Vocabulary Part 1

Question 1

Accounts

Answer 1

The basic storage unit for accounting data used to accumulate amounts from similar transactions con stitutes the core data elements of the financial system.

Question 2

APPRAISAL

Answer 2

An estimate of the fair market value of per sonal property or real estate by a certified appraiser.

Question 3

ACCOUNTS PAYABLE

Answer 3

Claims against the farm or ranch business which have yet to be paid.

Question 4

ASSETS

Answer 4

Resources controlled by the farm or ranch business.

Question 5

ACCOUNTS RECEIVABLE

Answer 5

Amounts owed to the farm or ranch business for products sold or services rendered,

Question 6

AVERAGE OUTPUT OR YIELD

Answer 6

Total units of output divided by the number of units of input.

Question 7

ACCRUAL ACCOUNTING METHOD

Answer 7

Gross income and expenses are included in the accounting period in which earned or incurred, regardless of when payment is received. This method recognizes the importance of transactions, such as changes in inventory, changes in accrued interest, and changes in accounts payable and accounts receivable.

Question 8

BASIS MARKETING

Answer 8

• In futures contract trading, the dif ference between the local cash market price and the price of the near term (expiring) futures contract.

Question 9

ACCRUED INTEREST

Answer 9

Interest owed but yet not paid.

Question 10

BEAR

Answer 10

A market participant who believes prices are too high and will decline.

Question 11

BEAR MARKET

Answer 11

A downward trend in market prices.

Question 12

ADJUSTED BASIS

Answer 12

The original cost of an asset plus the value of any improvement or alterations less the amount of depreciation, losses, or depletion. An adjusted basis is used to calculate depreciation and capital gains. Also called BOOK VALUE.

Question 13

BENEFICIARY

Answer 13

Person named in an insurance policy to receive proceeds at death of the insured.

Question 14

ADMINISTRATOR/ADMINISTRATRIX

Answer 14

A person legally vested with the right of administration of an estate.

Question 15

BENEFIT/COST RATIO

Answer 15

An investment analysis ratio equal to the present value of all future benefits of an investment divided by the present value of all future costs.

Question 16

ALLOCATIONS

Answer 16

The process of assigning costs of one segment of the organization to other responsibility centers in some systematic manner. Allocation criteria typically focus on the best objective and measurable way a particular segment provided support to other cost or profit centers of the organization.

Question 17

BREAK-EVEN

Answer 17

The output required for revenue to equal the total of fixed and variable costs.

Question 18

BREEDING LIVESTOCK

Answer 18

Livestock held for reproduction.

Question 19

AMORTIZATION

Answer 19

The repayment of a loan and the interest due with a series of equal payments over a specified period of time.

Question 20

BUDGET

Answer 20

A schedule of expected returns and costs.

Question 21

BULL

Answer 21

A market participant who believes prices are too low and will advance.

Question 22

BULL MARKET

Answer 22

An upward trend in market prices.

Question 23

ANNUITY

Answer 23

The receipt of (or the making of) a series of uniform payments over a specified period of time.

Question 24

CALL OPTION

Answer 24

The right to buy an underlying futures contract or publicly traded stock at a specific price before a certain date.

Question 25

CAPITAL

Answer 25

Non-human resources used in the production of goods and services. Examples are buildings, machinery, equipment, and cash.

Question 26

COMMODITY

Answer 26

Raw materials or semi-processed goods that can be bought and/or sold for further processing.

Question 27

CAPITAL BUDGETING

Answer 27

The process of estimating the profitability of an investment, or comparing the profitability of two or more alternative investments. Also called INVESTMENT ANALYSIS.

Question 28

COMPARATIVE ANALYSIS

Answer 28

The comparison of expected results from different action, approaches, or enterprises during the same time period.

Question 29

CAPITAL GAIN (LOSS)

Answer 29

The gain (loss) realized from the sale of a capital asset when the asset is sold for more (less) than its adjusted basis.

Question 30

COMPOUNDING

Answer 30

Interest received from an investment is added to the principal and interest is paid again on the total sum. It can be used to determine the future value of the amount of money that you now have. The opposite proce dure from DISCOUNTING.

Question 31

CAPITAL LEASE

Answer 31

A financial agreement to purchase an asset which in turn may have a value.

Question 32

CONSTANT RATE OF SUBSTITUTION

Answer 32

When one input, financial or physical, substitutes for another at the same rate for each additional unit of input.

Question 33

CAPITALIZATION

Answer 33

Process for placing a current value on an asset based on its expected future earning power and the expected interest rate.

Question 34

CONTINGENT TAX

Answer 34

Tax owed if all assets could be liqui dated for exactly the amount shown on the balance sheet and all liabilities could be satisfied for the amount shown on the balance sheet.

Question 35

CASH

Answer 35

Cash or access to accounts where cash may be with drawn within one year. Cash is a capital resource.

Question 36

CASH ACCOUNTING METHOD

Answer 36

All income and expens es, whether received in cash or property, are included in the accounting period they are received.

Question 37

CONTRACT

Answer 37

An informal or formal written document or oral agreement that is a binding agreement between two or more people or businesses.

Question 38

CASH FLOW STATEMENT

Answer 38

Shows cash received and spent during an accounting period, usually one year. When calcu lated over several periods, cash flow shows the use and requirements for cash over time.

Question 39

COOPERATIVE

Answer 39

A corporation formed by a group of peo ple—members to provide specific products and/or ser vices to themselves

Question 40

COOPERATIVE MARKETING

Answer 40

-A process whereby produc ers pool their resources for shipment to market in an effort to increase bargaining power. It may also be used for pool ing for purchase of inputs.

Question 41

CASH FLOW PROJECTION

Answer 41

The listing of all anticipated cash inflows for a period of time, usually one year, both farm and non-farm, and all projected cash outflows, includ ing farm operating expenses and capital outlays, along with family living expenses and tax payments.

Question 42

CORPORATION

Answer 42

A legal entity that can own property and conduct business. The entity is separate and distinct from its owners and managers. Shareholders own the corporation. Officers manage the corporation.

Question 43

CASH VALUE OF LIFE INSURANCE

Answer 43

Cash available for borrowing or redemption but not the death benefit.

Question 44

COST OF PRODUCTION

Answer 44

Costs of the fixed and variable inputs needed to obtain output.

Question 45

CHART OF ACCOUNTS

Answer 45

A list of account titles used to classify transactions in the general ledger; the consistent us of these accounts is essential for both internal usage and for the creation of industry wide standard information.

Question 46

COST CENTER

Answer 46

Support activities important to and used by profit centers (i.e., an equipment cost center supports the crop profit centers). (See PROFIT CENTER)

Question 47

COLLATERAL

Answer 47

Assets used to secure a loan.

Question 48

CREDIT

Answer 48

An addition to revenue, net worth or any other account.

Question 49

CURRENT ASSETS

Answer 49

Cash, marketable securities, accounts and notes receivable, prepaid expenses, and inventories which are expected to be converted to cash within one year (or operating cycle if longer).

Question 50

DEPRECIATION

Answer 50

A method of prorating the cost of a capi tal asset over its useful life. A decrease in value of a capital asset that occurs regardless of repair and maintenance due to wear, tear, and/or obsolescence (see Farmer's Tax Guide for tax depreciation methods).