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P
Pareto analysis
Analysis of a frequency distribution with a small proportion
(say 20%) of the items accounting for a large proportion
(say 80%) of the total. Examples may be seen in around 80%
of sales of a company being derived from about 20% of its
customers, and 80% of the value of its stocks being held
in 20% of its items.
payback
The number of years it takes the cash inflows from a capital
investment project to equal the cash outflows. An organisation
may have a target payback period, above which projects are
rejected.
period cost
A cost which relates to a time period rather than to the
output of products or services.
periodicity concept
The requirement to produce financial statements at set time
intervals. This requirement is embodied, in the case of
UK corporations, in the Companies Act.
planning
The establishment of objectives, and the formulation, evaluation
and selection of the policies, strategies, tactics and action
required to achieve them. Planning comprises long-term/strategic
planning, and short-term operational planning, the latter
being usually for a period of up to one year.
planning variance
A planning or revision variance is a classification of variances
caused by ex ante budget allowances being changed to an
ex post basis.
poka yoke
Failsafe devices, support jidoka by preventing parts being
mounted or fitted in the wrong way and alerting operators
by flashing lights, ringing buzzers - it is a method of
spotting defects, identifying, repairing and avoiding further
defects.
policy deployment
The process of internalising improvement policies throughout
the company from translation of customer
requirements, through each process of specification, design,
etc. to final manufacturing and delivery.
post balance sheet events
Favourable and unfavourable events, which occur between
the balance sheet date and the date on which the financial
statements are approved by the board of directors.
preference shares
Shares carrying a fixed rate of dividend, the holders of
which, subject to the conditions of issue, have a prior
claim to any company profits available for distribution.
Preference shares may also have a prior claim to the repayment
of capital in the event of a winding up.
prepayments
Prepayments includes prepaid expenses for services not yet
used, for example rent in advance or electricity charges
in advance, and also accrued income. Accrued income relates
to sales of goods or services that have occurred and have
been included in the profit and loss account for the trading
period but have not yet been invoiced to the customer.
present value
The cash equivalent now of a sum receivable or payable at
a future date.
price elasticity
A measure of the responsiveness of the demand for a product
or service to a change in the price of that product or service.
Products with an inelastic demand show relatively little
changes in demand to relatively large changes in price (for
example, the necessities of life) - demand is therefore
not significantly price sensitive. Products with an elastic
demand show relatively large changes in demand to relatively
small changes in price.
price/earnings ratio (P/E)
The market price per ordinary share divided by earnings
per share shows the number of years it would take to recoup
an equity investment from its share of the attributable
equity profit.
profit and loss account (or income
statement)
The profit and loss account shows the profit or loss generated
by an entity during an accounting period by deducting all
expenses from all revenues. It measures whether or not the
company has made a profit or loss on its operations during
the period, through producing and selling its goods or services.
profit before tax (PBT)
Operating profit plus or minus net interest.
profit centre
A part of the business that is accountable for both costs
and revenues - the manager is responsible for revenues and
costs.
provision
Amount charged against profit to provide for an expected
liability or loss even though the amount or date of the
liability or loss is uncertain (FRS 12).
prudence concept
The principle that revenue and profits are not anticipated,
but are included in the profit and loss account only when
realised in the form either of cash or of other assets,
or the ultimate cash realisation can be assessed with reasonable
certainty; provision is made for all known liabilities (expenses
and losses) whether the amount of these is known with certainty
or is a best estimate in the light of information available.
public limited company
A company limited by shares or by guarantee, with a share
capital, whose memorandum states that it is public and that
it has complied with the registration procedures for such
a company. A public company is distinguished from a private
company in the following ways: a minimum issued share capital
of £50,000; public limited company, or plc, at the end of
the name; public company clause in the memorandum; freedom
to offer securities to the public.
pull system
A system whose objective is to produce or procure products
or components as they are required for use by internal and
external customers, rather than for stock. This contrasts
with a 'push' system, in which stocks act as buffers between
processes within production, and between production, purchasing
and sales.
purchase invoice
A document received from a supplier by an entity showing
the description, quantity, prices and values of goods or
services received.
purchase invoice daybook
A list of supplier invoices recording their dates, gross
values, values net of VAT, the dates of receipt of the invoices,
the names of suppliers, and the general ledger allocation
and coding.
purchase ledger
The purchase ledger contains all the personal accounts of
each individual supplier or vendor, and records every transaction
with each supplier since the start of their relationship
with the company.
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