Accounting for Business Terms with "R"

Glossary of Accounting for Business - Glossario Contabilità Imprese

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Receipt: a written acknowledgment that a specified article, sum of money, or shipment of merchandise has been received.

Receipts: unless otherwise qualified, in accounting means cash received.

Receivable: an amount awaiting receipt of payment.

Reconciliation: the process of agreeing accounting entries from one source, with entries from another source. The most common reconciliation is a bank reconciliation, which matches transactions posted against a bank account with the statement received from the bank.

Reduced Rate (of VAT): a lower VAT rate applicable to certain goods and services.

Reducing Balance Method: a method of calculating depreciation based on the principle that you calculate annual depreciation as a percentage of the net-of-depreciation-to-date balance brought forward at the start of the period on the fixed asset.

Registered Business: a business that has registered for VAT. It must account for VAT and submit a VAT Return at the end of every VAT tax period.

Remittance Advice: a document accompanying a receipt, showing which invoices less credit notes are being paid.

Remittance List: a listing of all the receipts of the business for a period, usually that day.

Reserve Accounts: the transfer of apportioned profits to accounts for use in future years.

Reserves: the accumulated and retained difference between profits and losses year on year since the company's formation.

Residual Value: the net amount receivable when a fixed asset is put out of use by the business.

Retained Earning: retained earnings are profits that were not paid to a company's shareholders. They are reported in the ownership equity section of the firm's balance sheet. Dividing profits between dividends and retained earnings depends on at least two things: the firm's judgement of its own investment opportunities relative to those available in the market and any difference in tax treatment of dividends paid now and capital gains expected to result from investing retained earnings.

Retention: an amount of money retained by a customer for a specified period of time after a service has been provided, to ensure that if anything should subsequently go wrong then it will be rectified.

Return on Capital Employed (R.O.C.E.): Return on Capital Employed = (Net Profit ÷ Capital Employed) x 100. This is one of the most important profitability ratios, as it encompasses all the other ratios, and because an adequate return on capital employed, is why people invest their money in a business in the first place. This ratio gives an indication as to how much profit in percentage terms is being earned from the money invested in the business. If the owner could earn more from investing the capital in a building society, it would be pointless running the business. There are several ways of calculating this ratio in respect to the capital employed figure. Sometimes it is Opening Capital, sometimes the Closing Capital and sometimes the Average Capital.

Return On Investment: a fundamental financial and business performance measure. This term can mean different things to different people (often depending on perspective and what is actually being judged) so it's important to clarify understanding if interpretation has serious implications. Many business managers and owners use the term in a general sense as a means of assessing the merit of an investment or business decision. "Return" generally means profit before tax, but clarify this with the person using the term - profit depends on various circumstances, such as the accounting conventions used in the business. In this sense most CEO's and business owners regard ROI as the ultimate measure of any business or any business proposition, after all it's what most business is aimed at producing - maximum return on investment, otherwise you might as well put your money in a bank savings account. Strictly speaking Return On Investment is defined as: Profits derived as a proportion of and directly attributable to cost or 'book value' of an asset, liability or activity, net of depreciation. In simple terms this is the profit made from an investment. The 'investment' could be the value of a whole business (in which case the value is generally regarded as the company's total assets minus intangible assets, such as goodwill, trademarks, etc and liabilities, such as debt.

Return On Owners' Equity: net profit as a percentage of ordinary share capital plus all reserves, often abbreviated as ROOE. The more common term in use for this is (return on shareholders' funds).

Return On Shareholders' Funds: net profit as a percentage of ordinary share capital plus all reserves, often abbreviated as ROSF and more commonly used than the alternative term, return on owners' equity.

Returns: goods returned to the business by a customer, or by the business to a supplier.

Revaluation Account: an account used to record gains and losses when assets are revalued.

Revenue: another term for sales or income.

Revenue Expenditure: expenses needed for the day-to-day running of the business.

Revenue Reserves: a balance of profits retained available to pay cash dividends including an amount voluntarily transferred from the profit and loss appropriation account by debiting it, reducing the amount of profits left for cash dividend purposes, and crediting a named reserve account, such as a general reserve.

Rights Issue: a rights issue is a way in which a company can sell new shares in order to raise capital. Shares are offered to existing shareholders in proportion to their current shareholding, respecting their pre-emption rights. The price at which the shares are offered is usually at a discount to the current share price, which gives investors an incentive to buy the new shares - if they do not, the value of their holding is diluted.