ACCOUNTING:  The principles and techniques utilized in establishing, maintaining and analyzing the records of various essential business, individual or governmental transactions .

ACCOUNTS PAYABLE (AP):  Debt owed by a business, principally for goods purchased by said business.

ACCOUNTS RECEIVABLE (AR):  Debt owed to you or your company, particularly money for which you have documentation, such as invoices.

ACCOUNTS RECEIVABLE TURNOVER:  Annual net sales divided by end-or-year accounts receivables.  This indicates the rate at which a business is collecting on its accounts.

ACCRUAL:  Accounting term for the increase over time of expenses incurred by your business, such as:  taxes, wages, interest, and insurance.  Right up until they are paid in full, they are said to have accrued.

QUICK ASSET RATIO:  The ratio of cash, accounts receivable and marketable securities to the current liabilities.  Also called:  ACID TEST RATIO

ADVERTISING:  Presentation or promotion of your ideas, goods or services; usually non-personal.

AGENT:  Any person authorized to represent another person.  A company or individual that negotiates terms or sales but never takes title.

AGING-ACCOUNTS RECEIVABLES:  Measurement of time in days, in which someone or some entity has been financially indebted to you or your company.  Generally measured in categories of 30, 60, 90, and 120+ days.  This is a good indication of whether or not collections are improving or declining.

AMORTIZATION:  Gradual elimination of debt through payments made periodically.  This term also pertains to the periodic expensing and write-off of assets classified intangible, such as:  copyrights, patents and forms of good will.

ANTICIPATION:  Discount given a buyer for advance payment of an invoice with dated terms.

APPRECIATION:  Increase in dollar value of an asset over time.

ARTICLES OF INCORPORATION:  Legal document which makes your company a legal entity.

ASSET:   Assets include anything your business owns in order to produce or provide goods or services and can be tangible or intangible.

AUDIT:  An independent review by a CPA or an accounting entity and its records.  Performed to determine whether its financial statements fairly reflect and represent the financial results and condition of said entity.

BALANCE SHEET:  Report generally produced for the purposes of measuring net value of your company at a specified date, as well as its risk to potential credits.  A financial statement setting out liabilities, assets and ownership interest.

BALLOON PAYMENT:  Final payment at the end of a contract period that is substantially larger than the periodic payments being made and results in the debt being paid in full.

BASIS:  Cost of an asset for computing gain or loss and for tax purposes.  Purchase price + other expenses - (less) amortization or depreciation.  The loss or taxable gain = the difference between the net selling price and the basis.

BOM:  Beginning of the month.

BOND:  Instrument of long-term debt.

BENEFICIARY:  Person named to receive resources or property.

BID:  Price announced and agreed upon by a willing buyer.

BOARD OF DIRECTORS:  Elected representatives of a corporation’s shareholders.

BOOK VALUE:  Net value of a property as a capital asset.  Cost + additions to value – (less) depreciation.

BRAND:  Symbol, design or name that distinguishes your product or company from other similar products and companies.

BREAK-EVEN POINT:  Point at which income from sales of a product, business unit or service equals total expenses.  Generally arrived at through a formula related to fixed and variable costs.

BUDGET:  In financial terms, a document which establishes the income and expenses of your company (or personally) for a clearly defined period into the future.

CAPITAL ASSETS:  Those assets which are of a permanent or long-life nature used in the production of income.  Ex:  buildings, equipment and machinery, land, etc.  Must be distinguished separately from inventory.

CAPITAL GAINS OR LOSSES:  Difference between the purchase and sale price of an investment asset.

CASH DISCOUNT:  Used to provide incentive for early payment, a percentage reduction in price offered to customers or clients.

CASH FLOW:  Figure which shows the flow of cash through your company.  Shows your net cash generation and requirements each month; therefore, it is usually desirable to project your cash flow monthly.

CERTIFIED PUBLIC ACCOUNTANT:  CPA:  An accountant who has met certain experience and educational requirements and has passed the licensing examination of the American Institute of Certified Public Accountants.

CHANNEL OF DISTRIBUTION:  Complete organizational structure of dealers through which a product is marketed.

COD:  Cash on Delivery.  Payment collected at the time goods are received.

COLLATERAL:  Property which is pledged by a borrower as security on a loan.

COLLECTION PERIOD:  Average number of days needed to collect an accounts receivable.  Divide average daily credit sales into AR outstanding.

COMINGLING OF FUNDS:  A practice to be avoided; this is the mixing of one’s personal and business accounts making it difficult to determined which money belongs to the account holder personally and which belongs to the business.

CONSUMER BEHAVIOR:  Study of factors which cause consumers to make buying decisions.

CONSUMER GOODS:  Goods purchased for personal use.

CONSUMER PRICE INDEX:  CPI:  Published monthly by the U.S. Bureau of Labor Statistics, showing the cost of a typical “market basket” of consumer services and products.

CONTRACT:  Agreement between two or more parties, persons or entities which creates or modifies a legal relationship.

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