C.A. is sometimes used to identify the Chief Accountant & Chartered Accountant
CAD see CASH AGAINST DOCUMENTS.
CAFR see Comprehensive Annual Financial Report.
CAGR see COMPOUND ANNUAL GROWTH RATE.
CALL can be 1. process of redeeming a bond or preferred stock issue before its normal maturity. A security with a call provision typically is issued at an interest rate higher than one without a call provision. Investors look at yield-to-call rather than yield-to-maturity; 2. right to buy 100 shares of stock at a specified price within a specified period; or, 3. option to buy (call) an asset at a specified price within a specified period.
CALLABLE BOND is a bond the issuer has the right to pay off at issuer's discretion.
CALL CENTER is the part of an organization that handles inbound/outbound communications with customers.
CALL PREMIUM is a premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date.
CALL PROVISION is a. a provision of a bond or preferred stock issue, listed in its indenture (the formal agreement between the bond issuer and the holder) that allows the issuer to redeem the bond before the maturity date either at par or at a premium to par; or, b. a clause in a mortgage giving the lender the right to demand and receive payment of the balance of the unpaid principal in full under certain conditions. A call provision is similar to an acceleration clause.
C&C can mean: Cash and Carry or Collection & Classification.
C&F (COST & FREIGHT) includes all shipping costs but insurance. Generally used in statement of terms, stating cost and freight are paid by the exporter from his warehouse to a port in the importer's country. In this case, the buyer is responsible for insurance.
C&I (COST & INSURANCE), in a price that is quoted “C&I”, means that the cost of the product and insurance are included in the quoted price. In this case, the cost of shipping would be borne by the buyer.
CANDY DEAL is a slang term that refers to an illegal business practice to inflate revenue/sales numbers by selling product to distributors with a pledge to buy them back later, in addition to providing a percentage kickback to the distributor for assisting in falsifying the sale.
CAP is a series of European interest rate call options used to protect against rate moves above a set strike level.
CAPEX see CAPITAL EXPENDITURE.
CAPITAL, in economics, can mean: factories, machines, and other man-made inputs into a production process. In finance, capital is money and other property of a corporation or other enterprise used in transacting the business.
CAPITAL ACCOUNT, in finance, is an account of the net value of a business at a specified date; in economics, it is that part of the balance of payments recording a nation's outflow and inflow of financial securities.
CAPITAL ADDITION is a. new (as opposed to replacement) part added to an existing non-current productive asset (e.g., equipment) used for business purposes that increases the useful life and service potential of the asset; or, b. in taxation, cost of capital improvements and betterments made to the property by a taxpayer.
CAPITAL ADEQUACY RATIO (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss.
CAPITAL ASSET is a long-term asset that is not purchased or sold in the normal course of business. Generally, it includes fixed assets, e.g., land, buildings, furniture, equipment, fixtures and furniture.
CAPITAL ASSET PRICING MODEL (CAPM) is an equilibrium model which describes the pricing of assets, as well as derivatives. The model concludes that the expected return of an asset (or derivative) equals the riskless return plus a measure of the assets non-diversiable risk ("beta") times the market-wide risk premium (excess expected return of the market portfolio over the riskless return). That is: expected security return = riskless return + beta x (expected market risk premium). It concludes that only the risk which cannot be diversified away by holding a well-diversified portfolio (e.g. the market portfolio) will affect the market price of the asset. This risk is called systematic risk, while risk that can be diversified away is called diversifiable risk (or "nonsystematic risk"). Unfortunately, The CAPM is more difficult to implement in practice than the binomial option pricing model or the Black-Scholes formula because to price an asset it requires measurement of the asset's expected return and its beta. But, on the other hand, it also attempts to answer a more difficult question: The binomial option pricing model or the Black-Scholes formula asks what is the value of a derivative relative to the concurrent value of its underlying asset. The CAPM asks what is the value of an asset (or derivative) relative to the return of the market portfolio. Because of this, the option models are often referred to as "relative" valuation models, while the CAPM is considered an "absolute" valuation model. William Sharpe won the Nobel Prize in Economics principally for his role in the development of the CAPM.
CAPITAL BUDGET is the estimated amount planned to be expended for capital items in a given fiscal period. Capital items are fixed assets such as facilities and equipment, the cost of which is normally written off over a number of fiscal periods. The capital budget, however, is limited to the expenditures that will be made within the fiscal year comparable to the related operating budgets.
CAPITAL CHARGE is a monetary amount, calculated by multiplying the money the business has tied up in capital, by the weighted average cost of capital (WACC). Capital charge is deducted from net operating profit after tax to arrive at Economic Profit.
CAPITAL COMMITMENT is an agreement to undertake capital expenditure at some set time in the future which has not yet become an actual liability.
CAPITAL CONTRIBUTION is cash or property acquired by a corporation from a shareholder without the receipt of additional stock.
CAPITAL COST ALLOWANCE (CCA) is a tax deduction that Canadian tax laws allow a business to claim for the loss in value of capital assets due to wear and tear or obsolescence.
CAPITAL EMPLOYED is the value of the assets that contribute to a company's ability to generate revenue, i.e, fixed assets plus current assets minus current liabilities.
CAPITAL EXPENDITURE (CAPEX) is the amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment.
CAPITAL EXPENDITURE RATIO is the ratio of capital expenditure and other investments to total assets. It is used as a proxy for growth opportunities in a financial analysis.
CAPITAL FUNDS is the total of capital debentures, if any, capital stock, if any, surplus, undivided profits, unallocated reserves, guaranty fund, and guaranty fund surplus.
CAPITAL GAIN is the excess of selling price over purchase price, which may be given special treatment for tax purposes provided the sale takes place more than a given number of months after purchase.
CAPITAL IMPROVEMENT, in real estate, is any permanent structure or other asset added to a property that adds to its value. In general, it is any value added activity or cost to a long-term or permanent asset that increases its value.
CAPITAL IN EXCESS OF PAR see ADDITIONAL PAID IN CAPITAL.
CAPITAL INFUSION often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. In the context of venture capital, it can also refer to funds received from a venture capitalist to either get the firm started or to save it from failing due to lack of cash.
CAPITAL INTENSIVE is used to describe industries or sectors of the economy that require large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit margins and/or low costs of borrowing to survive.
CAPITAL INVESTMENT see CAPITAL EXPENDITURE.
CAPITAL ITEM is a long-lived business asset (buildings, plant and equipment, etc) of an entity.
CAPITALIZATION is the statement of capital within the firm - either in the form of money, common stock, long-term debt, or in some combination of all three. It is possible to have too much capital (in which case the firm is overcapitalized) or too little capital (in which case the firm is undercapitalized).
CAPITALIZATION OF MAINTAINABLE EARNINGS is a valuation method; perhaps the most generally accepted method that involves capitalizing the future maintainable earnings by the application of a suitably chosen capitalization rate or multiple. The definition of earnings may be profit after tax ("PAT") or earnings before interest and tax ("EBIT"). This methodology, which in reality is a surrogate for the discounted cash flow method, requires consideration of several factors, including: a. an estimate of future maintainable earnings having regard to historical operating results and forecasts of future earnings; b. determination of an appropriate capitalization rate which will reflect the risks inherent in the business including sensitivity to industry risk factors, growth prospects, the general economic outlook and alternative investment opportunities; and c. a separate assessment of any surplus or unrelated assets and liabilities which are not essential to the continuing earning capacity of the business operations.
CAPITALIZATION RATE, also known as CAP RATE, is the rate of return a property will produce on the owner's investment. It is stated as a rate of interest or discount rate used to convert a series of future payments into a single 'present value'. In real estate, the rate includes annual capital recovery in addition to interest.
CAPITALIZE, in general business, it is to supply with capital, as of a business by using a combination of capital used by investors and debt capital provided by lenders; or, to consider expenditures as capital assets rather than expenses. Specifically, it is to: a) convert a schedule of income into a principal amount, called capitalized value, by dividing by a rate of interest; b) record capital outlays as additions to asset accounts, not as expenses; c) convert a lease obligation to an asset/liability form of expression called a capital lease, i.e., to record a leased asset as an owned asset and the lease obligation as borrowed funds; or d) turn something to one’s advantage economically, e.g., sell umbrellas on a rainy day.
CAPITALIZED COSTS are business expenses that are written off or deducted over a period of time through depreciation or amortization schedules.
CAPITALIZED INTEREST is the accrued interest added to the principal balance of a loan while you are not making payments or your payments are insufficient to cover both the principal and interest due. When this occurs, you are paying interest on interest, sometimes called "negative amortization".
CAPITALIZED LABOR means all direct costs of labor that can be identified or associated with and are properly allocable to the construction, modification, or installation of specific items of capital assets and, as such, can thereby be written down over time via a depreciation or amortization schedule as capitalized costs.
CAPITAL LEASE is a lease obligation that has to be capitalized on the balance sheet. It is characterized by: it is non-cancelable; the life of lease is less than the life of the asset(s) being leased; and, the lessor does not pay for the upkeep, maintenance, or servicing costs of the asset(s) during the lease period.
CAPITAL LOSS is the excess of purchase price over selling price when the assets have been held for more than a certain period of time and which is given a special treatment for tax purposes.
CAPITAL MAINTENANCE contains two concepts, a financial concept and a physical concept. Most entities adopt a financial concept of capital maintenance. Under this concept a profit is earned only if the monetary amount of net assets at the end of the period, excluding distributions/contributions to/from owners, exceeds the monetary amount of net assets at the beginning of the period. Financial capital maintenance is usually measured in monetary units; however, the requirement to report the impact of hyperinflation results in the measurement of assets and liabilities in monetary units of constant purchasing power.
CAPITAL MARKET is a market where equity or debt securities are traded.
CAPITAL OUTLAY see CAPITAL EXPENDITURE.
CAPITAL PROFIT is a synonym for: RETURN OF CAPITAL is the distribution of cash that resulted from tax savings on depreciation, sale of a capital asset or securities, or any other sources unrelated to retained earnings.
CAPITAL RATIONING is restrictions put of the amount planned for new expenditures.
CAPITAL RECEIPTS is proceeds from the sale of capital assets. They may be used to finance new capital expenditure or repay existing loan debt. Receipts available to finance capital expenditure in future years are normally held in the usable capital receipts reserve.
CAPITAL REDEMPTION RESERVE, in Great Britain, the S170 Companies Act 1985 provides that where shares of a company are redeemed or purchased wholly out of the company’s profits, or by a fresh issue the amount by which the company’s issued share capital is diminished on cancellation of the shares shall be transferred to a reserve called the ‘capital redemption reserve’. It also provides that the reduction of the company’s share capital shall be treated as if the capital redemption reserve were paid up capital of the company.
CAPITAL REDUCTION means reducing a company's stated capital base.
CAPITAL REPLACEMENT, or economic depreciation, is the portion of the value of machinery and equipment, in addition to repairs, that is used up in the production of a particular commodity. It is based on the current value of the machinery. Capital replacement may be regarded as a discretionary expense in any particular year. It may be deferred when income is low but ultimately must be paid to maintain the capital stock so that over the long term, the operation remains in business.
CAPITAL RESERVE is a fund set aside for specific purposes, thereby cannot be distributed for other uses. See also REVENUE RESERVE.
CAPITAL SPARE is the parts within inventory that are purchased as spare parts for depreciable assets (e.g., capital equipment). As such, the capital spares within inventory are depreciable and should not be treated as normal inventory.
CAPITAL STOCK is the ownership shares of a corporation authorized by its articles of incorporation, including preferred and common stock.
CAPITAL STRUCTURE refers to the permanent long-term financing of a company. Capital structure normally includes common and preferred stock, long-term debt and retained earnings. It does not include accounts payable or short-term debt.
CAPITAL SURPLUS is an archaic term. See PREMIUM ON CAPITAL STOCK.
CAPITAL TO RISK (WEIGHTED) ASSETS RATIO (CRAR) see CAPITAL ADEQUACY RATIO (CAR).
CAPITATION, generally, is a tax or payment levied on the basis of a fixed amount per person. In medical insurance, it is a method of paying for healthcare services on the basis of the number of patients who are covered for specific services over a specified period of time rather than the cost or number of services that are actually provided.
CAPM see CAPITAL ASSET PRICING MODEL.
CAP RATE see CAPITALIZATION RATE.
CAPS, FLOORS AND COLLARS: CAP is a series of European interest rate call options used to protect against rate moves above a set strike level; FLOOR a series of European interest rate put options used to protect against rate moves below a set strike level; and, COLLAR is the simultaneous purchase of an interest rate cap and sale of an interest rate floor on the same index for the same maturity and notional principal amount.
CAPTIVE DISTRIBUTOR is one held under control of another but having the appearance of independence; especially: owned or controlled by another concern and operated for its needs rather than for an open market.
CAR see Capital Adequacy Ratio.
CARNET is a customs document which permits you to send or carry merchandise into a country duty and tax free for a short period, for use as samples or as display merchandise in a trade show, for example.
CARRIED DOWN (CD) is a bookkeeping term for the previous period amount that will be the opening amount (opening balance) for the next period.
CARRIER is any company which transports passengers or freight.
CARRY FORWARD (CF) is data items that will always carry forward into subsequent transactions. If the item is allowed per the required/conditional matrix and no entry is made, the new transaction will reflect the data from the most current record. For example, if the new transaction to be added is current (in sequence), the CF data item will carry forward the data from the prior active record. If the new transaction to be added is out-of-sequence and no entry is made, the CF data item will reflect the data from the current status record. If the item is not allowed, the new transaction will reflect the data from the prior active record.
CARRYING VALUE, also known as "book value", it is a company's total assets minus intangible assets and liabilities, such as debt.
CARTE BLANCHE is unrestricted power to act at one's own discretion, i.e. unconditional authority.
CASE-BASED REIMBURSEMENT, in healthcare, is a hospital payment system in which a hospital is reimbursed for each discharged inpatient at rates prospectively established for groups of cases with similar clinical profile and resource requirements.
CASH is money, in the form of notes and coins, which constitutes payment for goods at the time of purchase.
CASH AGAINST DOCUMENTS (CAD) is a transaction where the buyer assumes ownership/title for the goods being purchased upon paying the agreed upon sale price in cash.
CASH & EQUIVALENTS means all cash, marketplace securities, and other near-cash items. Excludes sinking funds.
CASH BASIS OF ACCOUNTING is the accounting basis in which revenue and expenses are recorded in the period they are actually received or expended in cash. Use of the cash basis generally is not considered to be in conformity with generally accepted accounting principles (GAAP) and is therefore used only in selected situations, such as for very small businesses and (when permitted) for income tax reporting. See also Accrual Basis.
CASH BILL is a documented receipt of cash payment as opposed to an invoice or promise to pay.
CASH BOOK is a book that records all payments and receipts of business transactions – whether by cash, check or credit card.
CASH BUDGET tracks a business’s anticipated cash receipts and disbursements. This is a very detailed and important schedule that draws on information in the Operating Budget.
CASH-CARD is a credit card that entitles the holder to receive cash.
CASH CLEARING ACCOUNT represents a clearing account for voided and reissued imprest cash checks. It is also used for miscellaneous corrections of imprest cash checks.
CASH CONVERSION CYCLE see CASH CYCLE.
CASH COVERAGE RATIO see CASH DEBT COVERAGE RATIO.
CASH COWS are products that produce a large amount of revenue or margin because they have a large share of an existing market which is only expanding slowly.
CASH CYCLE is the length of time, normally stated in numbers of days, between the purchase of raw materials and the collection of accounts receivable generated in the sale of the final product.
CASH DEBT COVERAGE RATIO is the ratio of net cash provided by operating activities to average total liabilities, called the cash debt coverage ratio, is a cash-basis measure of solvency. This ratio indicates a company’s ability to repay its liabilities from cash generated from operating activities without having to liquidate the assets used in operations.
CASH DEFICIT, in accounting, is a shortage of available funds to satisfy current obligations.
CASH DISBURSEMENT see DISBURSE/DISBURSEMENT.
CASH DISBURSEMENTS/PAYMENTS JOURNAL is the journal recording all disbursements (or payments).
CASH DISCOUNT is a refund of some fraction of the amount paid because the purchase price is paid by the buyer in cash, as opposed to making the purchase on credit or, sometimes, credit card or check.
CASH DIVIDEND is the payment of earnings to shareholders.
CASH DRAW see PROPRIETORS DRAW.
CASH EARNINGS is cash revenues minus cash expenses. This differs from earnings in that it does not include non-cash expenses such as depreciation.
CASH FLOW is earnings before depreciation and amortization. Cash flow is calculated as the difference between cash inflows and outflows. Cash flow can be derived from Operating Profit by adjusting for items which do not affect payments (e.g. depreciation) and items (e.g. changes in working capital) which affect payments but are not recorded in Operating Profit.
CASH FLOW ANALYSIS is a type of financial analysis that compares the timing and amount of cash inflows with the timing and amount of cash outflows. A firm’s cash flow position can greatly affect its ability to remain in business. These effects may not be apparent from a cost-benefit analysis.
CASH FLOW / CURRENT PORTION OF LONG TERM DEBT is a measure of the firm's ability to meet its obligations with internally generated cash.
CASH FLOW PROJECTION is a forecast of the cash (checks or money orders) a business anticipates receiving and disbursing during the course of a given span of time - frequently a month. It is useful in anticipating the cash portion of your business at specific times during the period projected.
CASH FLOW STATEMENT see STATEMENT OF CASH FLOWS.
CASH FREE BALANCE AMOUNT, in the general ledger, usually represents the net amount of Balance Forward plus Allocations plus Revenue minus Expenditures minus Encumbrances.
CASH FROM FINANCING is the sum of all the individual financing activity cash flow line items.
CASH FROM INVESTING is the sum of all the individual investing activity cash flow line items.
CASH FLOW FROM OPERATIONS is the sum of all the individual operating activity cash flow line items, less cash realized from the sale of extraordinary items, e.g., fixed assets.
CASH-GENERATING UNIT (CGU) is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
CASHIER'S CHECK also known as a bank check, official check, teller's check, bank draft or treasurer's check; is a check guaranteed by a bank. They are normally treated as cash because most banks clear them instantly.
CASH IN ADVANCE is when full payment is due before the merchandise is shipped. Least risk to seller, most risk to buyer.
CASH IN BANK literally means coin, currency, and cash items on deposit.
CASH INFLOW / OUTFLOW is the realization of cash increase (inflow) or decrease (outflow). Some examples:
•Payment for goods or services from your customers.
•Receipt of a bank loan.
•Interest on savings and investments.
•Increased bank overdrafts or loans.
◦Purchase of stock, raw materials or tools.
◦Wages, rents and daily operating expenses.
◦Purchase of fixed assets - PCs, machinery, office furniture, etc.
◦Income tax, corporation tax, VAT and other taxes.
◦Reduced overdraft facilities
CASH IN TRANSIT is cash being transferred from one business to another or between two parts of the same business. If it is not recorded as an asset in either an adjusting entry may be necessary.
CASH MANAGEMENT is the management of the cash balances of a concern in such a manner as to maximize the availability of cash not invested in fixed assets or inventories and to avoid the risk of insolvency. According to Keynes there are three motives for holding cash: the transactions motive, the precautionary motive, and the speculative motive. The most useful technique of cash management is the cash budget.
CASH MARGIN is the difference in cash terms between the sales price and the costs directly attributable to the product sold. See also GROSS MARGIN.
CASH MARKET see SPOT MARKET.
CASH-ON-CASH RETURN is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage. It is often used to evaluate the cash flow from income-producing assets. It is generally considered a quick napkin test to determine if the property qualifies for further review and analysis. Cash on Cash analyses are generally used by investors looking for properties where cash flow is king, however, some use it to determine if a property is under priced, indicating instant equity in a property. It is calculated: Annual Before-tax Cash Flow divided by the Total Cash Invested.
CASH ON HAND literally means coin, currency, and cash items on hand. It is not possible to have negative cash on hand.
CASH PORTION is that percentage of assets consisting of the legal tender of the amounts in question; the balance of which is the non-cash portion; an example, a transaction where a corporation is acquired via a combination of cash and stock.
CASH PROFIT is profit after tax plus depreciation.
CASH RATIO is a refinement to the QUICK RATIO. It is the ratio of cash and marketable securities to current liabilities. The CASH RATIO indicates the extent to which liabilities could be liquidated immediately. Sometimes called LIQUIDITY RATIO.
CASH RECEIPTS see RECEIPTS.
CASH RECEIPTS JOURNAL is the journal for recording all cash receipts.
CASH REGISTER TAPE see PAPER TAPE.
CASH RESERVE RATIO (CRR) is a ratio which banks have to maintain with itself in the form of cash reserves or by way of current account with the Reserve Bank, computed as a certain percentage of its demand and time liabilities. The objective is to ensure the safety and liquidity of the deposits with the banks.
CASH SHORT/OVER ACCOUNT, in retail sales, is where any differences between the cash register tape totals and the actual cash receipts is charged against the cash short and over account. If the ending balance of the account is a debit it is shown on the Income Statement as a miscellaneous expense. If the ending balance of the account is a credit it is shown on the Income Statement as Other Revenue.
CASH SWEEP is the use of surplus cash to prepay debt or provide extra security for lenders, instead of paying it out to investors.
CASH VOUCHER is a receipt or sales slip. See VOUCHER.
CAVEAT, generally, is a warning against certain acts; in law, is a formal notice filed with a court or officer to suspend a proceeding until filer is given a hearing.
CCA see CAPITAL COST ALLOWANCE.
CD see CERTIFICATE OF DEPOSIT.
CD see CARRIED DOWN.
CDPA is Certified Data Processing Auditor.
CDS see CREDIT DEFAULT SWAP.
CEBS is Certified Employee Benefit Specialist, Committee of European Banking Supervisors, or Capital Equipment Budget System.
CEO is an acronym for Chief Executive Officer. The CEO is the principle individual responsible for the activities of a company.
CERTIFICATE OF DEPOSIT (CD) is a document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.
CERTIFICATE OF INSPECTION is certification, generally by an independent third party, that the goods were in good condition at the time of shipment.
CERTIFICATE OF OBLIGATION is a bond issued by a city, without voter approval.
CERTIFICATE OF ORIGIN is a document that states where the goods were made. This document is legally required for many countries for the importation of merchandise.
CERTIFIED FINANCIAL PLANNER (CFP) is a financial planner who has received a license from the Institute of Certified Financial Planners, indicating that he/she was trained in investments, budgeting, taxes, banking, estate planning and insurance. Some CFPs work on commission for the products they sell, and some work for a flat hourly fee.
CERTIFIED FINANCIAL STATEMENTS are financial statements that have undergone a formal audit by a certified public accountant and usually contain statements of certification by the CPA.
CERTIFIED PAYROLL REPORT means the record that a contractor or subcontractor engaged on a public work is required to submit to an awarding government body with a statement of compliance as required pursuant to regulations for each month in which the contractor or subcontractor employs one or more workmen in connection with the public work.
CERTIFIED PUBLIC ACCOUNTANT (CPA) is an accountant licensed to practice public accounting.
CFD see CONTRACT FOR DIFFERENCE.
CFFA is Certified Financial Forensic Analyst.
CFM, in finance / accounting, means Certified In Financial Management.
CFO is an acronym for: a. Cash Flow From Operations; or, b. Chief Financial Officer. The CFO is the officer in a corporation responsible for handling funds, signing checks, the keeping of financial records, and financial planning for the company.
CFO to DEBT see CASH FLOW / CURRENT PORTION OF LONG TERM DEBT.
C.G.A. means Certified General Accountant.
CGU see CASH-GENERATING UNIT.
CHAIRPERSON OF THE BOARD is the head of the board of directors of a corporation, and generally considered as head of the firm.
CHANNEL COSTING is the fulfillment cost information pertaining to distribution channels.
CHARGEBACK, in the credit industry, occurs when a credit card processor “charges back” to the merchant the cost of returned items or incorrect orders that the customer claims were made to his or her credit card.
CHARGE OFF see BAD DEBT.
CHAPTER S or SUBCHAPTER S is a legal corporate entity organized under the United States Federal Tax Code that allows Subchapter S Corporations to distribute all income / loss proportionately to its shareholders, who then claim that income / loss on their personal income taxes; thereby avoiding the payment of corporate taxes.
CHARTER is the document of corporation organization.
CHARTERED ACCOUNTANT (CA) is a British accountant who is a member of the Institute of Chartered Accountants. They work in many areas of business and the public sector, in roles ranging from sole practitioner to chief executive of a multinational company. In public practice firms, they provide professional services to a wide range of fee paying clients from private individuals to large commercial and public sector organizations, including banks. The seservices include audit/assurance, accountancy, tax, business advisory, management consultancy, systems and IT,corporate finance, corporate recovery and forensic accounting. In commerce/industry and the public sector, they work in a variety of roles including fund management, venture capital and equity analysis, as well as financial management and financial reporting roles.
CHARTERED FINANCIAL CONSULTANT (ChFC) is a financial planning designation for the insurance industry. ChFCs must meet experience requirements and pass exams covering finance and investing. They must have at least three years of experience in the financial industry, and have studied and passed an examination on the fundamentals of financial planning, including income tax, insurance, investment and estate planning.
CHART OF ACCOUNTS is a list of ledger account names and associated numbers arranged in the order in which they normally appear in the financial statements. The Chart of Accounts are customarily arranged in the following order: Assets, Liabilities, Owners' Equity (Stockholders' Equity for a corporation), Revenue, and Expenses.
CHATTEL MORTGAGE CONTRACT is a credit contract used for the purchase of equipment where the purchaser receives title of the equipment upon delivery but the creditor holds a mortgage claim against it.
CHECK is a draft drawn against a bank, payable upon demand to the person/entity named upon the draft.
CHECK BOOK see CHECK REGISTER.
CHECKING ACCOUNT is an account at a bank or savings and loan from which an individual can withdraw money by check, ATM card or debit card.
CHECK REGISTER is the journal for recording payments by check.
CHEQUE see CHECK.
CHEQUE BOOK see CHECK REGISTER.
CHIEF ACCOUNTING OFFICER see CFO.
CHURN RATE is the percentage of customers (e.g., cellular telephone subscribers) that cancels their service per month.
CIA, in accounting, is an acronym for Certified Internal Auditor; or, Cash in Advance.
CIBT is an acronym for Cash Income Before Taxes.
CIF (COST, INSURANCE AND FREIGHT) is a shipment where all shipping costs are paid by the exporter, including insurance.
CIP could be Capital Improvement Plan, Capital Improvement Program, Capital Investment Program, or Capital Investment Proposal(s).
CIRCA means about or approximately. It is used before a year, e.g. circa 2000.
CK is Check.
CLAIM, in health care, is an itemized statement of healthcare services and their costs provided by a hospital, physician's office, or other provider facility. Claims are submitted to the insurer or managed care plan by either the plan member or the provider for payment of the costs incurred. In general law, a claim is: 1) to make a demand for money, for property, or for enforcement of a right provided by law. 2) the making of a demand (asserting a claim) for money due, for property, from damages or for enforcement of a right. If such a demand is not honored, it may result in a lawsuit. In order to enforce a right against a government agency (ranging for damages from a negligent bus driver to a shortage in payroll) a claim must be filed first. If rejected or ignored by the government, a lawsuit may be filed.
CLAIMS OUTSTANDING, in general, is the difference between claims against assets (liabilities) and claims settled/paid. Within the insurance industry it would be the difference between insurance claims filed and claims settled/paid.
CLASSIFICATION, generally, is the act of distributing things into classes or categories of the same type. In accounting, there are many ways to classify information, e.g. assets, liabilities or equity and the many subsets to those three classifications.
CLEARANCE LETTER is a documented certification from a recognized authority that the cleared entity has satisfied certain requirements, payments, actions, etc.
CLEARED ITEMS are accounts payable documents which have been paid.
CLEARING ACCOUNT, in banking, is a bank account used by a mortgage servicing company for the temporary, short-term deposit of mortgage payments that have been collected and are either awaiting transmittal to investors who bought the mortgages or awaiting deposit in escrow accounts. See CASH CLEARING ACCOUNT.
CLIENT is someone who pays for goods or services.
CLOSE is 1. The planned termination of accounting ledger activity with the resultant consolidation within a business, i.e. monthly, quarterly or annual; 2.The final half-hour of a securities trading session; 3. The price of the last transaction for a given security at the end of a given trading session. also called closing price; or, 4. To consummate a sale, contract or ownership transfer.
CLOSELY HELD is a description of a corporation whose voting stock is owned by a very small number of shareholders.
CLOSING ACCOUNT is the determining the balance of an account and posting an entry to offset such balance.
CLOSING DATE is the date the purchase of the asset becomes final and you, the new owner, obtain title.
CLOSING ENTRY is a journal entry at the end of a period to transfer the net effect of revenue and expense items from the income statement to owners' equity.
CLOSING STOCK is a business' remaining stock at the end of an accounting period. It includes finished products, raw materials, or work in progress and is deducted from the period's costs in the balance sheets.
C.M.A. means Certified Management Accountant.
CMI see COST MANAGEMENT INDEX.
CMO see COLLATERIALIZED MORTGAGE OBLIGATION.
CNF is Cost and Freight
COA, in accounting, means Chart Of Accounts or Cost of Acquisition.
COD is Cash On Delivery; which is exactly what it means.
COC see COST OF CONTROL.
CODING, in accounting, is the assignation of the proper account code to invoices.
COE see COST OF EQUITY.
COGM is Cost Of Goods Manufactured. See Cost of Goods Sold.
COGNOVIT NOTE is a note in which the maker acknowledges the debt and authorizes the entry of judgment against him or her without notice or a hearing : a note containing a confession of judgment. This type of note is not valid in many states.
COGAS is Cost Of Goods Available for Sale. See Cost of Goods Sold.
COGS see COST OF GOODS SOLD
COGS (COST OF GOODS) RATIO = COGS / Total Sales.
COHORT SURVIVAL METHOD, in academia, utilizes historic enrollment data and birth records to estimate future enrollments.
COLLAR is the simultaneous purchase of an interest rate cap and sale of an interest rate floor on the same index for the same maturity and notional principal amount.
COLLATERAL is assets used as security for the extension of a loan.
COLLATERALIZED MORTGAGE OBLIGATION (CMO) or, since 1986, as a Real Estate Mortgage Investment Conduit (REMIC). CMOs and REMICs (terms which are often used interchangeably) are similar types of securities which allow cash flows to be directed so that different classes of securities with different maturities and coupons can be created. They may be collateralized by mortgage loans as well as securitized pools of loans.
COLLATERAL NOTE is a note secured by collateral. Same as secured note.
COLLECTIBLE is an amount subject to or requiring payment especially as specified, e.g. a collectible bill.
COLLECTION PAPERS are those documents specified as necessary for payment to be made, such as the commercial invoice, certificate of inspection, and bill of lading.
COLLECTION PERIOD (Period End) is used to appraise accounts receivable (AR). This ratio measures the length of time it takes to convert your average sales into cash. This measurement defines the relationship between accounts receivable and cash flow. A longer average collection period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less cash is available to cover cash outflows, such as paying bills. NOTE: Comparing the two COLLECTION PERIOD ratios (Period Average and Period End) suggests the direction in which AR collections are moving, thereby giving an indication as to potential impacts to cash flow. Formula: AR (current) / (Net Revenue / 365)
COLLECTION PERIOD (Period Average), also known as Days Sales Outstanding, is used to appraise accounts receivable (AR). This ratio measures the length of time it takes to convert your average sales into cash. This measurement defines the relationship between accounts receivable and cash flow. A longer average collection period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less cash is available to cover cash outflows, such as paying bills. NOTE: Comparing the two COLLECTION PERIOD ratios (Period Average and Period End) suggests the direction in which AR collections are moving, thereby giving an indication as to potential impacts to cash flow. Formula: (AR (current) + AR (period ago) / 2) / (Net Revenue / 365)
COLLECTIVE INVESTMENT SCHEME, globally, is any arrangement for pooling several investors' funds so that the pooled fund can obtain economies of scale and a spread of investments beyond the reach of individual investors. It is usually called an investment company in the U.S.A.
COMBINED FINANCIAL STATEMENT is a financial statement that merges the assets, liabilities, net worth, and operating figures of two or more affiliated companies. A combined statement is distinguished from a consolidated financial statement of a company and subsidiaries, which must reconcile investment and capital accounts.
COMFORT LETTERS see KEEP-WELL AGREEMENTS.
COMMANDER THEORY holds that the goals of the managers of the entity are as equally important as the stockholders. The theory assumes that the "commander's" view will transpose the view of the investor.
COMMERCIAL BANK is a financial institution that provides commercial banking services. A commercial bank accepts deposits, gives business loans and provides other services to businesses.
COMMERCIAL ATTACHÉ is a business and trade expert on the staff of a consulate or embassy. They are responsible for promoting exports of their country's goods and are an excellent source of help.
COMMERCIAL INVOICE, generally, is the seller's bill of sale for the goods sold, specifying type of goods, quantity and price of each type and terms of sale. In import/export, it represents a complete record of the transaction between exporter and importer with regard to the goods sold. Also reports the content of the shipment and serves as the basis for all other documents about the shipment.
COMMERCIAL LOAN is a short-term business loan usually issued for a term of up to six months.
COMMERCIAL PAPER is short-term obligations with maturities ranging from 2 to 270 days issued by corporations, banks, or other borrowers to investors who have temporarily idle cash on hand. Commercial paper is usually unsecured and discounted.
COMMISSION is remuneration proportional to sales volume.
COMMITMENT is the act of standing behind a policy whose value ends when the policy is concluded. For example: " We made a commitment to do this".
COMMITMENT BASED ACCOUNTING is where spending controls are enacted that ensures that no budget executor can exceed his annual appropriation.
COMMITTED COSTS are costs, usually fixed costs, which the management of an organization has a long-term responsibility to pay. Examples include rent on a long-term lease and depreciation on an asset with an extended life.
COMMODITY is an article of commerce or product that can be used for commerce. In a narrower sense, commodity is product traded on an authorized commodity exchange. Some types of commodities: agricultural products, metals, petroleum, foreign currencies, financial instruments and indices, etc.
COMMON EQUITY is the result of subtracting redeemable and non-redeemable preferred stock from total equity.
COMMON LAW is an unwritten body of law based on general custom in England; it is used to some extent in the United States.
COMMON SIZE ANALYSIS, as used in vertical analysis of financial statements, an item is used as a base value and all other accounts in the financial statement are compared to this base value. On the balance sheet, total assets equal 100% and each asset is stated as a percentage of total assets. Similarly, total liabilities and stockholder's equity are assigned 100%, with a given liability or equity account stated as a percentage of total liabilities and stockholder's equity. On the income statement, 100% is assigned to net sales, with all revenue and expense accounts then related to it in percentages. See COMMON SIZE PERCENTAGES.
COMMON SIZE PERCENTAGES are financial statements in which each item is expressed as a percentage of a major financial statement component. In the Income Statement, each "Common Size %" is the field amount expressed as a percent of "Net Revenues." In the Balance Sheet, each "Common Size %" is the amount in the category as a percent of Total Assets. Common sized financial statements can be used to: a. identify key structural changes in a company’s financial data over a period of time; b. more easily compare the financial data of firms that vary significantly in size; and, c. compare a company’s financial data to industry norms.
COMMON-SIZE STATEMENT see COMMON SIZE ANALYSIS.
COMMON STOCK is the most frequently issued class of stock; usually it provides a voting right but is secondary to preferred stock in dividend and liquidation rights.
COMPANY is an organized group of people to perform an activity, business or industrial enterprise.
COMPANY TAX see CORPORATION TAX.
COMPANY KIT, normally, is a for sale commercially packaged self-instruction product containing written instructions, forms, software (sometimes), for establishing an enterprise.
COMPANY LIMITED BY GUARANTEE is where the liabilities of the members will be restricted to the amount each agrees to contribute to the assets of the company in the event of dissolution or liquidation.
COMPANY LIMITED BY SHARES is where the members personal liabilities are limited to the par value of their shares. a company limited by guarantee.
COMPARABILITY is the quality or state of being similar or alike.
COMPARATIVE STATEMENT is a form of financial-statement presentation in which current period results and positions are presented with corresponding figures for previous periods.
COMPENSATING BALANCES are the funds a business might be required to keep in a deposit or reserve account to help offset what the bank perceives as risk. The lender might require that an amount based on the business’ average account balance or a certain percentage of the face value of the loan be maintained in a deposit account.
COMPENSATING ERROR is the name given to the situation where one mistake cancels out the effect of a second mistake.
COMPETITIVE PRICING generally is where firms must be able to offer the best price in the market and meet price erosion without compromising quality. This is normally met whenever a firm finds acceptable a prices-production combination such that: a. At these prices, there is no other production plan yielding higher profits and using fewer capital goods; namely, firms behave as constrained profit maximizers at given prices; and, b. There is no price vector satisfying "a." with higher prices for capital goods. In other words, the prices of capital goods are maximal within those satisfying constrained profit maximization
COMPILATION is the presentation of financial statement information by the entity without the accountant’s assurance as to conformity with Generally Accepted Accounting Principles (GAAP). In performing this accounting service, the accountant must conform to the AICPA Statements on Standards for Accounting and Review Services (SSARS).
COMPLETED CONTRACT METHOD OF ACCOUNTING is a method of revenue recognition for long-term contracts (i.e., contract which span more than one accounting period) whereby the total contract revenue and related cost of performance are recognized in the period in which the contract is completed. This method stands in contrast to the percentage-of-completion method of accounting and is most often used when significant uncertainty exists with respect to the total cost of performing the contract and, accordingly, the ultimate amount of profit to be recognized thereon.
COMPLIANCE AUDIT is the review of financial records to determine whether the entity is complying with specific procedures or rules.
COMPLIANCE PANEL is a multi-member committee chartered to investigate conformance to laws, rules or regulations. On many occasions they may be empowered by government agencies to make rulings as to compliance or non-compliance of any entity under their perusal.
COMP0SITE DEPRECIATION is the grouping of similar assets or dissimilar assets within the same class together for the purpose of computing a single depreciation rate to be applied to all assets within the group.
COMPOSITE FINANCIAL STATEMENT is an average or index of financial statements of multiple accounting periods or companies, e.g., industry averages.
COMPOUND ANNUAL GROWTH RATE (CAGR) is the year over year growth rate applied to an investment or other part of a company's activities over a multiple-year period. The formula for calculating CAGR is (Current Value/Base Value) ^ (1/# of years) - 1.
COMPOUND INTEREST is interest calculated from the total of original principal plus accrued interest.
COMPOUND INTEREST PRINCIPLE is where the interest is computed on principal plus interest earned in previous periods.
COMPOUND JOURNAL ENTRY is a journal entry that involves more than one debit or more than one credit or both.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) is the official annual financial report of the entity encompassing all funds and component units of the entity. It includes an introductory section, management's discussion and analysis (MD&A), basic financial statements, required supplementary information other than MD&A, combining and individual fund statements, schedules, and a statistical section.
COMPREHENSIVE INCOME is change in equity (net assets) of an entity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners.
COMPTROLLER is the misspelling of the word CONTROLLER caused by confusion in the root of the word in French and Latin. Comptroller is sometimes used within titles in the government, e.g. Comptroller of the Currency.
COMPULSORY LIQUIDATION is the winding-up of a company by a court. A petition must be presented both at the court and the registered office of the company. Those by whom it may be presented include: the company, the directors, a creditor, an official receiver, and the Secretary of State for Trade and Industry. The grounds on which a company may be wound up by the court include: a special resolution of the company that it be wound up by the court; that the company is unable to pay its debts; that the number of members is reduced below two; or that the court is of the opinion that it would be just and equitable for the company to be wound up. The court may appoint a provisional liquidator after the winding-up petition has been presented; it may also appoint a special manager to manage the company's property. On the grant of the order for winding-up, the official receiver becomes the liquidator and continues in office until some other person is appointed, either by the creditors or the members.
CONCESSIONARY LOANS, normally, are loans made by a government or other controlling authority in return for stipulated services or a promise that the funds will be used for a specific purpose.
CONDITIONAL SALES CONTRACT is a credit contract used for the purchase of equipment where the purchaser doesn't receive title of the equipment until the amount specified in the contract has been paid in full.
CONDUCIVE is tending to bring about or being partly responsible for, e.g. current working conditions may not be conducive to productivity.
CONDUIT is a primary means by which something is transmitted,
CONDUIT DEBT is issued by a state agency or public corporation on behalf of borrowers which include businesses, health care institutions, private higher education institutions, local governments, and qualified individuals (loans for higher education and housing purposes). No State credit support is provided.
CONGLOMERATE is a group of diverse companies under common ownership and run as a single organization.
CONQ see COST OF NON-QUALITY.
CONSERVATISM PRINCIPLE provides that accounting for a business should be fair and reasonable. Accountants are required in their work to make evaluations and estimates, to deliver opinions, and to select procedures. They should do so in a way that neither overstates nor understates the affairs of the business or the results of operation.
CONSERVATIVE INVESTOR, dependent upon the degree of conservatism, is one that protects and preserves their principal above consideration of capital gains to the point that in the extreme they can be described as being risk averse.
CONSIGNMENT is when goods are offered for sale on behalf of another without the seller actually purchasing or taking title to the goods. Only when there is a subsequent sale does the owner receive any payment.
CONSIGNMENT STOCK is vendor supplied stock that is only paid for when it is used. Consignment stock should change nothing except cash flow. Holding any more stock than is necessary is always inefficient whether it is consignment stock or not.
CONSISTENCY is using the same accounting procedures by an accounting entity from period to period. That means using similar measurement concepts and procedures for related items within the company’s financial statements for one period.
CONSISTENCY PRINCIPLE requires accountants to apply the same methods and procedures from period to period. When they change a method from one period to another they must explain the change clearly on the financial statements.
CONSOLIDATED CAPITAL is the value of all money and other assets, on a consolidated basis, used directly in business operations.
CONSOLIDATED ENTITY is a user-defined combination of several consolidation units, grouped together for consolidation and reporting purposes.
CONSOLIDATED FINANCIAL STATEMENTS is the end financial statement that accounts for all assets, liabilities and operating accounts of a parent and all subsidiaries.
CONSOLIDATED NEXUS is a consolidation of a connected series or group (usually contracts).
CONSOLIDATION is similar to refinancing, but there is no loan fee. It simplifies loan repayment by combining several types of federal education loans into one new loan. (In the case of Direct Loan consolidation, the interest rate may be lower than one or more of the underlying loans.).
CONSORTIA see CONSORTIUM.
CONSORTIUM is an association of companies for some definite purpose.
CONSTANT DOLLAR is when the dollar amount is adjusted for inflation.
CONSTRAINT is a limiting factor to business activity.
CONSTRUCTION IN PROGRESS is capital assets under construction or development that have not yet been placed into service, such as a building or parking lot. Capital assets are not subject to depreciation while in a construction in progress status.
CONSTRUCTIVE FRAUD is an act, statement, or omission which operates as a fraud, although perhaps it was not intended to be such.
CONSTRUCT OF UTILITY THEORY is a scientific calculation that has an underlying concept of utility in that it is used to rank a series of alternatives and, in the case of a simple choice, identify the single alternative, which has higher utility, or out ranks, all other alternatives. The primary implication of this ranking or ordering of alternatives is that there is no absolute reference, zero point, for utility values. Thus, the only valuation that is important is the difference in utility between pairs of alternatives; particularly whether that difference is positive or negative. Any function that produces the same preference orderings can serve as a utility function and will give the same predictions of choice, regardless of the numerical values of the utilities assigned to individual alternatives. It also follows that utility functions, which result in the same order among alternatives, are equivalent.
CONSULAR DECLARATION is a formal statement to the consul of a foreign country declaring the merchandise to be shipped.
CONSUMABLE is a resource attribute representing a type of capacity. A resource with consumable capacity can have its capacity value permanently altered as a result of being tasked, e.g. chemicals in a manufacturing process or office supplies.
CONSUMER is an individual who purchases, uses, maintains, and disposes of products and services.
CONSUMER PRICE INDEX (CPI) is the measure of change in consumer prices as determined by a monthly survey by the U.S. Bureau of Labor Statistics. Among the CPI components are the costs of food, housing, transportation, and electricity (i.e., the average cost of a "basket" of goods and services). Also known as the cost-of-living index.
CONSUMMATE is to bring to completion or fruition; conclude, e.g., consummate a business transaction.
CONSUMPTION SMOOTHING is aimed at protecting consumption patterns from the impact of shocks, and can take effect either before or after their occurrence. Post-shock responses include modifying consumption, raising income by mobilizing labor or selling assets, drawing on informal or formal sources of savings, or activating claims on informal insurance mechanisms.
CONTINENTAL MODEL is an accounting model. There are other accounting systems which differ from the U.S. accounting model. U.S. GAAP and FASB standards are not the only accounting principles used internationally; for example, many countries reverse the U.S. debit and credit system. Many countries with high rates of inflation account for inflation in financial reports much more than the U.S. does. Also, for any company operating internationally there is the currency exchange translation problem when consolidating financial statements.
CONTINGENCY BUDGET is the amount of money required to implement a contingency plan. If an authorized entity approves a contingency plan, it would normally set aside a contingency budget, which would only be called upon if the contingency plan had to be implemented.
CONTINGENCY PLAN is a plan that provides an outline of decisions and measures to be taken if defined circumstances, outside the control of the affected organization, should occur.
CONTINGENT is a result that is determined by conditions or circumstances not yet established.
CONTINGENT ASSET is a possible asset from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.
CONTINGENT CONSIDERATION is a payment that is contingent on a particular factor or factors occurring.
CONTINGENT LIABILITY is: (a) A possible obligation from past events that will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or (b) A present obligation from past events but is not recognized because (i) it is not probable that an outflow of resources will be required to settle the obligation; or (ii) the obligation cannot be measured reliably. Some examples: in corporate reports are pending lawsuits, judgments under appeal, disputed claims, and the like, representing potential financial liability.
CONTINUITY is the property of a continuous and connected period of time, e.g. the continuity or viability of a business entity to remain in business. Also see GOING CONCERN CONCEPT.
CONTINUITY ASSUMPTION see GOING CONCERN CONCEPT.
CONTINUOUS BUDGET is a budget that rolls ahead each time period (e.g., month) without regard to the fiscal year, i.e., a twelve-month or other periodic forecast is always available; also called a ROLL FORWARD BUDGET.
CONTINUOUS INVENTORY see PERPETUAL INVENTORY.
CONTRA ACCOUNT 1. is the reduction to the gross cost of an asset to arrive at the net cost; also known as a valuation allowance; e.g., accumulated depreciation is a contra account to the original cost of a fixed asset to arrive at the book value; or, 2. reduction of a liability to arrive at its carrying value; e.g., bond discount, which is a reduction of bonds payable.
CONTRA REVENUE ACCOUNT is an account that is offset against a revenue account on the income statement.
CONTRACT ALLOWANCE is the limit set within an agreement as to what is the maximum allowed of any given item covered under contract, e.g., home construction with a builder may have allowances or "limits" set in your contract that tell you how much the price of your house "allows" for things such as floor coverings, countertops, and cabinets.
CONTRACT COSTING is mainly associated with civil engineering works, although sometimes also with the manufacture of a major engineering structure over a considerable time (for example, a contract to manufacture a turbine generator).
CONTRACTEE is the person or entity who will receive the goods or services under the provisions of the contract.
CONTRACT FOR DIFFERENCE (CFD) is an agreement to exchange the difference between the opening and closing price of the position under the contract on various financial instruments. CFD trading is an effective and convenient speculative instrument for trading shares, indices, futures and commodities. Contracts for differences allow investors to take long or short positions, and unlike futures contracts have no fixed expiry date or contract size. Trades are conducted on a leveraged basis with margins typically ranging from 1% to 30% of the notional value for CFDs on leading equities.
CONTRACT LAW is that body of law which regulates the enforcement of contracts. Contract law has its origins thousands of years ago as the early civilizations began to trade with each other, a legal system was created to support and to facilitate that trade. The English and French developed similar contract law systems, both referring extensively to old Roman contract law principles such as consensus ad idem or caveat emptor. There are some minor differences on points of detail such as the English law requirement that every contract contain consideration. More and more states are changing their laws to eliminate consideration as a prerequisite to a valid contract thus contributing to the uniformity of law. Contract law is the basis of all commercial dealings from buying a bus ticket to trading on the stock market.
CONTRACTOR is the person or entity who will provide the goods or services under the provisions of the contract.
CONTRACT RATE OF INTEREST is the interest rate specified in a contract.
CONTRACT REVENUES are the revenues recognized under % of completion method.
CONTRACTUAL ALLOWANCE, in healthcare, is the difference between what hospitals bill and what they receive in payment from third party payers, most commonly government programs; also known as contractual adjustment.
CONTRA ENTRY, in accounting, is a ledger entry which is offset by an opposite entry, either a debit or credit.
CONTRIBUTED ASSETS are those assets, including real property assets, that are owned, leased or licensed by the contributing entity. Such contributions are normally associated with the contributing entity receiving equity interest (in a commercial exchange) or tax relief (in a charitable donation) in recognition of the value for those contributed assets.
CONTRIBUTED CAPITAL see PAID-IN-CAPITAL.
CONTRIBUTED SURPLUS is money a company receives by selling shares above par value or their stated value, or from government donation of land to the company, etc. Contributed Surplus is a balance sheet item that is part of the shareholders’ equity.
CONTRIBUTION see CONTRIBUTION MARGIN.
CONTRIBUTION MARGIN (CM) is the difference between sales and the variable costs of the product or service, also called marginal income. It is the amount of money available to cover fixed costs and generate profits.
CONTRIBUTION MARGIN ANALYSIS is a technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio. The manager asks what will happen to profits if a new product is added or an existing product is discontinued. Calculations take into account additional revenues, additional costs, effects on other products in the portfolio (referred to as cannibalization), and competitors' reactions.
CONTRIBUTION MARGIN RATIO is the computation showing CONTRIBUTION MARGIN as a percentage of sales.
CONTRIBUTION/SALES RATIO (C/S RATIO) is a tool used in profit management. It is important to establish the C/S RATIO: C/S ratio = (Sales revenue – Variable cost of sales)/Sales revenue x 100. If a company achieves a high average marginal profit ratio of say, 40%, it does not mean that it will achieve high profits. The eventual profit will be dependent on the level of fixed costs within the organization.
CONTROL is the process of directing operations to achieve a goal.
CONTROLLABILITY, COST is the financial policy of controlling, limiting or curbing the cost of materials, labor, and overhead.
CONTROL ACCOUNT is a summary account in the General Ledger that is supported by detailed individual accounts in a subsidiary ledger. See CREDITORS CONTROL ACCOUNT, DEBTORS CONTROL ACCOUNT, and STOCK CONTROL ACCOUNT.
CONTROLLABLE COST see CONTROLLABLE EXPENSE.
CONTROLLABLE EXPENSE expenses that can be controlled or restrained by management. Some of the costs of doing business can be postponed or spread out over a longer period of time (e.g., personnel costs, travel & entertainment, marketing expense).
CONTROLLABLE MARGIN technically is the excess of contribution margin over controllable fixed costs. Managerially it is that margin that you can reasonably expect from a process that is balanced and controlled. Controllable margin is considered to be the best measure of a manager's performance in efforts to control revenues and costs.
CONTROLLER is usually an experienced accountant who directs internal accounting processes and procedures, including cost accounting.
CONTROLLERSHIP is the position of controller. See CONTROLLER.
CONVENTION is an agreement, principle or statement expressed or implied that is used to solve given types of problems. Conventions allow a standardized approach to problem solving and behavior in certain situations. For example, placing debits on the right and credits on the left of an account is termed an accounting convention.
CONVERSION COSTS is Direct Labor + Manufacturing Overhead.
CONVERSION DATE, dependent upon usage, there are likely many definitions varying within the industries in which the term is being used. Basically, it is a date on which an asset is converted into a similarly valued but different asset.
CONVERTIBLE is a corporate security (usually bonds, notes or preferred stock) that can be exchanged for another form of security (usually common stock).
CONVERTIBLE BOND is a bond that can be converted to other securities under certain conditions.
CONVERTIBLE CURRENCY is any national currency that can be easily exchanged for that of another country.
CONVERTIBLE DEBENTURE is any type of debenture that can be converted into some other security, e.g. conversion of a convertible bond into stock.
CONVERTIBLE DEBT is a debt instrument which can be exercised into the security of the debtor in accordance with the conditions set forth in the debt instrument.
CONVERTIBLE NOTE see CONVERTIBLE DEBT.
CONVERTIBLE PREFERRED STOCK is preferred stock which can be converted into common stock at the option of the holder of the preferred stock.
COO is an acronym for Chief Operating Officer. The COO is responsible for the day-to-day management of a company. The COO usually reports to the CEO.
COOKIE JAR RESERVES is an overly aggressive accrual of operating expenses and the creation of liability accounts done in an effort to reduce future year operating expenses.
COOKING THE BOOKS is when a company fraudulently misrepresents the financial condition of a company by providing false or misleading information.
COOPERATIVE ADVERTISING is a joint advertising strategy under which costs are shared; e.g. by a manufacturer and another firm that distributes its products.
COPYRIGHT is a form of legal protection used to safeguard original literary works, performing arts, sound recordings, visual arts, original software code and renewals.
CORE BUSINESS is the sector(s) of business activity that is the reason or purpose for being, e.g. providing communications services within a telephone company would be considered core, while real estate holdings and the securities investment portfolio will likely be considered non-core business activities.
CORE CAPITAL is one of three capital standards established for savings institutions in 1989. The minimum amount of core capital for the soundest institutions is 3 percent of assets. See TANGIBLE CAPITAL and RISK-BASED CAPITAL.
CORE PROCESS - A process is a set of related and interdependent activities that transform an input to a system to an output with added value to a customer. It is the transformation of people, money, materials or information that is the value-added work of the organization. The CORE PROCESSES are those by which the organization creates its most value-added and essential transformations for the customers.
CORPORATE GOVERNANCE is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.
CORPORATE STRUCTURE is the layout of the various departments, divisions, and job positions that interact to conduct the business of the company. Generally, a corporate structure is necessary in order to ensure that all important tasks are conducted according to the guidelines of the corporation, as well as providing lines of communication and authority for the overall function of the company. Even the smallest of businesses have a corporate structure, although the exact format for the structure may be extremely simplistic. A simple corporate structure usually allows for a much flatter managerial organization with enhanced communication and decision making processes. A complex corporate structure normally has a heavy layer of management and defined silos of responsibility. A complex corporate structure will in most cases tend to be bureaucratic, e.g. government agencies or institutes of higher learning.
CORPORATION is a type of business organization chartered by a state and given many of the legal rights as a separate entity.
CORPORATION TAX refers to direct taxes charged by various jurisdictions on the profits made by companies or associations. As a general principle, this varies substantially between jurisdictions. In particular allowances for capital expenditure and the amount of interest payments that can be deducted from gross profits when working out the tax liability vary substantially. Also, tax rates may vary depending on whether profits have been distributed to shareholders or not.
CORPUS is often confused and misunderstood. The literal meaning of the term corpus is the main part/organ of a body. The term corpus also denotes the sum and substance of an issue/entity.
CORPUS FUND is the capital of the organization; the funds generated and kept for the existence and sustenance of the organization. Normally a corpus fund denotes a permanent fund kept for the basic expenditures needed for the administration and survival of the organization.
CORRECTING ENTRY, a type of ADJUSTING ENTRY, is required at the end of an accounting period if a mistake was made in the accounting records during the period. See REVERSING ENTRY.
CORRESPONDENT BANK is a bank having communications and business links with the seller's bank.
CORRIDOR RULE, 10%, in pension accounts, is a ruling by the FASB to where only that portion of the aggregate gains and losses that exceed the greater of 10% of the present value of the obligations or 10% of the fair value of plan assets are recognized in profit or loss over the remaining expected average service period of the plan participants. Actuarial gains and losses are otherwise not recognized.
COST is the amount of money that must be paid to take ownership of something; expense or purchase price.
COST ACCOUNTING is a managerial accounting activity designed to help managers identify, measure, and control operating costs.
COST ACCUMULATION METHODS are the various ways in which the entries in a set of cost accounts may be aggregated to provide different perspectives on the information.
COST ALLOCATION is the assignment to each of several particular cost-centers of an equitable proportion of the costs of activities that serve all of them, i.e. shared cost pools.
COST ASSIGNMENT involves assigning costs of an account to the accounts that are responsible or accountable for incurring the cost. For example, the cost of issuing purchase orders is allocated to the various objects procured. The cost assignment is done through assignment paths and cost drivers. The assignment path identifies the source account (the account whose cost is being assigned—"Issue Purchase Orders" in the above example) and destination accounts (the accounts to which the costs are being allocated—the various cost objects procured by issuing purchase orders in the above example). The cost driver identifies the measure or rationale on the basis of which the assignment needs to be done—that is, whether the costs of issuing purchase orders need to be assigned to various cost objects evenly, based on some defined percentage values, or based on some criterion, like the number of purchase orders of each cost object issued. Defining the cost drivers and assignment paths (i.e., source and destination accounts) enable proper assignment and accounting of the various costs incurred in the organization.
COST AVOIDANCE is an action taken in the present designed to decrease costs in the future.
COST BASIS, in securities, is the purchase price after commissions or other expenses. It is used to calculate capital gains or losses when the security is eventually sold.
COST-BENEFIT ANALYSIS is the method of measuring the benefits anticipated from a decision by determining the cost of the decision, then deciding whether the benefit outweighs the cost of that decision.
COST CEILING, in project management, is the sum of the Project Cost Target plus the project's Contingencies cost allowances.
COST CENTER is a non-revenue-producing element of an organization, where costs are separately figured and allocated, and for which someone has formal organizational responsibility.
COST CONTROL is the process of controlling the cost of a project within a predetermined sum throughout its various stages from inception to completion.
COST DRIVER is any activity or series of activities that takes place within an organization and causes costs to be incurred. Cost drivers are used in a system of activity-based costing to charge costs to products or services. Cost drivers are applied to cost pools, which relate to common activities. Cost drivers are not restricted to departments or sections, as more than one activity may be identified within a department.
COST EFFECTIVE is when a judgement is made that something is economical in terms of the goods or services received for the money spent.
COST ELEMENT, in cost accounting, is the lowest level component of a resource activity, or cost object.
COST IMPLOSION is a cost rollup using the quantities and costs of low-level items through a where used chain to determine total cost of the finished item. See COST ROLLUP.
COST/INCOME RATIO is total expenses divided by the sum of total income.
COST IN EXCESS OF BILLINGS, in percentage of completion method, is when the billings on uncompleted contracts are less than the income earned to date. These underbillings result in increased assets. Conversely, where billings are greater than the income earned on uncompleted contracts, a liability, billings in excess of costs, results.
COST MANAGEMENT INDEX (CMI) is a method for determining cost management benchmarks for public companies using published financial data. It is used to establish realistic cost reduction goals by conducting a definitive comparison of single company performance against others in that industry combined with a thorough internal expenditure analysis. This provides realistic parameters for cost cutting objectives as well as insight into which categories of products and services to target. The CMI equals cost of goods sold plus sales, general and administrative expenses, divided by your operating revenue (CMI = (COGS+SG&A)/Revenue). It is expressed as a percentage.
COST OBJECT is anything for which cost data is desired, e.g., products, product lines, customers, jobs, and organizational sub-units such as departments or divisions of a company.
COST OF CAPITAL/FUNDS is the rate of return that a business could earn if it so chose other investments with the equivalent risks. Also can be stated as opportunity cost of the funds used due to the investment decision.
COST OF CONTROL (COC) is the amount paid by a holding company, sometimes at a premium, for shares in its subsidiary company over and above the value they would command as an investment, in recognition of the particular benefit, which the company gains through control.
COST OF DEBT is interest rate times 1 minus the marginal tax rate (because interest is a tax deduction). An increase in the tax rate decreases the cost of debt.
COST OF EQUITY (COE) is the minimum rate of return a firm must offer owners to compensate for waiting for their returns, and for bearing risk. It is calculated: COE = Dividends per Share (for next year) / Current Market Value of Stock + Growth Rate of Dividends.
COST OF GOODS SOLD (COGS) is a figure representing the cost of buying raw material and producing finished goods. Included are precise factors, i.e. material and factory labor; as well as others that are variable, such as factory overhead.
COST OF GOODS SOLD BUDGET decomposes, or breaks down, the components of a business’s cost of goods sold (in some cases referred to as the cost of revenues). This budget breaks out each separate factor underlying the cost of goods sold for a business. See OPERATING BUDGET.
COST-OF-LIVING LEASE is a lease where yearly increases are tied to the cost of living index.
COST OF MONEY is a form of indirect cost incurred by investing capital in facilities employed on government contracts.
COST OF NON-QUALITY (CONQ) is the CONQ technique (measure of costs specifically associated with the achievement or non-achievement of product or service quality). It is a tool used by quality management in its pursuit of quality improvement and profit contributions.
COST OF REVENUE see COST OF GOODS SOLD.
COST OF SALES see COST OF GOODS SOLD.
COST OVERRUN is the amount by which an entity exceeds or expects to exceed the estimated cost to completion of: a. a product; b. a process; or, c. the final limitations of costs stipulated in a contract.
COST PER OUTCOME links the unit-level economics of an operation with the impact that the organization wishes to have. For example, a nonprofit that delivers meals to the elderly might measure its impact by the number of meals served. To arrive at its cost per outcome, therefore, it would divide the full cost of its meals program by the number of meals it serves.
COST PER OUTPUT see OBJECT COST.
COST PER THOUSAND (CPM) is advertising terminology used in buying media. CPM refers to the cost it takes to reach a thousand people within your target market.
COST-PLUS is determining payment based on the actual cost of production or service provisioning plus an agreed-upon fee or rate of profit; for example, a cost-plus government contract.
COST PRINCIPLE is the principle where a company is obliged to record its fixed assets at their actual purchase price or production cost.
COST REDUCTION is actions taken in the present designed to decrease costs in the present. See COST AVOIDANCE.
COST ROLLUP is a determination of all cost elements within total cost. A cost rollup will normally but not always allow for the dissection of cost by material by a where used chain to the individual component, labor by operation and overheads applied. See COST IMPLOSION.
COST SPLIT is the breakdown of the costs associated with producing a product, providing a service, ... The makeup is dependent upon what costs are being analyzed, e.g. in manufacturing a company would track the cost split between materials, direct labor, and production overhead.
COST SYNERGY is the savings in operating costs expected after two companies, who compliment each other's strengths, join.
COST-TO-COST METHOD, in construction contracts, is an estimate of completion in which the state of completion is the ratio of costs incurred as of a given date divided by the estimated total project cost. See also PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING.
COST UNIT is a functional cost unit which establishes standard cost per workload element of activity, based on calculated activity ratios converted to cost ratios.
COST-VOLUME-PROFIT ANALYSIS (CVPA) examines the behavior of total revenue, total costs and profit as changes occur in the output level, selling price and variable costs per unit or fixed costs.
COUNTERBALANCE is a compensating equivalent or to oppose and mitigate the effects of something by contrary actions.
COUNTERCLAIM is a claim filed in opposition to another claim in a legal action.
COUNTING HOUSE is a British 19th century term meaning the building, room, office or suite in which a business firm carries on operations, particularly accounting.
COUPON BOND pays the holder of the bond a fixed interest payment (a coupon payment) every year until the bond reaches maturity. It is named a coupon payment, because a bondholder had to obtain their interest payment by clipping a coupon off of a bond and send it to the bond issuer, the bond issuer then sent the bondholder the payment. This process is no longer necessary for most coupon bonds. Examples of coupon bonds: Treasury bonds, Treasury notes and corporate bonds.
COUPON RATE is the annual interest rate of a bond.
COVENANT is a clause in a contract that requires one party to do, or refrain from doing, certain things. It is usually a restriction on a borrower imposed by a lender.
COVERAGE OF FIXED CHARGES is computed by taking your net income, before taxes and fixed charges (debt repayment, long-term leases, preferred stock dividends etc.), and dividing by the amount of fixed charges. The resulting number shows your ability to meet your fixed obligations of all types — the higher the number, the better.
COVERAGE RATIO is a measure of a corporation's ability to meet a certain type of expense. In general, a high coverage ratio indicates a better ability to meet the expense in question. Examples: dividend coverage, fixed-charge coverage, interest coverage, preferred dividend coverage.
CP is an acronym with many possible meanings, e.g., Capacity Planning, Central Procurement, Change of Plan (insurance), Claims Procedure (insurance), Commercial Paper, Community Property, Consumer Products, Contingency Plan, Contract Price, Change Proposal, etc.
CPA is Certified Public Accountant, Cost Per Action, or Critical Path Analysis.
CPFF is Cost Plus Fixed Fee.
CPI see CONSUMER PRICE INDEX.
CPLTD is Current Portion of Long-Term Debt.
CPT is Cost Per Thousand.
CR, in accounting, is an acronym for Credit Record. See CREDIT RECORD.
CRAR see CAPITAL TO RISK ASSET RATIO.
CRAT is an acronym for Charitable Remainder Annuity Trust.
CREATIVE ACCOUNTING is slang for the concept of maintaining accounts giving possibly illegal or dubious benefits to the entity for which the accounts are maintained.
CREDIT, in accounting, is an accounting entry system that either decreases assets or increases liabilities; in general, it is an arrangement for deferred payment for goods and services.
CREDIT CARD is a card authorizing purchases on credit at a predetermined interest rate and payment conditions.
CREDIT CARD RECEIPTS is sales revenue where payment has been made through the use of recognized/authorized credit cards versus cash or check receipts/payments.
CREDIT CONTROL is policies and procedures aimed at controlling the granting of credit.
CREDIT DEFAULT SWAP (CDS) is a credit derivative contract between two counterparties. The buyer makes periodic payments (premium leg) to the seller, and in return receives a payoff (protection or default leg) if an underlying financial instrument defaults. CDS contracts have been compared to insurance, because the buyer pays a premium and, in return, receives a sum of money if a specified event occurs. However, there are a number of differences between CDS and insurance; the buyer of a CDS does not need to own the underlying security; in fact the buyer does not even have to suffer a loss from the default event.
CREDIT LINE is the maximum credit that a customer is allowed.
CREDIT LOSSES PROVISION see PROVISION FOR CREDIT LOSSES.
CREDIT MEMO is a document used to issue a vendor credit.
CREDIT NOTES are issued to indicate a positive action within an account. Credit notes are issued for reasons such as overpayment, duplicate payment, damaged goods, returned merchandise, etc.
CREDITOR DAYS is the number of days it takes the company to pay trade creditors. This ratio provides an indication of the amount of credit given to the business by its suppliers. The formula is trade creditors divided by sales multiplied by 365 days.
CREDITORS are the entities to which a debt is owed by another entity.
CREDITORS CONTROL ACCOUNT reflects the total amount owed to all the individual creditors. The balance of the creditor s control account must equal the total of the creditors list, which represents the amounts owed by the individual creditors obtained from the individual balances in the various subsidiary ledger accounts for each creditor. This subsidiary ledger is known as the creditors' ledger.
CREDITORS LEDGER see LEDGER.
CREDITORS TURNOVER = Average creditors / (Credit Sales / 365).
CREDIT RATING is an assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities.
CREDIT RECORD (CR) is an entry in a double-entry bookkeeping system recording an increase in a liability; an owner's equity item or revenue; or a decrease in an asset or an expense. Credit entries are conventionally made on the right-hand side of T accounts.
CREDIT RISK is the risk of loss from an unfulfilled payment or delivery, i.e. the possibility that a borrower will default on any monies that are owed.
CREDIT SALES are merchandise or services sold on the promise to pay later.
CRITICAL ACCOUNTING ESTIMATE is when a company must make assumptions about matters that are “ highly uncertain” when the company makes the accounting estimate and either of the following conditions would have a material effect on the company’s financial condition, changes in financial condition or results of operations: 1. the company could reasonably have used a different estimate for the current period; or, 2.changes in the estimate are reasonably likely to occur from period to period in the future.
CRITICAL FEW see 80 - 20 RULE.
CROSS-ACCOUNTING is non-cash payment through the delivery of goods or services to satisfy a liability; a very common practice between subsidiaries of a company. See IN-KIND.
CROSS-AGED RECEIVABLE means all accounts receivable due from a Customer if more than 50% of the aggregate amount of all accounts receivable due from such Customer are aged more than 90 days.
CROSS-FOOTING is the addition of columns of figures in different ways to check the accuracy of the totals, e.g. vertically and horizontally deriving the same total in a spreadsheet.
CROWN CORPORATION is a corporation that has been established by a nation’s government.
CRR see CASH RESERVE RATIO.
CRUT is an acronym for Charitable Remainder Unitrust.
C/S RATIO see CONTRIBUTION/SALES RATIO.
CTP is Certified Treasury Professional.
CUMULATIVE EARNINGS is the sum of all earnings over the time periods in question.
CUMULATIVE PREFERRED STOCK is preferred stock which gives holder a right to dividends if they have not been paid in a given year.
CURRENCY DENOMINATION see DENOMINATION.
CURRENCY MEASUREMENT is part of determining the "functional currency" that mainly influences sales prices for goods / services. It will often be the currency in which denominated and settled: a. of country whose competitive forces and regulations mainly determine sales prices for goods / services; b. that mainly influences labor, material and other costs of providing goods / services; or, as stated, c. will often be the currency in which transactions are denominated and settled.
CURRENCY TRANSLATION see FOREIGN CURRENCY TRANSLATION.
CURRENT ACCOUNT in a national economy it is a category in the balance of payments account that includes all transactions that either contribute to national income or involve the spending of national income.
CURRENT ASSETS are those assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during the normal operating cycle of the business (usually one year). Such assets include cash, accounts receivable and money due usually within one year, short-term investments, US government bonds, inventories, and prepaid expenses.
CURRENT CAPITAL see WORKING CAPITAL.
CURRENT CASH DEBT RATIO measures ability to pay current liabilities in given year with cash derived from operating activities. Calculated using net cash from operating activities divided by average current liabilities.
CURRENT COST is the cost which would be incurred for replacement of an asset.
CURRENT COST ACCOUNTING is a system of accounting which adjusts for changing pricing.
CURRENT DEBT TO TOTAL DEBT shows Current Liabilities as a percent of Total Debt. Smaller firms carry proportionally higher level of current debt to total debt than larger firms. Formula: Total Current Liabilities / Total Liabilities
CURRENT LIABILITIES are liabilities to be paid within one year of the balance sheet date.
CURRENT MATURITIES-L/T/D is that portion of long term obligations which is due within the next fiscal year.
CURRENT PORTION OF LONG-TERM DEBT is only that portion of long-term obligations (payable in more than one year) which are owed and payable in the current year; e.g. the portion of a five-year loan or lease that is due in the current calendar/fiscal year.
CURRENT RATIO, a comparison of current assets to current liabilities, is a commonly used measure of short-run solvency, i.e., the immediate ability of a firm to pay its current debts as they come due. Current Ratio is particularly important to a company thinking of borrowing money or getting credit from their suppliers. Potential creditors use this ratio to measure a company's liquidity or ability to pay off short-term debts. Though acceptable ratios may vary from industry to industry below 1.00 is not atypical for high quality companies with easy access to capital markets to finance unexpected cash requirements. Smaller companies, however, should have higher current ratios to meet unexpected cash requirements. The rule of thumb Current Ratio for small companies is 2:1, indicating the need for a level of safety in the ability to cover unforeseen cash needs from current assets. Current Ratio is best compared to the industry. Formula: Current Assets / Total Liabilities
CURTAIL is to terminate or abbreviate before an intended or proper end or its full extent, e.g. the national product launch was curtailed due to lack of acceptance in the rural market place.
CUSTODIAN is an entity entrusted with guarding and keeping property or records.
CUSTODIAN BANK is the bank that acts a custodian to a mutual fund. Does not manage anything, just holds the cash and securities and does the clerical.
CUSTOMER ACQUISITION COST is calculated by dividing total acquisition expenses by total new customers. However, there are different opinions on what constitutes an acquisition expense, e.g. rebates and special discounts do not represent an actual cash outlay, yet they have an impact on cash (and, presumably, on the customer). There is no set standard, i.e. acquisition costs vary across industries. When acquisition data is available, it is best to try to determine if you are comparing apples to apples. This is not easy, as customer acquisition data is usually scarce and the methodology is often questionable.
CUSTOMER DEPOSIT if you have just signed a contract and received payments from a customer and have not actually done any work on that, you have not yet earned that sale. You're just holding the person's money for them. It is not yet truly a sale - it's a CUSTOMER DEPOSIT. The entry will be debit to CASH and credit CUSTOMER DEPOSIT, which is a liability account (you would have to refund the money if you don't do the job). CUSTOMER DEPOSITS turn into CASH as you earn them - through the purchase of materials or labor performed.
CUSTOMER MARGIN, within the futures industry, is the financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfilling of contract obligations. Margins are determined on the basis of market risk and contract value.
CUSTOMS are the authorities charged with collecting duty and controlling the entry of merchandise into a country.
CUSTOMS BROKER is an individual or firm licensed to process entry and clear goods into the country for another.
CUT-OFF RATE is the predetermined maximum rate and/or minimum rate at which the subject is still acceptable, but where a rate above the proscribed higher or below the proscribed lower rate is no longer acceptable.
CUT-OFF YIELD, in securities, is the yield at which or below which the bids are accepted.
CUT SCORE is a point on a score scale in which scores at or above the point are in a different category or classification than scores below the point (e.g. pass versus fail).
CVP see COST-VOLUME-PROFIT ANALYSIS.
CVPA see COST-VOLUME-PROFIT ANALYSIS.
CYCLE COUNT is a partial count of a single inventory location as opposed to a Complete Count, i.e., a complete count of a single inventory location. An organization should not wait to do a complete count; usually once a year. The best way to ensure that a minimum of 97% accuracy is maintained in inventory on an ongoing basis is to continually count your products. That is, count part of your inventory every day, and count each item several times per year. This process is called "cycle counting."
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