A profession regulated by accountancy bodies that oversees the activities of accountants, encompassing the process of accounting.
An accounting package is a type of business software designed to help businesses manage their accounting processes including invoicing, payroll, accounts payable, accounts receivable, and general ledger functions.
Programs used to maintain books of account on computers. The software can be used to record transactions, maintain account balances, and prepare financial statements and reports. Many different accounting software packages exist.
Actual cost refers to the tangible expenditure incurred in carrying out specific activities of an organization, as opposed to budgeted or standard costs. It represents the real outlay of funds, including invoices paid, wages, materials, and other expenses.
An advance refers to a payment on account or a loan. It is particularly relevant in a partnership context, referring to amounts paid into the partnership that exceed agreed capital contributions. Under the Partnership Act 1890, such advances collect interest unless otherwise agreed by the partners. On dissolution, advances are repaid after external creditors but before the distribution of remaining capital to the partners.
Age analysis is a crucial component of the credit control system, enabling businesses to categorize and evaluate outstanding debtor accounts based on the length of time they have been overdue, ensuring timely follow-ups and effective credit management.
An aggregator is a firm that collates and presents information about an individual's bank accounts, investments, insurance policies, and other financial data, enabling the person to manage their financial affairs through a single platform.
Amortization refers to the process of spreading out a loan into a series of fixed payments over a specified period of time. Each payment covers both principal and interest, resulting in the gradual reduction of the loan balance.
In budget management, an appropriated expenditure refers to an amount set aside for a specific acquisition or purpose. It ensures that funds are allocated and used in accordance with designated objectives.
Appropriation in accounting refers to the allocation of net profits of an organization in its accounts. This can include dividends to shareholders, transfers to reserves, and amounts for taxation.
Asset demand for money refers to the desire to hold money as a store of value rather than other forms of investment. This occurs when individuals or businesses forgo potential interest earned from assets in favor of liquidity and stability that money offers.
Bad-debt recovery is the receipt of an amount, whether partially or in full, that had previously been written off as uncollectible. This often occurs after the debt has been removed from accounting records.
A bank aggregator is a service or a platform that consolidates information from multiple bank accounts into a single, unified interface, facilitating ease of access and management of finances.
A bank statement is a document provided periodically by a bank to account holders detailing all the credit and debit transactions made to their account over a specified period. It serves as an important tool for tracking account activity and managing finances.
A derogatory term used to refer to accountants by highlighting the meticulous nature of their job, often implying a focus on minute details rather than broader perspectives.
A method of reducing bank charges in which two related companies offset their receipts and payments with each other, usually monthly, to save on transaction costs and paperwork.
The billing cycle is the interval between periodic billings for goods sold or services rendered, normally one month, or a system whereby bills or statements are mailed at periodic intervals in the course of a month in order to distribute the clerical workload evenly.
A blind trust is a financial arrangement in which a person in public office or high-ranking position places their private financial affairs under the management of an independent trustee, who manages the assets without communicating details to the beneficial owner to prevent conflicts of interest.
A blue-chip stock represents a national company renowned for its robust profit growth, consistent dividend payments, quality management, and top-tier products and services. The term 'blue-chip' is derived from the color of the most valuable gambling tokens.
A budget centre is a segment within an organization for which budgets are prepared and compared against actual performance as part of the budgetary control process.
A committee responsible for overseeing and managing the budgetary control process within an organization, including the preparation, scrutiny, and submission of budgets for approval.
Budget Cost Allowance refers to the amount of budgeted expenditure that a cost centre or budget centre is allowed to spend in relation to its budget, with consideration to the actual level of activity achieved during the budget period. It distinguishes between fixed and variable costs to adjust expenditure limits.
A budget director is responsible for the administration of the budgetary control process within an organization. They coordinate the flow of information between budget centers, the budget committee, and the board of directors.
A budget period is a designated timeframe during which a specific budget is planned and implemented, aligning closely with the accounting periods utilized by the organization. Typically, this period spans a year but can be broken down into shorter control periods like months or quarters for enhanced financial oversight.
Budgetary control is the process through which financial control is exercised within an organization by preparing budgets for income and expenditure in advance, comparing them with actual performance, and taking necessary actions on variances.
Burn rate is the speed at which a company is spending its cash. Particularly applicable to start-up enterprises, which may not generate enough new cash flow to offset their rate of spending.
Capital Expenditure (CapEx) refers to the funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. It is often used to undertake new projects or investments by the firm.
A Capital Expenditure Budget plans for significant investments in long-term assets, covering the costs of major projects or purchases essential for sustaining or growing an organization's operations.
Capital investment involves the outlay of funds to acquire or upgrade physical assets such as property, buildings, or equipment, which are expected to improve the capacity or efficiency of a business.
Capital outlay, also known as capital expenditure (CapEx), refers to funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. It is a crucial aspect of an organization's investment strategy and financial management.
Capital rationing occurs when managers have insufficient funds to invest in all projects with a positive net present value (NPV). It requires prioritization of projects to maximize NPV. It is classified into soft and hard capital rationing depending on whether constraints are self-imposed or external, respectively.
Capital reduction, also known as the reduction of capital, is a restructuring process whereby a company reduces its shareholder equity through activities such as repurchasing shares or decreasing share capital to distribute assets to shareholders or to eliminate losses.
Cash disbursement refers to the amount of money paid out by a business or individual during a specific period for expenses, purchases, or other financial obligations.
Cash equivalents are highly liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of changes in value.
Cash outflows are the financial transactions where a business expends cash, which is essential for managing liquidity and business operations.
The amount of cash or equivalent instruments held at any point in time. A commodity or securities trader or an investment company needs to monitor its cash position carefully to maintain adequate liquidity.
Cash Throw-Off, often used interchangeably with Cash Flow, refers to the net amount of cash generated and available for use after accounting for cash outflows.
Charge and discharge accounting is a historical method used during the Middle Ages, especially within the manorial system. This method involves individuals keeping a record of sums or estates they receive and balancing it with sums paid out, effectively accounting for both inflows and outflows.
A charge card allows the holder to purchase goods or services with the condition that the full balance is paid off at regular intervals. Unlike credit cards, charge cards usually do not have a spending limit and do not incur interest charges but come with an annual fee.
The Chart of Accounts (CoA) is a detailed listing of all the individual accounts used by an organization’s accounting system, providing a structured framework for categorizing transactions and financial data.
The Chief Financial Officer (CFO) is a senior executive responsible for managing the financial actions, planning, and reporting of an organization. This role includes overseeing financial planning, financial risk management, record-keeping, and financial reporting.
A Chief Financial Officer (CFO) is a corporate officer responsible for managing the financial actions of a company, including financial planning, management of financial risks, record-keeping, and financial reporting.
CIPFA is the professional body for people in public finance, offering qualifications, training, and a range of support for those involved in public sector accounting and financial management.
Cleared balance refers to the funds in a bank account that have been processed and are available for withdrawal or use. It excludes any deposits that have not yet been confirmed or cleared by the bank.
Closed-End Funds are investment funds with a fixed amount of capital managed by an investment company, as opposed to open-ended funds like unit trusts that continually issue and redeem shares.
The practice of mixing personal funds with client or customer funds by a fiduciary or trustee, which is generally prohibited by law unless an exact accounting is maintained.
A constant-payment loan is structured such that equal payments are made periodically to completely pay off the debt by the loan's maturity date. This type of loan typically involves fixed interest rates and scheduled payments that cover both principal and interest.
Contributed capital, also known as paid-in capital, refers to the total value of cash and other assets that shareholders have directly invested in a company in exchange for stock. This equity portion represents funds that are raised and used for the growth and operational needs of the business.
A control period is the span of time for which budgeted figures are compared with actual results. Splitting up the financial year into control periods makes control of the financial figures more manageable.
The techniques used in collecting, processing, and presenting financial and quantitative data within an organization to ascertain the cost of cost centres and cost units and the various operations.
The process of determining the costs of the operations, processes, cost centres, and cost units within an organization.
A Cost Function is a formula or equation that represents how specific costs behave when visualized on a graph. It typically depicts total cost as the sum of fixed costs and variable costs.
The cost of capital is the return, expressed in terms of an interest rate, required by an organization to finance its activities. It can vary depending on the types of capital employed, such as equity share capital or loan capital. A unique weighted average cost of capital (WACC) is often computed for each organization based on their specific mix of capital sources. The cost of capital is frequently used as a hurdle rate in discounted cash flow calculations.
A predetermined level of cost expected to be incurred by a specific cost item in the supply, production, or operation of a service, product, process, or cost centre. Cost standards are often applied to performance standards in order to calculate standard overhead costs.
A cost unit represents a unit of production for which costs are aggregated. It can vary from a single item like a chair or light bulb to a sub-assembly in more complex products like an aircraft wing or gearbox. In cases where individual unit costs are minimal, cost units might be expressed as batches.
Cost-effectiveness refers to the ability to generate sufficient value to offset the associated costs of an activity. In a business context, this value is often interpreted as revenue.
Credit bureau scores are numerical expressions based on a statistical analysis of a person's credit files, representing the creditworthiness of that individual.
Creditors are individuals or entities to whom an organization or an individual owes money, such as unpaid suppliers of raw materials. Effective management of creditor payments is essential for maintaining credit periods and securing prompt-payment discounts.
Current Cash Equivalent (CCE) is a financial concept that refers to the amount of cash or cash-equivalent assets that a company holds, which can be quickly converted into cash without significant loss of value.
An investment (e.g., shares) intended to be held for less than one year. See also fixed-asset investment.
Cycle Billing is a method sometimes adopted in large organizations for invoicing their customers at different time intervals. Often using the alphabet as a basis, customers starting with the letter A may be invoiced on the first day, B on the second day, and so on. This method spreads the workload in the organization and ensures a steady inflow of cash—provided that there are many customers with comparable accounts.
A capital reserve created to ensure that funds are available for the redemption of debentures at maturity, limiting profits available for distribution but not providing actual redemption funds directly.
Debt restructuring involves adjustments to the terms of debt, either through legal action or by agreement, to provide more favorable conditions for the debtor to meet financial obligations. It can involve both corporate and sovereign entities.
A deferred account is a financial account that postpones tax obligations until a later date, allowing the account holder to potentially reduce their current tax burden.
Deferred billing refers to the delayed invoicing of a credit order at the request of the seller. This practice allows buyers to receive products or services before the actual bill is due.
A Direct Charge Voucher (DCV) is a financial document used in accounting to record direct expenses incurred by an organization, facilitating efficient and accurate tracking of specific chargeable items to appropriate accounts or projects.
The spending capability that is not mandated by law or required automatically within the system, allowing individuals or organizations to allocate their funds according to their choices and preferences.
Distributive share refers to the allocation of income, gain, loss, deduction, or credit to a partner in a partnership, typically determined by the partnership agreement.
Duration Driver refers to a measure of the amount of time required to perform an activity, especially when there is significant variance in the time taken to complete different activities.
A digital method for generating, sending, and receiving invoices, typically replacing traditional paper-based billing systems.
Enterprise Performance Management (EPM) is a framework used by organizations to monitor and manage their performance against key business objectives. It encompasses strategies, tools, and processes that provide comprehensive insights into business performance.
Equity finance involves raising capital through the sales of shares, where shareholders earn ownership in the company and potentially receive dividends based on company profits.
Equity financing involves raising capital through the sale of shares in a company, providing stakeholders with ownership interests in contrast to accruing debt.
The European Court of Auditors (ECA) is the institution of the European Union (EU) responsible for auditing the EU's finances. Its role is to improve the financial management of EU funds by evaluating the correctness, legality, and efficiency of the financial undertakings.
An expenditure code is a unique identifier used in accounting to categorize and record expenses based on their nature and function within an organization, allowing for efficient budgeting and financial reporting.
A fiduciary is a person, company, or association holding assets in trust for a beneficiary, with the responsibility of investing the money wisely for the beneficiary's benefit.
Financial control encompasses actions taken by the management of an organization to ensure that costs incurred and revenues generated are at acceptable levels. It involves the provision of financial information to management by accountants and utilizes techniques such as budgetary control and standard costing to highlight and analyze variances.
Financial gearing, also referred to as leverage, is the degree to which a company utilizes borrowed money or debt to finance its operations and growth.
The branch of financial economics that is concerned with questions of business funding and the management of a business in the interests of shareholders, ensuring effective allocation of resources and maximizing shareholder value.
The financial perspective focuses on how businesses can meet their goals in terms of profitability, growth, and shareholder value. It is one of the key facets of the Balanced Scorecard framework.
Financing cost refers to the expense incurred by an entity for funding its operations and activities. These costs can include interest payments on loans, fees for issuing bonds or equity, and other related expenses.
A firewall in a conglomerate is a strategic barrier designed to segregate the organization, funding, and ownership of different business entities within the group, ensuring that challenges faced by one entity do not adversely affect others.
A fiscal agent typically refers to a bank or trust company that manages various financial transactions and responsibilities, such as disbursing funds for dividend payments, redeeming bonds and coupons, handling bond-related taxes, and paying rents.
A fixed cost (also known as a fixed expense) is an item of expenditure that remains unchanged in total, irrespective of changes in the levels of production or sales. Examples include business rates, rent, and some salaries.
Flexed Budget Allowance refers to the budgeted expenditure level for each of the variable cost items adjusted to the level of activity actually achieved. This concept is crucial for adjusting budgetary figures based on actual performance.
Floating debt refers to short-term financial obligations that are continuously refinanced. It is commonly seen in both business and government sectors and includes instruments such as commercial paper and Treasury bills.
A fund family, also known as a family of funds, is a group of mutual funds offered by the same investment company that share similar investment objectives, management, and administrative structures.
Funded debt refers to debt that is due after one year and is formalized by the issuing of bonds or long-term notes. It often involves a sinking fund to ensure the debt can be retired systematically.
General expenses are those expenditures by an organization that cannot be conveniently categorized into any other specific cost classifications, encompassing a wide variety of costs essential for business operations.
A General Power of Attorney grants broad authority to a designated individual, known as the attorney-in-fact or agent, to act on behalf of the principal in all matters.
Group relief is a tax mechanism allowing companies within a 75% ownership group to transfer qualifying losses to other group companies, thus optimizing their overall tax position. From April 1, 2000, group members no longer have to be resident in the UK to qualify for this relief.
A hidden asset or reserve refers to asset value that is understated on the balance sheet of a company due to accounting conventions or deliberate action by management.
The Institute of Management Accountants (IMA) is a global association of accounting and finance professionals, focused on empowering professionals in roles of management accounting and financial management.
The imprest system is a bookkeeping system where a fixed amount of money is reserved for minor expenses and is periodically replenished.
An indirect cost centre refers to a division or department within an organization that incurs costs but does not directly generate revenue. These centres typically support the production of goods or services.
Indirect labour costs are the wages, bonuses, and other forms of remuneration paid to employees whose work does not directly contribute to the production of goods or services but supports the overall operations of a business.
Indirect materials cost refers to the expenses incurred in providing materials that are not directly traceable to a specific product or job but are necessary for the manufacturing process.
The Institute of Management Accountants (IMA) is a professional organization focused on advancing management accounting and finance, recognized globally for its certifications and educational resources.
Integrated accounts refer to a comprehensive set of accounting records that seamlessly combines both financial accounting and cost accounting into a single coherent system. This integration eliminates the need for reconciling separate financial and cost records, ensuring consistency, accuracy, and efficiency in data management.
Internal financing refers to funds generated from a company's normal operations, in contrast to external financing, which involves borrowings and new equity.
