Glossary of Financial Accounting Terms
GlossarioTermini Contabilità Finanziaria
Glossario Termini di Contabilità Finanziaria
In un mondo globalizzato nel quale la moneta circola senza più barriere né confini, è importante conoscere il significato dei termini contabili più utilizzati nel mondo della finanza.
Questo glossario è destinato ad essere utilizzato come riferimento rapido per alcuni dei termini tecnici contenuti nella contabilità finanziaria.
Queste definizioni e descrizioni non dovrebbero essere considerate singolarmente ma tenendo conto del contesto lessicale nel quale vengono inserite.
A | B | C | D | E | F | G | H | I | J
| L | M | P | Q | R | S | T | U
AVVERTENZE D'UTILIZZO: Il presente glossario contiene la definizione dei termini indicati con riferimento alla Contabilità Finanziaria.
La spiegazione di ciascuno dei termini indicati in questo glossario è di carattere meramente orientativo e priva di valore legale; si raccomanda, quindi, di tenere conto del contesto e dell'evento in cui essi vanno applicati, in quanto il significato loro attribuito potrebbe differire rispetto a quello qui rappresentato.
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- A -
An amount due for payment to a supplier of goods or services, also described as a "Trade Creditor".
Account ReceivableAn amount due from a customer, also described as a trade debtor.
Accountancy FirmA business partnership (or possibly a limited company) in which the partners are qualified Accountants.
The firm undertakes work for clients in respect of audit, accounts preparation, tax and similar activities.
The collective body of persons qualified in accounting, and working in accounting-related areas.
Usually they are members of a professional body, membership of which is attained by passing examinations.
The process of identifying, measuring and communicating financial information about an entity to permit informed judgements and decisions by users of the information.
The relationship between assets, liabilities and ownership interest.
Time period for which financial statements are prepared (e.g. month, quarter, year).
Accounting methods which have been judged by business enterprises to be most appropriate to their circumstances and adopted by them for the purpose of preparing their financial statements.
Definitive statements of best practice issued by a body having suitable authority.
Board The authority in the UK which issues definitive statements of best accounting practice.
The effects of transactions and other events are recognised when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate (see also matching).
Total depreciation of a non-current (fixed) asset, deducted from original cost to give net book value.
The ratio of liquid assets to current liabilities.
Company that becomes controlled by another.
Company that obtains control of another.
An acquisition takes place where one company – the acquirer – acquires control of another – the acquiree – usually through purchase of shares.
Production of consolidated financial statements for an acquisition.
Costs of managing and running a business.
A relationship between a principal and an agent. In the case of a limited liability company, the shareholder is the principal and the director is the agent.
A theoretical model, developed by academics, to explain how the relationship between a principal and an agent may have economic consequences.
See accumulated depreciation.
To assign a whole item of cost, or of revenue, to a simple cost centre, account or time period.
Process similar to depreciation, usually applied to intangible fixed assets.
A document produced each year by limited liability companies containing the accounting information required by law. Larger companies also provide information and pictures of the activities of the company.
Articles of Association
Document setting out the relative rights of shareholders in a limited liability company.
The term 'articulation' is used to refer to the impact of transactions on the balance sheet and profit and loss account through application of the accounting equation.
Rights or other access to future economic benefits controlled by an entity as a result of past transactions or events.
One company exercises significant influence over another, falling short of complete control.
An audit is the independent examination of, and expression of opinion on, financial statements of an entity.
An employee of an accountancy firm, usually holding an accountancy qualification, given a significant level of responsibility in carrying out an audit assignment and responsible to the partner in charge of the audit.
Bad DebtIt is known that a credit customer (debtor) is unable to pay the amount due.
A statement of the financial position of an entity showing assets, liabilities and ownership interest.
An arrangement with a bank to borrow money as required up to an agreed limit.
The name sometimes given to loan finance (more commonly in the USA).
Member of a Stock Exchange who arranges purchase and sale of shares and may also provide an information service giving buy/sell/hold recommendations.
Bulletin written by a stockbroking firm for circulation to its clients, providing analysis and guidance on companies as potential Investments.
A transaction in which one company acquires control of another.
Period (usually 12 months) during which the peaks and troughs of activity of a business form a pattern which is repeated on a regular basis.
A business which exists independently of its owners.
Called Up (Share Capital)
The company has called upon the shareholders who first bought the shares, to make their payment in fu
An amount of finance provided to enable a business to acquire assets and sustain its operations.
Capital ExpenditureSpending on non-current (fixed) assets of a business.
Capitalisation IssueIssue of shares to existing shareholders in proportion to shares already held. Raises no new finance but changes the mix of share capital and reserves.
CashCash on hand (such as money held in a cash box or a safe) and DEPOSITS in a bank that may be withdrawn on demand.
Cash EquivalentsShort-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash Flow ProjectionsStatements of cash expected to flow into the business and cash expected to flow out over a particular period.
Cash Flow StatementProvides information about changes in financial position.
ChairmanThe person who chairs the meetings of the board of directors of a company (preferably not the chief executive).
ChargeIn relation to interest or taxes, describes the reduction in ownership interest reported in the income statement (profit and loss account) due to the cost of interest and tax payable.
Chief ExecutiveThe director in charge of the day-to-day running of a company.
Close SeasonPeriod during which those who are 'insiders' to a listed company should not buy or sell shares.
Commercial PaperA method of borrowing money from commercial institutions such as banks.
Companies Act 2006 (The)Legislation to control the activities of limited liability companies.
ComparabilityQualitative characteristic expected in financial statements, comparable within company and between companies.
CompletenessQualitative characteristic expected in financial statements.
Conceptual FrameworkA statement of principles providing generally accepted guidance for the development of new reporting practices and for challenging and evaluating the existing practices.
ConservatismSee prudence. Sometimes used with a stronger meaning of understating assets and overstating liabilities.
ConsistencyThe measurement and display of similar transactions and other events is carried out in a consistent way throughout an entity within each accounting period and from one period to the next, and also in a consistent way by different entities.
Consolidated Financial StatementsPresent financial information about the group as a single reporting entity.
ConsolidationConsolidation is a process that aggregates the total assets, liabilities and results of the parent and its subsidiaries (the group) in the consolidated financial statements.
Contingent LiabilitiesObligations that are not recognised in the balance sheet because they depend upon some future event happening.
ControlThe power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Convertible LoanLoan finance for a business that is later converted into share capital.
Corporate GovernanceThe system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies.
Corporate Recovery DepartmentPart of an accountancy firm which specialises in assisting companies to recover from financial problems.
Corporate Social ResponsibilityCompanies integrate social and environmental concerns in their business operations and in their interactions with stakeholders.
Corporation TaxTax payable by companies, based on the taxable profits of the period.
Cost of a Non-Current AssetIs the cost of making it ready for use, cost of finished goods is cost of bringing them to the present condition and location.
Cost of Goods SoldMaterials, labour and other costs directly related to the goods or services provided.
Cost of SalesSee cost of goods sold.
CouponRate of Interest payable on a loan.
Credit (Bookkeeping System)Entries in the credit column of a ledger account represent increases in liabilities, increases in ownership interest, revenue, or decreases in assets.
Credit (Terms of Business)The supplier agrees to allow the customer to make payment some time after the delivery of the goods or services.
Typical trade credit periods range from 30 to 60 days but each agreement is different.
Credit NoteA document sent to a customer of a business cancelling the customer's debt to the business, usually because the customer has returned defective goods or has received inadequate service.
Credit PurchaseA business entity takes delivery of goods or services and is allowed to make payment at a later date.
Credit SaleA business entity sells goods or services and allows the customer to make payment at a later date.
CreditorA person or organisation to whom money is owed by the entity.
Critical EventThe point in the business cycle at which revenue may be recognised.
Current AssetAn asset that is expected to be converted into cash within the trading cycle.
Current LiabilityA liability which satisfies any of the following criteria:
(a) it is expected to be settled in the entity's normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within 12 months after the balance sheet date.
Current ValueA method of valuing assets and liabilities which takes account of changing prices, as an alternative to historical cost.
Customers' Collection PeriodAverage number of days credit taken by customers.
Cut-Off ProceduresProcedures applied to the accounting records at the end of an accounting period to ensure that all transactions for the period are recorded and any transactions not relevant to the period are excluded.
- D -
DebentureA written acknowledgement of a debt – a name used for loan financing taken up by a company.
DebtorA person or organisation that owes money to the entity.
Deep Discount BondA loan issued at a relatively low price compared to its nominal value.
DefaultFailure to meet obligations as they fall due for payment.
Deferred AssetAn asset whose benefit is delayed beyond the period expected for a current asset, but which does not meet the definition of a fixed asset.
Deferred IncomeRevenue, such as a government grant, is received in advance of performing the related activity. The deferred income is held in the balance sheet as a type of liability until performance is achieved and is then released to the income statement.
Deferred TaxationThe obligation to pay tax is deferred (postponed) under tax law beyond the normal date of payment.
Depreciable AmountCost of a non-current (fixed) asset minus residual value.
DepreciationThe systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is cost less residual value.
DerecognitionThe act of removing an item from the financial statements because the item no longer satisfies the conditions for recognition.
Difference on ConsolidationDifference between fair value of the payment for a subsidiary and the fair value of net assets acquired, more commonly called goodwill.
Direct Method (of Operating Cash Flow)Presents cash inflows and cash outflows.
DirectiveA document issued by the European Union requiring all Member States to adapt their national law to be consistent with the Directive.
Director(s)Person(s) appointed by shareholders of a limited liability company to manage the affairs of the company.
Disclosed, DisclosureAn item which is reported in the notes to the accounts is said to be disclosed but not recognised.
Discount ReceivedA supplier of goods or services allows a business to deduct an amount called a discount, for prompt payment of an invoiced amount.
The discount is often expressed a percentage of the invoiced amount.
DividendAmount paid to a shareholder, usually in the form of cash, as a reward for investment in the company.
The amount of dividend paid is proportionate to the number of shares held.
Dividend CoverEarnings per share divided by dividend per share.
Dividend YieldDividend per share divided by current market price.
Doubtful DebtsAmounts due from credit customers where there is concern that the customer may be unable to pay.
DrawingsCash taken for personal use, in sole trader or partnership business, treated as a reduction of ownership interest.
- E -
Earnings for Ordinary ShareholdersProfit after deducting interest charges and taxation and after deducting preference dividends (but before deducting extraordinary items).
Earnings per ShareCalculated as earnings for ordinary shareholders divided by the number of shares which have been issued by the company.
Effective Interest RateThe rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument.
Efficient Markets HypothesisShare prices in a stick market react immediately to the announcement of new information.
EndorsedInternational financial reporting standards approved for use in Member States of the European Union through a formal process of endorsement.
EnterpriseA business activity or a commercial project.
Entity, EntitiesSomething that exists independently, such as a business which exists independently of the owner.
Entry PriceThe value of entering into acquisition of an asset or liability, usually replacement cost.
Equities AnalystA person who investigates and writes reports on ordinary share investments in companies (usually for the benefit of investors in shares).
EquityA description applied to the ordinary share capital of an entity.
Equity AccountingReports in the balance sheet the parent or group's share of the investment in the share capital and reserves of an associated company.
Equity InterestSee ownership interest.
Equity PortfolioA collection of equity shares.
Equity SharesShares in a company which participate in sharing dividends and in sharing any surplus on winding up, after all liabilities have been met.
Eurobond MarketA market in which bonds are issued in the capital market of one country to a non-resident borrower from another country.
Exit PriceSee exit value.
Exit ValueA method of valuing assets and liabilities based on selling prices, as an alternative to historical cost.
ExpenseAn expense is caused by a transaction or event arising during the ordinary activities of the business which causes a decrease in the ownership interest.
External ReportingReporting financial information to those users with a valid claim to receive it, but who are not allowed access to the day-to-day records of the business.
External Users (of Financial Statements)Users of financial statements who have a valid interest but are not permitted access to the day-to-day records of the company.
- F -
Fair ValueThe amount at which an asset or liability could be exchanged in an arm's-length transaction between a willing buyer and a willing seller.
Faithful PresentationQualitive characteristic, information represents what it purports to represent.
Financial AccountingA term usually applied to external reporting by a business where that reporting is presented in financial terms.
Financial AdaptabilityThe ability of the company to respond to unexpected needs or opportunities.
Financial GearingRatio of loan finance to equity capital and reserves.
Financial InformationInformation which may be reported in money terms.
Financial ReportingStandard Title of an accounting standard issued by the UK Accounting Standards Board as a definitive statement of best practice (issued from 1990 onwards – predecessor documents are Statements of Standard Accounting Practice, many of which remain valid).
Financial RiskExists where a company has loan finance, especially long-term loan finance where the company cannot relinquish its commitment.
The risk relates to being unable to meet payments of interest or repayment of capital as they fall due.
Financial StatementsDocuments presenting accounting information which is expected to have a useful purpose.
Financial ViabilityThe ability to survive on an ongoing basis.
Financing ActivitiesActivities that result in changes in the size and composition of the contributed equity and borrowings of the entity.
Fixed AssetAn asset that is held by an enterprise for use in the production or supply of goods or services, for rental to others, or for administrative purposes on a continuing basis in the reporting entity's activities.
Fixed AssetsSee non-current assets.
Fixed Assets UsageRevenue divided by net book value of fixed assets.
Fixed CapitalFinance provided to support the acquisition of fixed assets.
Fixed CostOne which is not affected by changes in the level of output over a defined period of time.
Floating ChargeSecurity taken by lender which floats over all the assets and crystallises over particular assets if the security is required.
ForecastEstimate of future performance and position based on stated assumptions and usually including a quantified amount.
FormatA list of items which may appear in a financial statement, setting out the order in which they are to appear.
Forward Exchange ContractAn agreement to buy foreing currency at a fixed future date and at an agreed price.
Fully PaidShares on which the amount of share capital has been paid in full to the company.
Fund ManagerA person who manages a collection (portfolio) of investments, usually for an insurance company, a pension fund business or a professional fund management business which invests money on behalf of clients.
- G -
Gearing (Financial)The ratio of debt capital to ownership claim.
General Purpose Financial StatementsDocuments containing accounting information which would be expected to be of interest to a wide range of user groups.
For a limited liability company there would be: a balance sheet, a profit and loss account, a statement of recognised gains and losses and a cash flow statement.
Going Concern BasisThe assumption that the business will continue operating into the foreseeable future.
GoodwillGoodwill on acquisition is the difference between the fair value of the amount paid for an investment in a subsidiary and the fair value of the net assets acquired.
GrossBefore making deductions.
Gross MarginSales minus cost of sales before deducting administration and selling expenses (another name for gross profit). Usually applied when discussing a particular line of activity.
Gross Margin RatioGross profit as a percentage of sales.
Gross ProfitSales minus cost of sales before deducting administration and selling expenses (see also gross margin).
GroupEconomic entity formed by parent and one or more subsidiaries.
- H -
Highlights StatementA page at the start of the annual report setting out key measures of performance during the reporting period.
Historical CostMethod of valuing assets and liabilities based on their original cost without adjustment for changing prices.
HM Revenue and Customs (HMRC)The UK government's tax-gathering organisation (previously called the Inland Revenue).
- I -
IASInternational Accounting Standard, issued by the IASB's predecessor body.
IASBInternational Accounting Standards Board, an independent body that sets accounting standards accepted as a basis for accounting in many countries, including all Member States of the European Union.
IASB SystemThe accounting standards and guidance issued by the IASB.
IFRSInternational FINANCIAL REPORTING Standard, issued by the IASB.
ImpairmentA reduction in the carrying value of an asset, beyond the expected depreciation, which must be reflected by reducing the amount recorded in the balance sheet.
Impairment ReviewTesting assets for evidence of any impairment.
Impairment TestTest that the business can expect to recover the carrying value of the intangible asset, through either using it or selling.
ImprovementA change in, or addition to, a non-current (fixed) asset that extends its useful life or increases the expected future benefit. Contrast with repair which restores the existing useful life or existing expected future benefit.
Income StatementFinancial statement presenting revenues, expenses, and profit. Also called profit and loss account.
Incorporation, Date of.The date on which a company comes into existence.
Indirect Method (of Operating Cash Flow)Calculates operating cash flow by adjusting operating profit for non-cash items and for changes in working capital.
Insider InformationInformation gained by someone inside, or close to, a listed company which could confer a financial advantage if used to buy or sell shares.
It is illegal for a person who is in possession of inside information to buy or sell shares on the basis of that information.
Institutional InvestorAn organisation whose business includes regular investment in shares of companies, examples being an insurance company, a pension fund, a charity, an investment trust, a unit trust, a merchant bank.
IntangibleWithout shape or form, cannot be touched.
Interest (on Loans)The percentage return on capital required by the lender (usually expressed as a percentage per annum).
Interim ReportsFinancial statements issued in the period between annual reports, usually half-yearly or quarterly.
Internal ReportingReporting financial information to those users inside a business, at various levels of management, at a level of detail appropriate to the recipient.
InventoryStocks of goods held for manufacture or for resale.
Investing ActivitiesThe acquisition and disposal of long-term assets and other investments not included in cash equivalents.
InvestorsPersons or organisations which have provided money to a business in exchange for a share of ownership.
- J -
Joint and Several Liability (in a Partnership)The partnership liabilities are shared jointly but each person is responsible for the whole of the partnership.
- K -
Key Performance IndicatorsQuantified measures of factors that help to measure the performance of the business effectively.
- L -
LeasingAcquiring the use of an asset through a rental agreement.
Legal FormRepresenting a transaction to reflect its legal status, which might not be the same as its economic form.
LeverageAlternative term for gearing, commonly used in the USA.
LiabilitiesObligations of an entity to transfer economic benefits as a result of past transactions or events.
Limited LiabilityA phrase used to indicate that those having liability in respect of some amount due may be able to invoke some agreed limit on that liability.
Limited Liability CompanyCompany where the liability of the owners is limited to the amount of capital they have agreed to contribute.
LiquidityThe extent to which a business has access to cash or items which can readily be exchanged for cash.
Listed CompanyA company whose shares are listed by the Stock Exchange as being available for buying and selling under the rules and safeguards of the Exchange.
Listing RequirementsRules imposed by the Stock Exchange on companies whose shares are listed for buying and selling.
Listing RulesIssued by the UK Listing Authority of the Financial Services Authority to regulate companies listed on the UK Stock Exchange. Includes rules on accounting information in annual reports.
Loan CovenantsAgreement made by the company with a lender of long-term finance, protecting the loan by imposing conditions on the company, usually to restrict further borrowing.
Loan NotesA method of borrowing from commercial institutions such as banks.
Loan StockLoan finance traded on a Stock Exchange.
Long-Term Finance, Long-Term LiabilitiesMoney lent to a business for a fixed period, giving that business a commitment to pay interest for the period specified and to repay the loan at the end of the period Also called non-current liabilities information in the financial statements should show the commercial substance of the situation.
- M -
ManagementCollective term for those persons responsible for the day-to-day running of a business.
Management AccountingReporting accounting information within a business, for management use only.
Market Value (of a Share)The price for which a share could be transferred between a willing buyer and a willing seller.
Marking to MarketValuing a marketable asset at its current market price.
MarginProfit, seen as the 'margin' between revenue and expense.
MatchingExpenses are matched against revenues in the period they are incurred (see also accruals basis).
MaterialityInformation is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.
MaturityThe date on which a liability is due for repayment.
Maturity Profile of DebtThe timing of loan repayments by a company in the future.
Memorandum (for a Company)Document setting out main objects of the company and its powers to act.
MergerTwo organisations agree to work together in a situation where neither can be regarded as having acquired the other.
Minority InterestThe ownership interest in a company held by persons other than the parent company and its subsidiary undertakings. Also called a non-controlling interest.
- N -
NetAfter making deductions.
Net AssetsAssets minus liabilities (equals ownership interest).
Net Book ValueCost of non-current (fixed) asset minus accumulated depreciation.
Net ProfitSales minus cost of sales minus all administrative and selling costs.
Net Realisable ValueThe proceeds of selling an item, less the costs of selling.
NeutralQualitative characteristic of freedom from bias.
Nominal Value (of a Share)The amount stated on the face of a share certificate as the named value of the share when issued.
Non-Controlling InterestSee minority interest.
Non-Current AssetsAny asset that does not meet the definition of a current asset. Also described as fixed assets.
Non-Current LiabilitiesAny liability that does not meet the definition of a current liability. Also described as long-term liabilities.
Notes to the AccountsInformation in financial statements that gives more detail about items in the financial statements.
- O -
Off-Balance-Sheet FinanceAn arrangement to keep matching assets and liabilities away from the entity's balance sheet.
Offer for SaleA company makes a general offer of its shares to the public.
Operating ActivitiesThe principal revenue-producing activities of the entity and other activities that are not investing or financing activities.
Operating and Financial ReviewSection of the annual report of many companies which explains the main features of the financial statements.
Operating GearingThe ratio of fixed operating costs to variable operating costs.
Operating MarginOperating profit as a percentage of sales.
Operating RiskExists where there are factors, such as a high level of fixed operating costs, which would cause profits to fluctuate through changes in operating conditions.
Ordinary SharesShares in a company which entitle the holder to a share of the dividend declared and a share in net assets on closing down the business.
Ownership InterestThe residual amount found by deducting all of the entity's liabilities from all of the entity's assets. (Also called equity interest.)
- P -
Par ValueSee nominal value.
Parent CompanyCompany which controls one or more subsidiaries in a group.
PartnershipTwo or more persons in business together with the aim of MAKING A PROFIT.
Partnership DeedA document setting out the agreement of the partners on how the partnership is to be conducted (including the arrangements for sharing profits and losses).
Partnership LawLegislation which governs the conduct of a partnership and which should be used where no partnership deed has been written.
Portfolio (of Investment)A collection of investments.
Portfolio of SharesA collection of shares held by an investor.
Preference SharesShares in a company which give the holder a preference (although not an automatic right) to receive a dividend before any ordinary share dividend is declared.
Preliminary AnnouncementThe first announcement by a listed company of its profit for the most recent accounting period. Precedes the publication of the full annual report.
The announcement is made to the entire STOCK MARKET so that all investors receive information at the same time.
PremiumAn amount paid in addition, or extra.
PrepaymentAn amount paid for in advance for an benefit to the business, such as insurance premiums or rent in advance. Initially recognised as an asset, then transferred to expense in the period when the benefit is enjoyed. (Also called a prepaid expense.)
Present FairlyA condition of the IASB system, equivalent to true and fair view in the UK ASB system.
Price–Earnings RatioMarket price of a share divided by earnings per share.
Price-Sensitive InformationInformation which, if known to the market, would affect the price of a share.
Primary Financial StatementsThe balance sheet, profit and loss account, statement of total recognised gains and losses and cash flow statement.
Principal (Sum)The agreed amount of a loan, on which interest will be charged during the period of the loan.
Private Limited Company (Ltd)A company which has limited liability but is not permitted to offer its shares to the public.
Production Overhead CostsCosts of production that are SPREAD across all output, rather than being identified with specific goods or services.
ProfitCalculated as revenue minus expenses.
Profit and Loss AccountFinancial statement presenting revenues, expenses, and profit. Also called income statement.
Prospective InvestorAn investor who is considering whether to invest in a company.
ProspectusFinancial statements and supporting detailed descriptions published when a company is offering shares for sale to the public.
ProvisionA liability of uncertain timing or amount.
Provision for Doubtful DebtsAn estimate of the risk of not collecting full payment from credit customers, reported as a deduction from TRADE receivables (debtors) in the balance sheet.
PrudenceA degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that gains and assets are not overstated and losses and liabilities are not understated.
Public Limited Company (PLC)A company which has limited liability and offers its shares to the public.
Purchase MethodMethod of producing consolidated financial statements (see acquisition method).
PurchasesTotal of goods and services bought in a period.
- Q -
Qualified Audit OpinionAn audit opinion to the effect that: the accounts do not show a true and fair view; or the accounts show a true and fair view except for particular matters.
Quality of EarningsOpinion of investors on reliability of earnings (profit) as a basis for their forecasts.
Quoted CompanyDefined in section 262 of the Companies Act 1985 as a company that has been included in the official list in accordance with the provisions of Part VI of the Financial Services and Markets Act 2000, or is officially listed in an EEA state, or is admitted to dealing on either the New York Stock Exchange or the exchange known as Nasdaq.
- R -
Realised Profit, RealisationA profit arising from revenue which has been earned by the entity and for which there is a reasonable prospect of cash being collected in the near future.
RecognisedAn item is recognised when it is included by means of words and amount within the main financial statements of an entity.
Registrar of CompaniesAn official authorised by the government to maintain a record of all annual reports and other documents issued by a company.
RelevanceQualitative characteristic of influencing the economic decisions of users.
ReliabilityQualitative characteristic of being free from material error and bias, representing faithfully.
Replacement CostA measure of current value which estimates the cost of replacing an asset or liability at the DATE of the balance sheet. Justified by reference to value to the business.
ReservesThe claim which owners have on the assets of a company because the company has created new wealth for them over the period since it began.
Residual ValueThe estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated cost of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
Retained EarningsAccumulated past profits, not distributed in dividends, available to finance INVESTMENT in assets.
Retained ProfitProfit of the period remaining after dividend has been deducted.
ReturnThe yield or reward from an investment.
Return on Capital EmployedOperating profit before deducting interest and taxation, divided by share capital plus reserves plus long-term loans.
Return on Total AssetsOperating profit before deducting interest and taxation, divided by total assets.
Return on Shareholders' EquityProfit for shareholders divided by share capital plus reserves.
Return (in Relation to Investment)The reward earned for investing money in a business. Return may appear in the form of regular cash payments (dividends) to the investor, or in a growth in the value of the amount invested.
Revaluation ReserveThe claim which owners have on the assets of the business because the balance sheet records a MARKET value for an asset that is greater than its historical cost.
RevenueCreated by a transaction or event arising during the ordinary activities of the business which causes an increase in the ownership interest.
Rights IssueA company gives its existing shareholders the right to buy more shares in proportion to those already held.
Risk (in Relation to Investment)Factors that may cause the profit or cash flows of the business to fluctuate.
- S -
SalesSee revenue, turnover.
Sales InvoiceDocument sent to customers recording a sale on credit and requesting payment.
Secured LoanLoan where the lender has taken a special claim on particular assets or revenues of the company.
Segmental ReportingReporting revenue, profit, cash flow assets , liabilities for each geographical and business segment within a business, identifying segments by the way the organisation is managed.
Share CapitalName given to the total amount of cash which the shareholders have contributed to the company.
Share CertificateA document providing evidence of share ownership.
Share PremiumThe claim which owners have on the assets of a company because shares have been purchased from the company at a price greater than the nominal value.
ShareholdersOwners of a limited liability company.
Shareholders' FundsName given to total of share capital and reserves in a company balance sheet.
SharesThe amount of share capital held by any shareholder is measured in terms of a number of shares in the total capital of the company.
Short-Term FinanceMoney lent to a business for a short period of time, usually repayable on demand and also repayable at the choice of the business if surplus to requirements.
Sole TraderAn individual owning and operating a business alone.
Specific Purpose Financial StatementsDocuments containing accounting information which is prepared for a particular purpose and is not normally available to a wider audience.
StakeholdersA general term devised to indicate all those who might have a legitimate interest in receiving financial information about a business because they have a 'stake' in it.
Statement of Changes in EquityA financial statement reporting all items causing changes to the ownership interest during the financial period, under the IASB system.
Statement of PrinciplesA document issued by the Accounting Standards Board in the United Kingdom setting out key principles to be applied in the process of setting accounting standards.
Statement of Recognised Income and ExpenseA financial statement reporting realised and unrealised income and expense as part of a statement of changes in equity under the IASB system.
Statement of Total Recognised Gains and LossesA financial statement reporting changes in equity under the UK ASB system.
Stepped BondLoan finance that starts with a relatively low rate of interest which then increases in steps.
StewardshipTaking care of resources owned by another person and using those resources to the benefit of that person.
StockA word with two different meanings. It may be used to describe an inventory of goods held for resale or for use in business. It may also be used to describe shares in the ownership of a company. The meaning will usually be obvious from the way in which the word is used.
Stock Exchange (Also called Stock Market)An organisation which has the authority to set rules for persons buying and selling shares. The term 'stock' is used loosely with a meaning similar to that of 'shares'.
Stock Holding PeriodAverage number of days for which inventory (stock) is held before use or sale.
Stock MarketSee Stock Exchange.
Subsidiary CompanyCompany in a group which is controlled by another (the parent company). (See Chapter 7 for full definition.) Sometimes called subsidiary undertaking.
Substance (Economic)Information in the financial statements should show the economic or commercial substance of the situation.
SubtotalTotals of similar items grouped together within a financial statement.
Suppliers' Payment PeriodAverage number of days credit taken from suppliers.
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Tangible Fixed AssetsA fixed asset (also called a non-current asset) which has a physical existence.
TimelinessQualitative characteristic that potentially conflicts with relevance.
Total Assets UsageSales divided by total assets.
Trade CreditorsPersons who supply goods or services to a business in the normal course of trade and allow a period of credit before payment must be made.
Trade DebtorsPersons who buy goods or services from a business in the normal course of trade and are allowed a period of credit before payment is due.
Trade PayablesAmounts due to suppliers (trade creditors), also called accounts payable.
Trade ReceivablesAmounts due from customers (trade debtors), also called accounts receivable.
True and Fair ViewRequirement of UK company law for UK companies not using IASB system.
TurnoverThe sales of a business or other form of revenue from operations of the business.
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UK ASB SystemThe accounting standards and company law applicable to corporate reporting by UK companies that do not report under the IASB system.
UnderstandabilityQualitative characteristic of financial statements, understandable by users.
Unlisted (Company)Limited Liability Company whose shares are not listed on any stock eschange.
UnrealisedGains and losses representing changes in values of assets and liabilities that are not realised through sale or use.
Unsecured CreditorsThose who have no claim against particular assets when a company is wound up, but must take their turn for any share of what remains.
Unsecured LoanLoan in respect of which the lender has taken no special claim against any assets.
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Value to the BusinessAn idea used in deciding on a measure of current value.
VarianceThe difference between a planned, budgeted or standard cost and the actual cost incurred. An adverse variance arises when the actual cost is greater than the standard cost.
A favourable variance arises when the actual cost is less than the standard cost.
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Working CapitalFinance provided to support the short-term assets of the business (stocks and debtors) to the extent that these are not financed by short-term creditors.
It is calculated as current assets minus current liabilities.
Working Capital CycleTotal of stock holding period plus customers collection period minus suppliers payment period.
Work-in-ProgressCost of partly completed goods or services, intended for completion and recorded as an asset.
Written Down ValueSee net book value.