Glossary

Accounting & Finance

ACCA The Association of Chartered Certified Accountants Accounts payable Money owed by a company Accounts receivable Money owed to a company Amortization Reduction in value, writing down the capital value of an Intangible asset over a period of time in a company’s accounts Assets 1. Things which belong to a company, and which have a value; assets can be tangible or intangible, current, fixed, etc.; 2. Liabilities plus owners’ equity Bad Debt Debt which will not be paid (usually because the debtor has gone out of business) and which has to be written off in the accounts Balance Sheet (B.S.) Statement of the financial position of a company at a particular time, such as the end of the financial year or the end of a quarter, showing the company’s assets and liabilities Bond Contract document promising to repay money borrowed by a company or by the government at a certain date, and paying interest at regular intervals Borrowing Taking money from someone for a time, possibly paying interest for it, and repaying it at the end of the period Business plan Document drawn up to show how a business is planned to work, with cash flow forecasts, sales forecasts, etc. (often used when trying to raise a loan, or when setting up a new business) Cash Money in coins or notes Cash Flow (CF) Cash which comes into a company from sales (Cash Inflow) or the money which goes out in purchases or overhead expenditure (Cash Outflow) Cash Flow Statement Report which shows Cash Inflows and Cash Outflows during a given period Cash Inflow Receipts of cash or checks Cash Outflow Expenditure in cash or checks Common stock Ordinary shares in a company, giving shareholders a right to vote at meetings and to receive dividends Cost Amount of money which has to be paid for something Currency Money in coins and notes which is used in a particular country Debt Money borrowed by a company to finance its activities Deferred taxes Taxes which can be explained by the different treatment of certain transactions in the accounts and the tax computation Depreciation Reduction in value, writing down the capital value of a Fixed asset over a period of time in a company’s accounts Discount rate 1. Rate at which the face value of a bill of exchange is reduced when payment is made before its maturity date 2. Percentage used in a discounting calculation, e.g. to find the present value of future income Discounted cash flow (DCF) Calculating the forecast return on capital investment by discounting future cash flows from the investment, usually at a rate equivalent to the company’s minimum required rate of return Dividend Part of company’s profits paid to shareholders Draft See Note Earnings See Profit EBIT Earnings Before Interest and Taxes EBITDA Earnings Before Interest, Taxes, Depreciation, and Amortization Equity The value of a company which is the property of its ordinary shareholders (the company’s assets less its liabilities, not including the ordinary share capital) Equity capital A company’s capital which is invested by holders of ordinary shares giving them the right to unlimited returns (as opposed to preference shareholders who are only entitled to a fixed maximum return) Exchange rate Price at which one currency is exchanged for another Financial Accounting Standards Board (FASB) The body which regulates accounting standards in the USA FIFO First-In, First-Out Fixed assets Property or machinery which a company owns and uses, but which the company does not buy or sell as part of its regular trade, including the company’s investments in shares of other companies Forecast Description or calculation of what will probably happen in the future GAAP Generally Accepted Accounting Principles Goodwill Good reputation of a business, which can be included in a company’s intangible asset value; goodwill can include the trading reputation, the value of a "good site", etc. IFRS International Financial Reporting Standards Income 1. Money received by an accounting entity from its normal trading (i.e. not including the sale of fixed assets, which produces capital revenue) 2. Profit (i.e. revenue less expenses) earned by an accounting entity from its normal trading (excluding capital gains) Income Statement See Profit & Loss Statement Intangible assets (Intangibles) Assets, such as copyrights, patents, Goodwill, etc., which exist and have a value, but cannot be seen Interest 1. Payment made by a borrower for the use of money, calculated as a percentage of the capital borrowed 2. Money paid as income on investments or loans Internal Rate of Return (IRR) The Discount rate at which the cost of investment and its future Cash Inflows are exactly equal International Accounting Standards (IAS) Accounting standards which are applied internationally Inventory Stock or goods in a warehouse or in a shop Investments 1. Placing of money so that it will increase in value and produce an income (either in an asset, such as a building, or by purchasing shares, placing money on deposit, etc.) 2. Shares, bonds, deposits bought with invested money Lease Written contract for letting or renting a building or a piece of land or a piece of equipment for a period against payment of a fee Liabilities Responsibility for a payment (such as the repayment of a loan) LIFO Last-In, First-Out Loan See Borrowing LIBOR London InterBank Offered Rate Management Directing or running a business Mapping Reconciliation of RAS and GAAP accounts Net income Total earnings of a business after tax and other deductions Net present value (NPV) Present Value less Investments needed NIFO Next-In, First-Out Note Paper showing that money has been borrowed Operating expenses Costs of production, selling and administration incurred during normal trading Overhead costs Costs of materials, salaries and other expenses (including selling, administration and finance costs) which are not directly related to the making of a product Payables Money which is due to be paid Preferred stock Shares which receive their dividend before all other shares, and which are repaid first (at face value) if the company is in liquidation Present value (PV) 1. The value now of a specified sum of money to be received in the future, if invested at current interest rates 2. Price which a share must reach in the future to be the equivalent of today’s price, taking inflation into account Profit Money gained from a sale which is more than the money spent Profit & Loss Statement (P&L) Statement of a company’s expenditure and income over a period of time, almost always one calendar year, showing whether the company has made a profit or loss Profit Before Interest and Taxes (PBIT) See Earnings Before Interest and Taxes Receivables Money which is owed to a company Russian Accounting Principles (RAP) See Russian Accounting Standard Russian Accounting Standard (RAS) Russian Accounting Principles, legally stipulated in Russian Accounting Regulations (in Russian - PBU); the RAP and RAS abbreviations are not in general use Sale Act of selling, act of giving an item or doing a service in exchange for money, or for the promise that money will be paid Securities Investments in stocks, shares and money market instruments Securities & Exchange Commission (SEC) The official body which regulates the securities markets in the USA Shares See Stock 2 Statement of Earnings See Profit & Loss Statement Statement of Shareholders' Equity Statement of a company’s capital which is owned by its ordinary shareholders over a period of time Statement of Stockholders' Equity See Statement of Shareholders' Equity Stock 1. Quantity of goods for sale or materials for production in hand 2. Investments in a company, represented by share or fixed interest securities Tax Money taken by the government or by an official body to pay for government services Valuation Estimate of how much something is worth Value (V) Amount of money which something is worth Value Added Tax (VAT) Tax imposed as a percentage of the net invoice value of goods and services