accounts directly and net income only indirectly.
ABOVE THE LINE, for the individual, is a term derived from a solid bold line on Form 1040
and 1040A above the line for adjusted gross income. Items above the line prior to coming to
adjusted gross income, for example, can include: IRA contributions, half of the self-
employment tax, self-employed health insurance deduction, Keogh retirement plan and self-
employed SEP deduction, penalty on early withdrawal of savings, and alimony paid. A
taxpayer can take deductions above the line and still claim the standard deduction.
ABSOLUTE CHANGE is a numerical change in an empirical value, e.g. cost of goods was
reduced by $9.00.
ABSORB is to assimilate, transfer or incorporate amounts in an account or a group of
accounts in a manner in which the first entity loses its identity and is "absorbed" within the
second entity. For example, see ABSORPTION COSTING.
ABSORBED COSTS incorporates both variable and fixed costs.
ABSORPTION see ABSORB.

26. ABSORPTION COSTING is the method under which all manufacturing costs, both variable
and fixed, are treated as product costs with non-manufacturing costs, e.g. selling and
administrative expenses, being treated as period costs.
ABSORPTION PRICING is where all costs, both fixed and variable; plus a percentage mark-
up for profit; are recovered in the price.
ABSORPTION VARIANCE is the variance from budgeted absorption costing of manufactured
product. See also ABSORPTION COSTING.
ACA is Accreditation Council for Accountancy.
ACAT (Accreditation Council for Accountancy and Taxation) is a national organization
established in 1973 as a non-profit independent testing, accrediting and monitoring
organization. The Council seeks to identify professionals in independent practice who specialize
in providing financial, accounting and taxation services to individuals and small to mid-size
businesses. Professionals receive accreditation through examination and/or coursework and
maintain accreditation through commitment to a significant program of continuing professional
education and adherence to the Council's Code of Ethics and Rules of Professional Conduct.
ACB normally refers to 'adjusted cost base.'
ACCELERATED DEPRECIATION is a method of calculating depreciation with larger amounts
in the first year(s).
ACCEPTANCE is a drawee's promise to pay either a TIME DRAFT or SIGHT DRAFT. Normally,
the acceptor signs his/her name after writing "accepted" (or some other words indicating
acceptance) on the bill along with the date. That "acceptance" effectively makes the bill a
promissory note, i.e. the acceptor is the maker and the drawer is the endorser.
ACCOMODATION ENDORSEMENT is a) the guarantee given by one legal entity to induce a
lender to grant a loan to another legal entity. b) a banking practice where one bank endorses
the acceptances of another bank, for a fee, qualifying them for purchase in the acceptance
market.
ACCOUNT is the detailed record of a particular asset, liability, owners' equity, revenue or
expense.
ACCOUNT AGING usually refers to the methods of tracking past due accounts in accounts
receivable based on the dates the charges were incurred. Account aging can also be used in

27. accounts payable, to a lesser degree, to monitor payment history to suppliers. See also AGING
OF ACCOUNTS.
ACCOUNT ANALYSIS is a way to measure cost behavior. It selects a volume-related cost
driver and classifies each account from the accounting records as a fixed or variable cost. The
cost accountant then looks at each cost account balance and estimates either the variable cost
per unit of cost driver activity or the periodic fixed cost.
ACCOUNTANT'S OPINION is a signed statement regarding the financial status of an entity
from an independent public accountant after examination of that entities records and
accounts.
ACCOUNT-CLASSIFICATION METHOD, also called account analysis, is a cost estimation
method that requires a study of an account in the general ledger. The experienced analysts
use the account information as well as their own judgment to determine how costs will behave
in the future.
ACCOUNT CURRENT is a running or continued account between two or more parties, or a
statement of the particulars of such an account.
ACCOUNT DISTRIBUTION is the process by which debits and credits are identified to the
correct accounts.
ACCOUNT GROUP, in accounting, is a designation of a group of accounts of like type (for
example: accounts receivable and fixed assets).
ACCOUNTING is primarily a system of measurement and reporting of economic events based
upon the accounting equation for the purpose of decision making. Generally, when someone
says "accounting" they are referring to the department, activity or individuals involved in the
application of the accounting equation.
ACCOUNTING CONCEPTS are the assumptions underlying the preparation of financial
statements, i.e., the basic assumptions of going concern, accruals, consistency and prudence.
ACCOUNTING CONVENTION see CONVENTION.
ACCOUNTING CYCLE is the sequence of steps in preparing the financial statements for a
given period. It refers to the fact that because financial reports are given each period (usually
a year) there are a set of steps (cycle) taken each period that result in the reports and
preparation for the next period or cycle. The term cycle is used because every period there is

28. a start and an end. The cycle usually starts with the budget, goes through the journal entries,
adjusting entries, posting to the accounts, financial reports, and closings.
ACCOUNTING DATA is all the information and data contained in journals, ledgers and other
records that support financial statements, e.g. spreadsheets. It may be in computer readable
form or on paper.
ACCOUNTING DIVERSITY is the recognition that many diverse national and international
accounting standards exist in the world.
ACCOUNTING ENTITY ASSUMPTION states that a business is a separate legal entity from
the owner. In the accounts the business’ monetary transactions are recorded only.
ACCOUNTING ENTITY is an organization, institution or being that has its own existence for
legal or tax purposes. An accounting entity is often an organization with an existence separate
from its individual members--for example, a corporation, partnership, trust, etc. See also
ACCOUNTING ENTITY ASSUMPTION.
ACCOUNTING EQUATION is a mathematical expression used to describe the relationship
between the assets, liabilities and owner's equity of the business model. The basic accounting
equation states that assets equal liabilities and owner's equity, but can be modified by
operations applied to both sides of the equation, e.g., assets minus liabilities equal owner's
equity.
ACCOUNTING EVENT is when the assets and liabilities of a business increase/decrease or
when there are changes in owner's equity.
ACCOUNTING INCOME is the income derived through historical accrual based accounting.
Income = the change in net assets occurring during the period excluding transactions with
owners; i.e. transaction based.
ACCOUNTING MEASUREMENT AND DISCLOSURE is the concepts of measurement and
information disclosure required for decision making.
ACCOUNTING PACKAGE/SOFTWARE, usually, is a commercially available software program
or suite that, with little customization, will satisfy the accounting system needs of the
purchasing entity.
ACCOUNTING PERIOD is the time period for which accounts are prepared, usually one year.
ACCOUNTING PRINCIPLES see GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).

29. ACCOUNTING PRINCIPLES BOARD (APB) OPINIONS were published by the Accounting
Principles Board (APB). The APB was created by American Institute of Certified Public
Accountants (AICPA) in 1959; replaced by Financial Accounting Standards Board (FASB) in
1973. The APB mission was to develop an overall conceptual framework of US generally
accepted accounting principles (US GAAP). APB was the main organization setting the US
GAAP and its opinions are still an important part of it.
ACCOUNTING RATIO is the result of dividing one financial statement item by another. Ratios
help analysts interpret financial statements by focusing on specific relationships.
ACCOUNTING STANDARDS BOARD (ASB) makes, improves, amends and withdraws
accounting standards. Many of ASBs specialize in the various fields or sectors of accounting.
ACCOUNTING SYSTEM is the set of manual and computerized procedures and controls that
provide for identifying relevant transactions or events; preparing accurate source documents,
entering data into the accounting records accurately, processing transactions accurately,
updating master files properly, and generating accurate documents and reports.
ACCOUNTING THEORY tries to describe the role of accounting and is composed of four types
of accounting theory: classical inductive theories, income theories, decision usefulness
theories, and information economics / agency theories: a. Classical inductive theories are
attempts to find the principles on which current accounting processes are based; b. Income
theories try to identify the real profit of an organization; c. Decision usefulness theories
attempt to describe accounting as a process of providing the relevant information to the
relevant decision makers; and, d. The information economics / agency theories of accounting
see accounting information as a good to be traded between rational agents each acting in their
own self-interest.
ACCOUNTING TIMING DIFFERENCE is the effect that a defered accounting event would
have on the financials if taken into consideration e.g., the release of a deferred tax asset to
the income statement as a deferred tax expense (ie the reversal of an accounting timing
difference).
ACCOUNTING TREATEMENT is the methods, processes and decisions as to any given
accounting decision as to how a transaction is to be or is handled in compliance to GAAP and
all applicable statutes.
ACCOUNTS PAYABLE (AP) are trade accounts of businesses representing obligations to pay
for goods and services received.

30. ACCOUNTS PAYABLE TO SALES measures the speed with which a company pays vendors
relative to sales. Numbers higher than typical industry ratios suggest that the company is
using suppliers assets (cash owed) to fund operations.
ACCOUNTS RECEIVABLE is a current asset representing money due for services performed
or merchandise sold on credit.
ACCOUNTS RECEIVABLE LEDGER is the bookkeeping ledger in which all accounts for which
cash assets owed to an organization is maintained.
ACCOUNTS RECEIVABLE RESERVE is a reserve against bad debt. See also RESERVE and
RESERVE ACCOUNTS.
ACCOUNTS RECEIVABLE TURNOVER is the ratio of net credit sales to average accounts
receivable, which is a measure of how quickly customers pay their bills.
ACCRETION is the adjustment of the difference between the price of a bond purchased at an
original discount and the par value of the bond; or, asset growth through internal growth,
expansion or natural causes, e.g. the aging of wine or growth of timber/trees.
ACCRUAL is the recognition of revenue when earned or expenses when incurred regardless of
when cash is received or disbursed.
ACCRUAL BASIS OF ACCOUNTING is wherein revenue and expenses are recorded in the
period in which they are earned or incurred regardless of whether cash is received or
disbursed in that period. This is the accounting basis that generally is required to be used in
order to conform to generally accepted accounting principles (GAAP) in preparing financial
statements for external users.
ACCRUAL CONCEPT see ACCRUAL BASIS OF ACCOUNTING.
ACCRUED ASSETS are assets from revenues earned but not yet received.
ACCRUED EXPENSES are expenses incurred during an accounting period for which payment
is postponed.
ACCRUED INCOME is income earned during a fiscal period but not paid by the end of the
period.
ACCRUED INTEREST is interest earned but not paid since the last due date.

31. ACCRUED INVENTORY functions as a "clearing" account to establish a liability for inventory
physically received into the warehouse, but for which a vendor invoice had not yet arrived.
ACCRUED LIABILITY are liabilities which are incurred, but for which payment is not yet
made, during a given accounting period. Some examples in a manufacturing environment
would be: wages, taxes, suppliers/vendors, etc.
ACCRUED PAYROLL is a liability arising from employees' salary expense that has been
incurred but not paid.
ACCRUED REVENUE is the accumulated revenue as they have been recognized over a given
period.
ACCRUED VACATION see ACCRUED LIABILITY.
ACCUMULATED ADJUSTMENT ACCOUNT (AAA) under Section 1368(e)(1) of the IRS Code
provides that the term “accumulated adjustment account” (AAA) means an account of the S
corporation which is adjusted for the S period in a manner similar to the adjustments under §
1367 (except that no adjustment shall be made for income (and related expenses) which is
exempt from tax under title 26 and the phrase “(but not below)” shall be disregarded in §
1367(b)(2)(A)) and no adjustment shall be made for Federal taxes attributable to any taxable
year in which the corporation was a C corporation.
ACCUMULATED AMORTIZATION is the cumulative charges against the intangible assets of a
company over the expected useful life of the assets.
ACCUMULATED DEPRECIATION is the cumulative charges against the fixed assets of a
company for wear and tear or obsolescence.
ACH is Automated Clearing House.
ACID-TEST RATIO is an analysis method used to measure the liquidity of a business by
dividing total liquid assets by current liabilities.
ACKNOWLEDGEMENT OF INDEBTEDNESS is a written recognition of debt that is
enforceable in law, e.g. memorandum check, bank draft, or loan contract.
ACMA is an acronym for Associate Chartered Management Accountant.
ACQUISITION is one company taking over controlling interest in another company. See also
MERGER and POOLING OF INTERESTS.

32. ACQUISITION COST is the amount, net of both trade and cash discounts, paid for property,
plus transportation costs and ancillary costs.
ACQUISITION PRICE PRINCIPLE see COST PRINCIPLE.
ACR is Accounts Receivable. See ACCOUNTS RECEIVABLE.
ACTIVITY BASED COSTING (ABC) is a costing system that identifies the various activities
performed in a firm and uses multiple cost drivers (non-volume as well as the volume based
cost drivers) to assign overhead costs (or indirect costs) to products. ABC recognizes the
causal relationship of cost drivers with activities.
ACTIVITY BASED MANAGEMENT (ABM) converts Activity Based Costing (ABC) into a
system to manage an organization. Activity Based Management not only focuses on product,
service, customer, channel costing, it also emphasizes: cost drivers (root cause analysis),
action plans to improve to achieve strategic objectives, and, performance measures for
activities and processes.
ACTIVITY DRIVERS, in activity based costing (ABC), activity costs are assigned to outputs
using activity drivers. Activity drivers assign activity costs to outputs based on individual
outputs’ consumption or demand for activities. For example, a driver may be the number of
times an activity is performed (transaction driver) or the length of time an activity is
performed (duration driver) see DURATION DRIVERS, INTENSITY DRIVERS, TRANSACTION
DRIVERS.
ACTIVITY RATIO is any accounting ratio that measures a firm's ability to convert different
accounts within their balance sheets into cash or sales.
ACTUAL CASH VALUE (ACV) is the common method of determining the amount of
reimbursement for a loss. Normally calculated be determining what it will cost to replace an
item at the time of loss after subtracting depreciation.
ACTUAL COST is the amount paid for an asset; not its retail value, market value or insurance
value.
ACTUALS is jargon used when speaking of an actual number experienced through some point
in time as opposed to a number that is budgeted or projected into the future, e.g., year-to-
date sales, expenses, product produced, etc.
ACTUARIAL METHOD means the method of allocating payments made on a debt between
the amount financed and the finance or other charges where the payment is applied first to

33. the accumulated finance or other charges and any remainder is subtracted from, or any
deficiency is added to the unpaid balance of the amount financed.
ACTUARIAL SCIENCE applies mathematical and statistical methods to finance and insurance,
particularly to the assessment of risk. Actuaries are professionals who are qualified in this
field.
ACV see ACTUAL CASH VALUE.
ADA, among others, is Americans with Disabilities Act of 1990.
ADD-INS is: a. something designed or intended for use in conjunction with another, e.g.
accessories to a primary product in a purchase order; or, b. an accessory software program
that extends the capabilities of an existing application.
ADDITIONAL PAID IN CAPITAL is the amounts paid for stock in excess of its par value;
included are other amounts paid by stockholders and charged to equity accounts other than
capital stock.
ADEA is Age Discrimination in Employment Act of 1967.
ADEQUATE DISCLOSURE is sufficient information in footnotes, as well as financial
statements, indicative of a firm's financial status.
ADF, in invoicing, is After Deducting Freight.
AD HOC is being concerned with a particular end or purpose, e.g., a ad hoc committee
established to handle a specific subject.
ADI, in invoicing, is After Date of Invoice.
ADJUNCT ACCOUNT is an account that accumulates either additions or subtractions to
another account. Thus the original account may retain its identity. Examples include premiums
on bonds payable, which is a contra account to bonds payable; and accumulated depreciation,
which is an offset to the fixed asset.
ADJUSTED BASIS see BASIS.
ADJUSTED BOOK VALUE: Your MBA performs two types of adjusted book value analysis.
Tangible Book Value and Economic Book Value (also known as Book Value at Market).

34. • Tangible Book Value is different than book value in that it deducts from asset value
intangible assets, which are assets that are not hard (e.g., goodwill, patents,
capitalized start-up expenses and deferred financing costs).
• Economic Book Value allows for a book value analysis that adjusts the assets to their
market value. This valuation allows valuation of goodwill, real estate, inventories and
other assets at their market value.
ADJUSTED EARNINGS PER SHARE is a non-GAAP financial measure of earnings per share.
Dependent upon the entity, it may or may not include what would normally be included in a
GAAP sanctioned earnings per share calculation.
ADJUSTING ENTRIES are special accounting entries that must be made when you close the
books at the end of an accounting period. Adjusting entries are necessary to update your
accounts for items that are not recorded in your daily transactions.
ADJUSTMENT can be either: 1. an increase or decrease to an account resulting from
ADJUSTING ENTRIES; or, 2. changing an account balance due to some event, e.g.,
adjustment of an account due to the return of merchandise for credit.
ADMINISTRATIVE/ADMINISTRATION COST see INDIRECT COST.
ADMITTED ASSETS are assets whose values are permitted by state law to be included in the
annual statement.
ADMITTED VALUE see ADMITTED ASSETS.
ADR is American Depository Receipts.
ADSCR is Average Debt Service Coverage Ratio.
ADVANCE is an amount paid before it is earned, e.g. payment ahead of actual expenditures
or phase completion of a construction project.
ADVANCED ACCOUNTING covers accounting operations, patterns, merger of public holding
companies, foreign currency operations, changing financial statement prepared in foreign and
local currencies. Advanced accounting also includes a variety of advanced financial accounting
issues such as lease contracts, pension funds, end of service severance payments, etc.
ADVERSE OPINION is expressed if the basis of accounting is unacceptable and distorts the
financial reporting of the corporation. If auditors discover circumstances during the course of
the audit that make them question whether they can issue an unqualified opinion, they should

35. always discuss those circumstances with the client before issuing the opinion, in order to
determine whether it is possible to rectify the problem.
ADVICE NOTE is a written piece of information e.g. about the shipping status of the goods.
ADVISING BANK is a bank in the exporter's country handling a letter of credit.
AFE, dependent upon usage, is an acronym for Authorization for Expenditure or Average
Funds Employed.
AFFILIATE is a relationship between two companies when one company owns substantial
interest, but less than a majority of the voting stock of another company, or when two
companies are both subsidiaries of a third company.
AFUDC is Accumulated Funds Used During Construction or Allowance for Funds Used During
Construction.
AGED TRIAL BALANCE alphabetically lists accounts receivable with outstanding balances. It
displays one balance for every account by age and is typically produced only once on demand
to check receivable details against other reports.
AGENCY is the relationship between a principal and an agent wherein the agent is authorized
to represent the principal in certain transactions.
AGENCY COSTS is the incremental costs of having an Agent make decisions for a principal.
AGE OF INVENTORY see DAYS IN INVENTORY.
AGING OF ACCOUNTS is the classification of accounts by the time elapsed after the date of
billing or the due date. The longer a customer's account remains uncollected or the longer
inventory is held, the greater is its realization risk. If a customer's account is past due, the
company also has an Opportunity Cost of funds tied-up in the receivable that could be
invested elsewhere for a return. An aging schedule of accounts receivable may break down
receivables from 1-30 days, 31-60 days, 61-90 days, and over 90 days. With regard to
inventory, if it is held too long, obsolescence, spoilage, and technological problems may result.
Aging can be done for other accounts such as fixed assets and accounts payable. See also
ACCOUNT AGING.
AGGREGATE is the sum or total.

36. AGGREGATE THEORY is a theory of partnership taxation in which a partnership is considered
as an aggregate of individual co-owners who have bound themselves together with the
intention of sharing gains and loses; under this theory, the partnership itself has no existence
separate and apart from its members.
AGI (Annual Gross Income) is annualized total income prior to exclusions and deductions.
AGING see ACCOUNT AGING.
AGING OF RECEIVABLES see ACCOUNT AGING.
AGREED UPON PROCEDURES are used when a client retains an external auditor to perform
specific tests and procedures and report on the results. Examples might include special
reviews of loan portfolio or internal control systems. In performing agreed-upon procedures,
the auditor provides no opinion, certification, or assurance that the assertions being made in
the financial statements are free from material misstatement. The users of reports based on
agreed-upon procedures must draw their own conclusions on the results of the tests reported.
For example, an external auditor could be asked to look at a certain number of corporation
loan files and document which of the required forms are in the files. The auditor would report
on the selection and the results of the procedures performed but would not provide a formal
opinion with conclusions drawn from the results of the procedures.
AICPA is the American Institute [of] Certified Public Accountants.
AIR WAYBILL is a bill of lading and contract between the shipper and the airline for delivery
of goods to a specified location, and sometimes with specified delivery date/time. Non-
negotiable, but serves as receipt from the airline to prove that goods were received.
ALLOCATE is to distribute according to a plan or set apart for a special purpose. Examples: a.
spread a cost over two or more accounting periods; b. charge a cost or revenue to a number
of departments, products, processes or activities on a rational basis.
ALLOCATION is the act of distributing by allotting or apportioning; distribution according to a
plan, e.g., allocating costs is the assignment of costs to departments or products over various
time periods, products, operations, or investments. See ALLOCATE.
ALLONGE is a piece of paper attached to a negotiable instrument to allow space for writing
endorsements.
ALL OTHER CURRENT ASSETS relates to any other current assets. Does not include prepaid
items.

37. ALL OTHER CURRENT LIABILITIES includes any other current liabilities, including bank
overdrafts and accrued expenses.
ALL OTHER EXPENSES (NET) includes miscellaneous other income and expenses (net), such
as interest expense, miscellaneous expenses not included in general and administrative
expenses, netted against recoveries, interest income, dividends received and miscellaneous
income.
ALL OTHER NON-CURRENT ASSETS are prepaid items and any other non-current assets.
ALL OTHER NON-CURRENT LIABILITIES means any other non-current liabilities, including
subordinated debt, and liability reserves.
ALLOWANCE, within Sales, is a concession granted to customers for unsatisfactory goods or
services. Reduces sales because a portion of the sale has not been earned.
ALLOWANCE FOR BAD DEBTS is an account established to record a subtraction from
ACCOUNTS RECEIVABLE, to allow for those accounts that will not be paid.
ALLOWANCE FOR DOUBTFUL ACCOUNTS see ALLOWANCE FOR BAD DEBTS.
ALLOWANCE FOR DOUBTFUL DEBTS see ALLOWANCE FOR BAD DEBTS.
ALLOWANCE FOR NOTES RECEIVABLE LOSSES is an account maintained at a level
considered adequate to provide for probable losses. The provision is increased by amounts
charged to earnings and reduced by net charge-offs. The level of allowance is based on
management’s evaluation of the portfolio, which takes into account prevailing and anticipated
business and economic conditions and the net realizable value of securities held.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS see ALLOWANCE FOR BAD DEBTS.
ALLOWANCE METHOD is the accepted way to account for bad debt. Bad debt expense may
be based on the percent of credit sales for the period, an aging of the accounts receivable
balance at the end of the period, or some other method, e.g., percent of accounts receivable.
ALPHA is the measurement of returns from an investment in excess of market returns. It
represents the amount expected from fundamental causes, e.g. the growth rate in earnings
per share. This contrasts with BETA, which is a measure of risk or volatility.

38. ALTERNATE PAYEE ENDORSEMENT, normally, it is when one payee endorses a draft over
to another entity, then the new or alternate payee endorses the draft near the original payees
endorsement (signature).
ALTMAN, EDWARD developed the "ALTMAN Z-SCORE" by examining 85 manufacturing
companies. Later, additional "Z-Scores" were developed for private manufacturing companies
(Z-Score - Model A) and another for general/service firms (Z-Score - Model B). VentureLine
selects the "Z-Score" appropriate for each firm based upon the questionnaire input from the
listing company. A "Z-Score" is only as valid as the data from which it was derived i.e. if a
company has altered or falsified their financial records/books, a "Z-Score" derived from those
"cooked books" is of highly suspect value.
• ORIGINAL Z-SCORE (For Public Manufacturer) If the Z-Score is 3.0 or above -
banruptcy is not likely. If the Z-Score is 1.8 or less - bankruptcy is likely. A score
between 1.8 and 3.0 is the gray area. Probabilities of bankruptcy within the above
ranges are 95% for one year and 70% within two years. Obviously a higher Z-Score is
desirable.
• MODEL A Z-SCORE (For Private Manufacturer) Model A is appropriated for a private
manufacturing firm. Model A should not be applied to other companies. A Z-Score of
2.90 or above indicates that bankruptcy in not likely, buyt a Z-Score of 1.23 or below
is a strong indicator that bankruptcy is likely. Probabilities of bankruptcy within the
above ranges are 95% for one year and 70% within two years. Obviously a higher Z-
Score is desirable.
• MODEL B Z-SCORE (For Private General Firm) Model B Z-Score is appropriate for a
private general non-manufacturing firm. A Z-Score of 2.60 or above indicates that
bankruptcy in not likely, buyt a Z-Score of 1.10 or below is a strong indicator that
bankruptcy is likely. Probabilities of bankruptcy within the above ranges are 95% for
one year and 70% within two years. A Z-Score between the two is the gray area.
Obviously a higher Z-Score is desirable.
ALTMAN Z-SCORE reliably predicts whether or not a company is likely to enter into
bankruptcy within one or two years:
• If the Z-Score is 3.0 or above - bankruptcy is not likely.
• If the Z-Score is 1.8 or less - bankruptcy is likely.
• A Z-Score between 1.8 and 3.0 is the gray area, i.e., a high degree of caution should
be used.
Probabilities of bankruptcy within the above ranges are 95% for one year and 70% within two
years. A Z-Score between the two is the gray area. Obviously a higher Z-Score is desirable. It

39. is best to assess each individual company's Z-Score against that of the industry. In low margin
industries it is possible for Z-Scores to fall below the above. In such cases a trend comparison
to the industry over consecutive time periods may be a better indicator. It should be
remembered that a Z-Score is only as valid as the data from which it was derived i.e. if a
company has altered or falsified their financial records/books, a Z-Score derived from those
"cooked books" is of lesser use.
AM can be: Asset Management, Account Manager, After Market, Audit Manager, or Accounting
Management.
AMALGAMATION is a consolidation or merger, as of several corporations. In business, the
distinction being that the surviving entity incorporates the asset base of others into its base.
AMORTIZATION 1. is the gradual reduction of a debt by means of equal periodic payments
sufficient to meet current interest and liquidate the debt at maturity. When the debt involves
real property, often the periodic payments include a sum sufficient to pay taxes and hazard
insurance on the property. 2. is the process of spreading the cost of an intangible asset over
the expected useful life of the asset. For example: a company pays $100,000 for a patent,
they amortize the cost over the 16 year useful life of the patent. 3. the deduction of capital
expenses over a specific period of time. Similar to depreciation, it is a method of measuring
the "consumption" of the value of long-term assets like equipment or buildings.
AMS see AUTOMATED MANIFEST SYSTEM.
ANALYSIS CODES, in accounting, represent software driven analysis methods which are
independent of the normal grouping of account codes. An analysis code allows management to
collect and monitor income and expenditure for a particular function or event that is not
captured by the use of a project code or class, i.e. allows for much finer segmentation.
ANCILLARY relates to something extra or of lesser importance. For example, ancillary
revenue would be revenue derived from the provisioning of products or services that are not
considered to be primary to the generation of revenue.
ANGEL INVESTOR is a private wealthy individual that has no association with a venture
capital firm, investment fund, etc. The "angel" invests his/her private money into what he/she
believes to be promising opportunities, i.e., normally startup companies. Sometimes two or
more "angels" will jointly invest into opportunities to spread the risk.
ANNUALIZE is a statistical technique whereby figures covering a period of less than one year
are extended to cover a 12-month period. The technique, to be accurate, must take seasonal
variations into consideration.

40. ANNUAL REPORT is the requirement for all public companies to file an annual report with the
Securities and Exchange Commission detailing the preceding year's financial results and plans
for the upcoming year. Its regulatory version is called "Form 10 K." The report contains
financial information concerning a company's assets, liabilities, earnings, profits, and other
year-end statistics. The annual report is also the most widely-read shareholder
communication.
ANNUITY, in finance, is a series of fixed payments, usually over a fixed number of years; or
for the lifetime of a person, in which case it would be called a life-contingent annuity or simply
life annuity.
ANOMALY, generally, is a deviation from the common rule. It is an irregularity that is difficult
to explain using existing rules or theory. In securities, it is an unexplained or unexpected price
or rate relationship that seems to offer an opportunity for an arbitrage-type profit, although
not typically without risk. Examples include the tendency of small stocks to outperform large
stocks, of stocks with low price-to-book value ratios to outperform stocks with high price-to-
book value ratios, and of discount currency forward contracts to outperform premium currency
forward contracts.
ANR is Average Number of Runs or Average Not Ready (call centers).
AOP is either Adjusted Operating Profit or Annual Operations Plan.
AP is Accounts Payable.
APB is Accounting Principles Board or an Accounting Principles Board opinion (GAAP).
APB 18 is the Accounting Principles Board Equity Method of Accounting for Investments in
Common Stock.
APB 29 (Accounting Principles Board Opinion No. 29) Accounting for Non-monetary
Transactions states that an exchange of non-monetary assets should be recorded at fair value.
Certain modifications to that basic principle are contained in paragraphs 20-23 of APB No. 29.
Paragraph 21(b) provides that accounting for an exchange of productive assets for similar
productive assets should be based on the recorded amount of the non-monetary assets
relinquished. However, Paragraph 4 of APB No. 29 states that Opinion is not applicable to
business combinations.
APIC is an acronym for Additional Paid-In-Capital (finance/business).

41. APPLICATION RATE is the quantity (mass, volume or thickness) of material applied per unit
area.
APPLICATION RATE, OVERHEAD is a rate used to apply manufacturing overhead to output;
estimated factory overhead for a period divided by the estimated application base.
APPLIED RESEARCH is designed to solve practical problems of the modern world, rather
than to acquire knowledge for knowledge's sake.
APPORTION is to divide and share out according to a plan.
APPRAISAL is a report made by a qualified person setting forth an opinion or estimate of
value.
APPRAISAL VALUE is an opinion of a asset's fair market value, based on an appraiser's
knowledge, experience, and analysis of the asset class.
APPRECIATION is the increase in the value of an asset in excess of its depreciable cost,
which is due to economic, and other conditions, as distinguished from increases in value due
to improvements or additions made to it.
APPROPRIATE / APPROPRIATED / APPROPRIATION is distribution of net income to
various accounts and / or the allocation of retained earnings for a designated purpose, e.g.
plant expansion.
APPROPRIATION ACCOUNT is a separate account for which specific dollar amounts are
authorized and appropriated.
AR is Accounts Receivable.
ARBITRAGE is the movements of funds to take advantage of differences in exchange or
interest rates; such movements quickly eliminate any such differences.
ARGUMENT IN ACCOUNTING usually revolves around the premise that characterizes fair
values of assets as being more relevant but less reliable than their historical costs, with fair
value being ultimately more informative only if its increased relevance outweighs its reduced
reliability.
ARM’S LENGTH TRANSACTION is a transaction that is conducted as though the parties were
unrelated, thereby avoiding any semblance of conflict of interest.

42. AROE is Adjusted Return on Equity.
ARPU is Average Revenue Per User.
ARR is an acronym for Accounting Rate of Return.
ARREARS is an unpaid overdue debt, or the state of being behind in payments, e.g. an
account in arrears.
ARTICLES OF INCORPORATION is the primary legal document of a corporation; they serve
as a corporation's constitution. The articles are filed with the state government to begin
corporate existence. The articles contain basic information on the corporation as required by
state law.
ARTICLES OF PARTNERSHIP is the contract creating a partnership.
ARTICULATION, in business, is the shape or manner in which things come together and a
connection is made. In the spoken word, it is expressing in coherent verbal form.
ASB see ACCOUNTING STANDARDS BOARD.
ASC is Accounting Standards Committee or Australian Securities Commission.
ASEAN (Association of Southeast Asian Nations) is a trading block of countries in SE
Asia. Originally formed as an anti-communist military alliance, it is now focused on developing
a free trade agreement among member nations.
AS-IS CONDITION is the transfer of title to a property in an existing condition with no
warranties or representations.
ASK PRICE, in the context of the over-the-counter market, the term "ask" refers to the
lowest price at which a market maker will sell a specified number of shares of a stock at any
given time. The term "bid" refers to the highest price a market maker will pay to purchase the
stock. The ask price (also known as the "offer" price) will almost always be higher than the bid
price. Market makers make money on the difference between the bid price and the ask price.
That difference is called the "spread".
ASRB is Accounting Standards Review Board.
ASSESSED VALUE is the estimated value of property used for tax purposes.

43. ASSESSMENT is a. proportionate share of a shared expense; or, b. amount of tax or other
levied special payment due to a governmental municipality or association.
ASSET is anything owned by an individual or a business, which has commercial or exchange
value. Assets may consist of specific property or claims against others, in contrast to
obligations due others. (See also Liabilities).
ASSET AVAILABILITY is the stated condition or availability of an asset for usability. The
subject asset is not available if it is already in use, at capacity, undergoing maintenance,
broken, etc.
ASSET EARNING POWER is a common profitability measure used to determine the
profitability of a business by taking its total earning before taxes and dividing that by total
assets.
ASSET REVALUATION RESERVE is an accounting concept and represents a reassessment of
the value of a capital asset as at a particular date. The reserve is considered a category of the
equity of the entity. An asset is originally recorded in the accounts at its cost and depreciated
periodically over its estimated useful life as a measure of the amount of the asset's value
consumed in that period. In practice, the actual useful life of an asset can be miscalculated or
an event can cause a change to the useful life. Consequently, assets occasionally need to be
revalued in order to reflect a more close approximation to their "worth" in the accounts. When
the asset is revalued, the offsetting entry (in a double entry accounting system) would be
either made to the profit or loss accounts or to the equity of the entity.
ASSET REVERSION is asset recovery by the sponsoring employer through termination of a
defined benefit pension fund and/or of assets in excess of amounts required to pay accrued
benefits of a pension fund. In the U.S., assets recovered through reversion are subject to
corporate income tax and an excise tax.
ASSET SALE is the sale of certain named assets of a corporation, partnership or sole
proprietorship. Usually the seller retains ownership of the cash and cash equivalents (such as
Accounts Receivable) and the liabilities of the entity. The seller then will pay the liabilities with
the cash, any down payment and the cash equivalents as they become cash. Assets named
are typically trade name, trade fixtures, inventory, leasehold rights, telephone number rights
and goodwill. Assets sold can be tangible or intangible.
ASSETS HELD FOR SALE are those assets, primarily long-term assets, that an entity wishes
to dispose of or liquidate through sale to others.