C Accounting Definitions Flashcards
(161 cards)
1
Q
Call Option
A
A contract that gives the buyer the right to buy an asset (for example a share of stock) at a specified price within a specified period of time. (IMA)
2
Q
Call Provision
A
Enables the issuing company to repurchase bonds (or preferred shares) at their option. This is very beneficial to the issuer and will increase the required return for the investor (and therefore the cost of the financing to the issuing company). (HOCK)
3
Q
Capacity
A
The ability of the company to produce its products or services. (HOCK)
4
Q
Capacity Constraints
A
Resources that limit the maximum performance possible considering the conditions of the existing physical plant, labor force, method of production, or supply of material. (IMA)
5
Q
Capacity Management
A
Management of an entity’s costs of unused (excess) capacity such as production facilities, distribution channels, etc. (IMA)
6
Q
Capital
A
- The equity invested in an entity by its owners. Total assets less liabilities. 2. Long-term assets (e.g., equipment)
7
Q
Capital Adequacy
A
The amount of capital relative to a company’s assets. A useful measure in risk management (particularly for banks). (IMA)
8
Q
Capital Asset Pricing Model (CAPM)
A
A general framework for analyzing the relationship between risks and rates of return on securities, especially common stocks. (IMA)
9
Q
Capital Budget
A
A plan of proposed outlays for acquiring long term assets and the means of financing the acquisition. (IMA)
10
Q
Capital Budgeting
A
The evaluation and making of long-term investment decisions. (IMA)
11
Q
Capital Gain or Loss
A
The extent by which the net realized value from sales of a capital asset exceeds (or in the case of a capital loss is less than) the cost of acquisition plus additional improvements, less depreciation and/or depletion charges. (IMA)
12
Q
Capital Investment
A
Any expenditure which increases the capacity, efficiency, life span, or economy of the operation of an existing fixed asset. Outlay of money from which future cash inflows are expected for more than a year. (Also referred to as Capital Expenditure.) (IMA)
13
Q
Capital Lease
A
A lease that transfers substantially all the benefits and risks inherent in the ownership of the property to the lessee, who accounts for the lease as an acquisition of an asset and the incurrence of a liability. (IMA)
14
Q
Capital Markets
A
Markets where long-term debt and equity instruments are traded. (HOCK)
15
Q
Capital Rationing
A
A situation that exists when a constraint is placed on the total amount of the entity’s capital investment funds. The limited investment funds available must be allocated to the highest priority projects. (IMA)
16
Q
Capital Resources
A
The company’s fixed assets. (HOCK)
17
Q
Capital Stock
A
Ownership shares in a corporation issued to shareholders. May consist of Common Stock and Preferred Stock. (IMA)
18
Q
Capital Structure
A
The relative proportions of short-term debt, long-term debt, and owners’ equity in the company. (IMA)
19
Q
Capitalize
A
To record expenditure that is expected to benefit a future period as an asset rather than treating the expenditure as an expense of the period in which it occurs. (IMA)
20
Q
Captive-Product Pricing
A
The pricing process when a product requires the use of additional or “captive products,” such as a low-priced razor that requires high-priced replacement blades. (HOCK)
21
Q
Carrying Cost
A
Costs of storing and holding inventory, including the cost of capital from the time of acquisition or manufacture until the time of sale or use. (IMA)
22
Q
Cartel
A
An organization of sellers coordinating supply decisions to maximize joint profits. A cartel seeks to create a monopoly in the market. (IMA)
23
Q
Cash
A
Refers to money in the form of liquid currency that a bank will accept for immediate deposit, such as coins, checks, and money orders. (IMA)
24
Q
Cash Budget
A
An estimate of the amount and timing of cash receipts and disbursements at various points over a future period, and cash on hand at the end. (IMA)
25
Cash Cows
One of the classifications of products by the Boston Consulting Group. A cash cow is in an industry with a low market growth rate, but the product has a high share of the market. Cash cows are in mature markets in which the growth rate has slowed, but they are market leaders. Cash cows generate more cash than they consume. (HOCK)
26
Cash Cycle
The period of time during which cash is converted into inventories, and inventories are converted back into cash through the sale of goods or collection of accounts receivable. (Also called Cash Conversion Cycle or Earnings Cycle.) (IMA)
27
Cash Discount
A reduction in the basic price, commonly used to encourage prompt payment or promote sales. (IMA)
28
Cash Equivalents
Short-term financial instruments of high liquidity and safety which can be converted to cash on short notice
29
Cash Flow
The stream of cash inflows and outflows of an entity or segment of an entity. (IMA)
30
Cash Flow at Risk
A probabilistic estimate of the sensitivity of cash flow; how budgeted cash flow might be affected by changes in certain risk factors and other variables. (IMA)
31
Cash Flow Ratio
A liquidity measure, whereby operating cash flow is divided by current liabilities. (IMA)
32
Cash Flow to Fixed Charges
A leverage ratio that measures the cash flow available to meet fixed charges. (IMA)
33
Cash Management
The processes an entity uses to collect, disburse, and invest its cash. (IMA)
34
Cash Ratio
A measure of a company's liquidity that relates cash and marketable securities to current liabilities. (IMA)
35
Cash Surrender Value
The amount that the holder of the policy would get from the insurance company if he or she cancelled their insurance. (HOCK)
36
Causal Forecasting
Forecasting methods used when the value that is being forecasted can be determined to be affected by some other value. (HOCK)
37
Centralization
An organizational structure in which senior management maintains significant direction, authority, and control over all operations and policies. (IMA)
38
Certainty Equivalent
The amount a recipient would require with certainty to be indifferent between this certain risk-free amount and a particular uncertain risky amount. (IMA)
39
Certainty Equivalent NPV
A method of evaluating capital projects, this method adjusts the risky after-tax cash flows to a level judged by the decision-maker to be certain. It is more conservative than the standard NPV method. (HOCK)
40
Certifies Of Deposits (Cds)
A form of savings deposit with a bank that may not be withdrawn before their maturity without a high penalty. CDs usually have a higher rate of interest when compared with other savings instruments because they are for fixed, usually long-term periods. (HOCK)
41
Change in the Quantity Demanded
A change in the quantity that buyers are willing to purchase at different price levels due only to a change in price. Often referred to as a movement along the demand curve. (IMA)
42
Change in the Quantity Supplied
A change in the quantity sellers are willing to supply due only to a change in price. Often referred to as a movement along the supply curve. (IMA)
43
Check Digits
A number that is a part of an account or other type of number. The check digit is a function of the other digits within the number, determined by a mathematical algorithm. It is used to ensure the accuracy of information. (HOCK)
44
Circumstantial Evidence
Evidence that is consistent with a particular inference. Circumstantial evidence can be used to narrow competing explanations, but it is not persuasive in demonstrating fact. It can only be supportive evidence. (HOCK)
45
Code of Conduct
A set of rules outlining acceptable ethical behavior for employees within an organization. (IMA)
46
Coefficient Of Correlation
A numerical measure that measures both the direction (positive or negative) and the strength of the linear association (represented by the letter R or r) . (HOCK)
47
Coefficient Of Determination
The percentage of the total amount of change in the dependent variable that can be explained by changes in the independent variable (represented by the term R2, or r2). (HOCK)
48
Coefficient of Variation
A statistical measure of relative dispersion or relative risk. It is computed by dividing the standard deviation by the expected value. (IMA)
49
Cold Site
A facility where power and space are available to install processing equipment, but it is not immediately available. If an organization uses a cold site, its disaster recovery plan must include arrangements to get computer equipment installed there quickly. (HOCK)
50
Collateral
An asset pledged as a guarantee to a lender until a loan is repaid. If the borrower defaults, the lender has a right to sell the collateral asset. (IMA)
51
Collusion
When two or more individuals work together to overcome the internal control system and perpetrate a fraud. (HOCK)
52
Commercial Bank
An institution that accepts deposits, offers checking accounts, makes loans, and offers a variety of other related services. (IMA)
53
Commercial Paper
A short-term unsecured loan of a corporation having maturity up to 270 days. It is typically issued on a discount (from face value) basis. (IMA)
54
Commitment Fee
A fee paid to a financial institution by an entity to secure a line of credit and maintain the unused portion thereof. (IMA)
55
Committed Cost
A cost that the company has already committed to in the future, even if it is not currently recognized in the accounting records. A long-term lease is an example. (HOCK)
56
Committed Costs
Costs for the company's infrastructure. They are costs required to establish and maintain the readiness to do business. (HOCK)
57
Committee of Sponsoring Organizations (COSO)
A voluntary private-sector organization, established in the U.S., dedicated to providing guidance on organizational governance, business ethics, internal control, enterprise risk management, fraud, and financial reporting. (IMA)
58
Commodity Futures
Future contracts that are about commodities. Examples of commodities include agricultural products, metals, energy products, and forest products. (HOCK)
59
Common Base Year Statements
Financial Statements showing the percentage change over a base year. (Also called Horizontal Analysis.) (IMA)
60
Common Cost
A cost of operating a facility that is shared by two or more users. (IMA)
61
Common Stock
An ownership share in a company, having voting and dividend rights. (IMA)
62
Common-Size Financial Statements
Financial statements used for comparison between firms. A common size Income Statement shows all amounts as a percent of revenue. A common size Balance Sheet shows all values as a percent of total assets. (IMA)
63
Company Risk
The risk due to the unique circumstances of a specific enterprise, as opposed to the overall market. (Also called Unsystematic Risk.) (IMA)
64
Comparability
The quality of information that enables users to identify similarities in and differences between two sets of economic phenomena. (IMA)
65
Comparable Companies
Similar companies that are used to attempt to value a company. The more similar the companies are the more useful this method is. (HOCK)
66
Compensating Balance
An amount required to be kept on deposit at a bank. (IMA)
67
Compensating Controls
Controls that are designed to compensate for an internal control weakness by doing more of other controls. (HOCK)
68
Compensation
Employee or management wages and other financial benefits earned from labor. (IMA)
69
Competence
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to maintain an appropriate level of professional expertise and perform duties in accordance with relevant laws and standards. (IMA)
70
Competition-Based Pricing
A pricing strategy wherein the price of a product is determined primarily by the price being charged by one or more competitors. (IMA)
71
Competitive Advantage
An advantage that a company has over its competitors which it gains by offering consumers greater value than they can get from its competitors. (HOCK)
72
Completed-Contract Method
An accounting method that defers recognition of revenues until the completion of a contract, but recognizes anticipated losses immediately. (IMA)
73
Compliance Audit
A type of internal audit that reviews an organization's adherence to laws, rules, policies, and procedures. (IMA)
74
Compliance Risk
Risk to earnings or capital arising from violations of laws, rules, regulations, policies, procedures, and/or ethical standards. (IMA)
75
Composition
A partial payment of a debt that is accepted by the creditors as full payment of the debt. (HOCK)
76
Compound Interest
Interest resulting from the periodic addition of simple interest to principal, establishing the new base as the principal for computation of interest for the next period. (IMA)
77
Comprehensive Income
All changes in equity during a period except those resulting from investments by owners and distributions to owners. (IMA)
78
Concentration Banking
A procedure utilized to manage cash wherein an entity utilizes a large bank (the Concentration Bank) to gather all the cash from smaller local (depository) banks where customers make payments. (IMA)
79
Conclusive Evidence
Evidence that is indisputable. Direct evidence, well corroborated, may be conclusive evidence. (HOCK)
80
Conditional Probability
The probability that the second event will occur when it is known that the first event has already occurred. (HOCK)
81
Confidentiality
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to keep employer information confidential and to not use confidential information for personal advantage. (IMA)
82
Conglomerate Merger
A merger involving companies that are not in similar businesses. (HOCK)
83
Conservatism
1. An accounting concept that states that revenues are recognized only when they are reasonably certain, but expenses are recognized when they are probable. 2. A prudent reaction to uncertainty to try to ensure that uncertainty and risks inherent in business situations are adequately considered. (IMA)
84
Consistency
Conformity from period to period with unchanging policies and procedures. (IMA)
85
Consolidated Financial Statements
Financial Statements showing financial condition or operating results of two or more associated enterprises as they would appear if they were one entity. (IMA)
86
Constant Dollar Accounting
An accounting method that measures general changes in the price level and reports financial statement elements in dollars having similar purchasing power from one year to the next. (HOCK)
87
Constant Gross Profit Method
A method of allocating joint costs where costs are allocated so that the overall gross-margin percentage is identical for each individual product. (Also called Gross Margin Method.) (IMA)
88
Constraint
An activity, resource, or policy that limits or bounds the attainment of an objective. (IMA)
89
Consulting Services
Advisory and other related client service activities. Usually they are performed at the request of the client, and their nature and scope are agreed upon with the client (for internal auditors the client is usually a department within the company). (HOCK)
90
Contingency Planning
Planning for the response to situations that may occur such as emergencies or setbacks
91
Continuous Budget
A moving projection of financial operations for a series of weeks, months, or quarters immediately ahead. At the end of each period, the portion of the projection then lapsed is removed and a new projection for a period of similar length is added to the series. (Also called Rolling Budget.) (IMA)
92
Continuous Improvement
A management approach to productivity improvement, where planned improvements occur in small incremental amounts by refinement of all components of a process. (Also called Kaizen.) (IMA)
93
Continuous Random Variable
A random variable that can take on any value whatsoever within an interval or a collection of intervals. (HOCK)
94
Contribution Margin
The excess of sales revenues over variable costs. (Also called Marginal Contribution or Marginal Income.) (IMA)
95
Contribution Margin Ratio
The unit contribution margin expressed as a percentage of the sales price. (HOCK)
96
Contribution Pricing
A method of establishing the price of the product based on variable costs and usually a profit margin. (IMA)
97
Control Activities
The policies that address the identified risks and procedures that ensure that management directives are carried out, thus helping ensure that the organization's objectives will be achieved. (HOCK)
98
Control Environment
This is the attitude towards controls and the atmosphere regarding controls that exists in a company. It provides the foundation for all the other components of internal controls. It influences the control consciousness of all the people in the organization and sets the tone for the entire organization. (HOCK)
99
Control Risk
A measure of the auditor's assessment of the likelihood that misstatements exceeding a tolerable level will not be prevented or detected by the client's internal control system. (IMA)
100
Controllable Cost
A cost that can be influenced by the actions of the responsible manager. (IMA)
101
Controllable Fixed Costs
Fixed costs that the segment manager is able to control and influence. (HOCK)
102
Controllable Margin
The measurement of all the revenues and expenses (variable and fixed) that are controllable by the individual managers on a short-term (less than one year) basis. (HOCK)
103
Controller
The individual within an entity who is responsible for the accounting function. (Also called Comptroller.) (IMA)
104
Controls
Measures put in place to monitor activities and ensure they are functioning as designed. (IMA)
105
Conversion Cost
The sum of all manufacturing costs except direct material. (IMA)
106
Convertible
Securities (bonds or preferred stock) issued by companies which can be converted into common shares at a given price at a future date. (IMA)
107
Convertible Bonds
Bonds that can be converted into shares at the option of the bondholder. (HOCK)
108
Convertible Preferred Shares
Preferred shares that can be converted into shares at the option of the bondholder. (HOCK)
109
Corporate Governance
The set of rules, processes, policies and/or laws by which an organization is directed, operated and controlled. (IMA)
110
Corrective Controls
Controls designed to correct an undesirable event that has already occurred. (HOCK)
111
Correlation
The extent or degree of statistical association among two or more variables. (IMA)
112
Correlation Coefficient
A measure of the degree of correlation in the returns of any two securities. (HOCK)
113
Corroborative Evidence
Evidence that supports other evidence. The greater the amount of corroborating evidence, the more persuasive it is. (HOCK)
114
Cost (noun)
1. In management accounting, a measurement in monetary terms, of the amount of resources used for some purpose. 2. In financial accounting, the sacrifice measured by the price paid or required to be paid, to acquire goods or services. (IMA)
115
Cost (verb)
To ascertain the cost of something. (IMA)
116
Cost Allocation System
A method by which costs are allocated to cost objects (Job order costing, Process costing, Activity-based costing, and Life-cycle costing). (IMA)
117
Cost Behavior
The change or lack of change in the amount of a cost item associated with changes in the level of activity. (IMA)
118
Cost Benefit Analysis
A tool for planning and reporting that involves the identification and measurement of all costs and benefits attributed to an activity. (IMA)
119
Cost Center
A grouping of operating costs having some common characteristics for measuring performance and assigning responsibility. A Responsibility Center where the manager is responsible for costs only. (IMA)
120
Cost Driver
A variable causally affecting costs over a time period. (IMA)
121
Cost Management
Actions undertaken by managers to satisfy customers while continuously controlling and reducing costs. (IMA)
122
Cost Objects
A function, organizational subdivision, contract, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capitalized projects, etc. (IMA)
123
Cost of Capital
A measure of the cost of using capital. A weighted average of the interest cost of debt capital and the implicit cost of equity capital. It is the minimum rate of return that must be earned on new investments that will not dilute the interests of the shareholders. (IMA)
124
Cost Of Conformance
The costs that the company incurs to assess quality internally during the production process to insure that no defective products are produced. (HOCK)
125
Cost of Goods Sold
The inventory costs of the goods sold during a specific time period; the difference between the costs of goods available for sale during a specific period of time and the cost of goods on hand at the end of the period. Inventory costs include all costs necessary to get the product ready for sale. (IMA)
126
Cost of Quality
Costs incurred to detect, prevent, or rectify poor quality production. (IMA)
127
Cost of Sales
The cost of products or services whose sales are reported as revenue. (Also called Cost of Goods Sold.) (IMA)
128
Cost Pools
The collection of cost elements that have a common cause and that can be assigned to other cost objects according to a common basis of allocation. (IMA)
129
Cost System
The system an entity utilizes to collect and assign costs to intermediate and final cost objects. (IMA)
130
Cost Tracing
Assigning direct costs to a particular cost object. Direct costs (also called traceable costs) are costs that are incurred specifically because of the cost object. If it were not for the cost object, the direct cost would not have been incurred. (HOCK)
131
Cost-Based Approaches
Pricing strategies that are based in one way or another on the cost of producing the item. (HOCK)
132
Cost-Based Pricing
The practice of establishing the selling price of a good or service based primarily on the cost to produce it. (IMA)
133
Cost-Plus Pricing
A pricing practice in which the selling price is determined by adding a percentage or monetary amount to the cost of a product. (IMA)
134
Cost/Volume/Profit Analysis (CVP)
An analysis of the relationship of cost and revenue emphasizing both the volume at which there is zero profit and the influence of fixed and variable factors on the profit expectations at various levels of operation. (Also called Breakeven Analysis.) (IMA)
135
Costing
The accumulation and assignment of costs to cost objects. (IMA)
136
Costs Of Goods Manufactured (COGM)
An internal number that is not reported on either the balance sheet or the income statement. It represents the cost of the goods that were completed during the period. (HOCK)
137
Countertrade
The trading of goods for other goods. (Also called Barter.) (IMA)
138
Coupon Rate
The annual rate of interest stated on a debt instrument. (IMA)
139
Covariance
A statistical measure of the amount by which two securities' returns move together. (HOCK)
140
Covered Option
A call option that is for stock that is held in the option writer's portfolio. A person who writes a covered call option on a stock that they already own is obligating him- or herself to sell that stock at a specific price up until the expiration date. (HOCK)
141
Credibility
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to communicate information fairly and objectively, disclose all relevant information, and to disclose delays or deficiencies in information. (IMA)
142
Credit
A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date. (IMA)
143
Credit Risk
An investor's risk of loss arising from a borrower who defaults; i.e., does not make payments as promised. (IMA)
144
Credit Standards
The criteria that are used by a company to determine to whom they grant credit. (HOCK)
145
Credit Terms
The specific terms of credit that a company grants. This will include the time for payment, penalties for late payment, discounts for early payment and any other specific terms of the credit. (HOCK)
146
Critical Success Factors
The important things an entity must do to be successful. (IMA)
147
Crossover Rate
The interest rate at which the net present values of two projects are equal. (HOCK)
148
Crown Jewel Transfer
A takeover defense in which the target corporation sells or otherwise disposes of one or more assets that made it a desirable target. (HOCK)
149
Cumulative Average-Time Learning Model
A learning curve model in which the cumulative average time per unit declines by a constant percentage each time the cumulative quantity of units produced is doubled. (IMA)
150
Cumulative Dividends
A type of preferred dividends in which the dividend is earned each year. If the dividend is not distributed in a specific year, it accumulates and carries forward into future periods. All cumulative preferred dividends must have been paid before common dividends may be paid. (HOCK)
151
Currency Of Record
The currency in which a company keeps its accounting records. (HOCK)
152
Current Assets
Cash and other assets that are expected to be sold, consumed or converted into cash during the normal operating cycle of a business. (IMA)
153
Current Cost
The amount of cash needed if the same asset, an identical asset, or an asset with equivalent productive capacity were acquired currently. (IMA)
154
Current Cost Accounting
An accounting method in which many items are measured not at historical cost, but at replacement cost. (HOCK)
155
Current Liability
A liability required or expected to be discharged (fulfilled) by using current assets within one year or the operating cycle, whichever is longer. (IMA)
156
Current Ratio
A financial ratio used to measure short-term solvency. (Also called Liquidity Ratio.) (IMA)
157
Customer Satisfaction
A measure of the extent to which customers are satisfied with the products and related services they received from a supplier. (IMA)
158
Customer's Profitability
The profitability of a customer to a company. (HOCK)
159
Cybercrime
Crimes where the computer is a major factor in committing the criminal offense. (HOCK)
160
Cycle Time
The total elapsed time to move a unit of work from the beginning to the end of a physical process, as defined by the producer and the customer. (IMA)
161
Cyclical
A type of trend where something (e.g., sales) varies in a regular pattern; a repeated sequence. (IMA)
