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A
absorption costing
A method of costing that, in addition to direct costs, assigns
all, or a proportion of, production overhead costs to cost
units by means of one or a number of overhead absorption
rates.
accountability concept
Management accounting presents information measuring the
achievement of the objectives of an organisation and appraising
the conduct of its internal activities in that process.
In order that further action can be taken, based on this
information, it is necessary at all times to identify the
responsibilities and performance of individuals within the
organisation.
accountancy
The practice or profession of accounting.
accounting
The classification and recording of monetary transactions,
the presentation and interpretation of the results of those
transactions in order to assess performance over a period
and the financial position at a given date, and the monetary
projection of future activities arising from alternative
planned courses of action.
accounting adjustments
Accounting entries that do not arise from the basic transactions
of cash and invoices. Adjusting entries are made for depreciation,
bad and doubtful debts, closing stocks, prepayments, and
accruals.
accounting concepts
The principles underpinning the preparation of accounting
information. Fundamental accounting concepts are the broad
basic assumptions which underlie the periodic financial
accounts of business enterprises.
accounting period
The period covered by the accounting statements of an entity.
accounting policies
The specific accounting bases selected and consistently
followed by an entity as being, in the opinion of the management,
appropriate to its circumstances and best suited to present
fairly its results and financial position (SSAP 2 and Companies
Act).
accounting rate of return (ARR)
Annual profit divided by investment. It is a form of return
on capital employed. Unlike NPV and IRR, it is based on
profits, not cash flows.
accounting standard
Authoritative statement of how particular types of transaction
and other events should be reflected in financial statements.
Compliance with accounting standards will normally be necessary
for financial statements to give a true and fair view (ASB).
Accounting Standards Board (ASB)
A UK standard-setting body set up in 1990 to develop, issue
and withdraw accounting standards. Its aims are to 'establish
and improve standards of financial accounting and reporting,
for the benefit of users, preparers and auditors of financial
information'.
accounts payable
Also called trade creditors, is the money owed to suppliers
for goods and services.
accounts receivable
Also called trade debtors, is the money owed to entities
by customers.
accruals
Allowances made for costs and expenses payable within one
year of the balance sheet date but for which no invoices
have yet been recorded.
accruals concept
The principle that revenues and costs are recognised as
they are earned or incurred, and so matched with each other,
and dealt with in the profit and loss account of the period
to which they relate, irrespective of the period of receipt
or payment. Where a conflict arises, this concept is subservient
to the prudence concept.
accruals concept
The principle that revenues and costs are recognised as
they are earned or incurred, are matched with one another,
and are dealt with in the profit and loss account of the
period to which they relate, irrespective of the period
of receipt or payment. Where a conflict arises, this concept
is subservient to the prudence concept.
acid test
Quick assets (current assets excluding stocks) divided by
current liabilities measures the ability of the business
to pay creditors in the short-term.
activity based costing (ABC)
An approach to costing and monitoring of activities which
involves tracing resource consumption and costing final
outputs. Resources are assigned to activities and activities
to cost objects based on consumption estimates. The latter
utilise cost drivers to attach activity costs to outputs.
activity based management (ABM)
System of management which uses activity based cost information
for a variety of purposes including cost reduction, cost
modelling and customer profitability analysis.
aged creditors report
The amount owed by creditors, or accounts payable, classified
by age of debt.
aged debtors report
The amount owed by debtors, or accounts receivable, classified
by age of debt.
algorithm
A process or set of rules used for a mathematical calculation.
allocation
The charging to a cost centre those overheads which result
solely from the existence of that cost centre.
amortisation
In the same way that depreciation applies to the charging
of the cost of tangible fixed assets over their useful economic
lives, amortisation is the systematic write-off of the cost
of an intangible asset, relating particularly to the passage
of time, for example leasehold premises (FRS 11 and FRS
15).
annual report and accounts
A set of statements which may comprise a management report
(in the case of companies, a directors' report), an operating
and financial review (OFR), and the financial statements
of the entity.
apportionment
The charging to a cost centre of a fair share of an overhead
on the basis of the benefit received by the cost centre
in respect of the facilities provided by the overhead.
asset
A right or other access to future economic benefits controlled
by an entity as a result of past transactions or events
(FRS 5).
attainable standard
A standard that assumes efficient levels of operation, but
which includes allowances for normal loss, waste and machine
downtime.
attributable cost
The cost per unit that could be avoided, on the average,
if a product or function were discontinued entirely without
changing the supporting organisational structure.
audit
A systematic examination of the activities and status of
an entity, based primarily on investigation and analysis
of its systems, controls and records. A statutory annual
audit of a company is defined by the ASB as an independent
examination of, and expression of an opinion on, the financial
statements of the enterprise.
Auditing Practices Board (APB)
A body formed in 1991 by an agreement between the six members
of the Consultative Committee of Accountancy Bodies, to
be responsible for developing and issuing professional standards
for auditors in the United Kingdom and the Republic of Ireland.
auditor
A professionally qualified accountant who is appointed by,
and reports independently to, the shareholders, providing
an objective verification to shareholders and other users
that the financial statements have been prepared properly
and in accordance with legislative and regulatory requirements;
that they present the information truthfully and fairly,
and that they conform to the best accounting practice in
their treatment of the various measurements and valuations.
audit report
An objective verification to shareholders and other users
that the financial statements have been prepared properly
and in accordance with legislative and regulatory requirements;
that they present the information truthfully and fairly
and that they conform to the best accounting practice in
their treatment of the various measurements and valuations.
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