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ACCOUNTING REPORTS AND TERMINOLOGYAccounting Terminology
Any period of time utilised to measure accounting performancewww.lewistaxation.com.au1.	Accounting Period
Short term financial obligationswww.lewistaxation.com.au2.	Accounts Payable (Sundry Creditors)
Amounts owed to the firm by customerswww.lewistaxation.com.au3.	Accounts Receivable (Sundry Debtors)
Acquired by the firm to accomplish its business objectiveswww.lewistaxation.com.au4.	Assets
The comparison of operating figures from one firm with anotherwww.lewistaxation.com.au5.	Benchmarks
Sales to cover all variable and fixed expenseswww.lewistaxation.com.au6.	B.O.S. (Before Owners’ Salary)
Sales to cover all variable and fixed expenseswww.lewistaxation.com.au7.	Break – Even Sales
Future maintainable profit expressed at a capitalisation rateRate of return required by a prudent investorReflects a mark up on prevailing interest ratesItems which affect rate of return:RiskLack of negotiabilityEconomic conditionswww.lewistaxation.com.au8.	Capitalisation Rate
Items which affect rate of return (cont’d):Restrictions on entrySize of the share parcelGeneral business riskswww.lewistaxation.com.au8.	Capitalisation Rate cont'd...
Review your performance during each benchmark periodwww.lewistaxation.com.au9.	Comparative Analysis
Opening StockPlus:PurchasesFreight InwardsLess:Closing StockEquals – Cost Of Goods Soldwww.lewistaxation.com.au10.	Cost Of Goods Sold
Average days to pay creditors divided into 365 dayswww.lewistaxation.com.au11. Creditors Turnover
Usually turned into cash within twelve monthswww.lewistaxation.com.au12.	Current Assets
Normally paid within twelve monthswww.lewistaxation.com.au13.	Current Liabilities
Indication of LiquidityCalculatedCurrent Assets        Current Liabilities		= Current Ratiowww.lewistaxation.com.au14.	Current Ratio
Business’ valuation of assetswww.lewistaxation.com.au15.	Current Market Value
Shows how a business is paying its creditorsCalculated:	      Creditors		        		Average Daily Credit Purchase		= Days Creditors Outstandingwww.lewistaxation.com.au16.	Days Creditors Outstanding
Calculated:		Debtors			Average Daily Credit Sales	= Days Debtors Outstandingwww.lewistaxation.com.au17.	Days Debtors Outstanding
Percentage of debtors outstanding compared to credit salesDebtors Ratio – calculated:Debtors	x	100        Credit Sales		  1www.lewistaxation.com.au18.	Debtors’ Ratio
Amounts owed to the firm by customerswww.lewistaxation.com.au19.	Debtors
Debtor Ratio to Borrowed FundsWorking Capital Ratio to Borrowed FundsDebt to Equity RatioOther key performance indicators applicablewww.lewistaxation.com.au20.	Debt Covenants
Percentage of external debt to equityDebt to Equity % - calculated:Total Debt	x	100		    Equity		  1www.lewistaxation.com.au21.	Debt To Equity Percentage
Record department’s:SalesCost of Goods SoldGross ProfitsTo determine GP% for each departmentwww.lewistaxation.com.au22.	Departmental Gross Profit %
Costs incurred in producing net profitwww.lewistaxation.com.au23.	Expenses
Measures financial commitments:ProfitabilityExposure to DebtInterest RateOwners’ ReinvestmentIndicators to measure:Debt as % of SaleDebt as % of Equitywww.lewistaxation.com.au24.	Financing Indicators
Earning before Interest and Taxwww.lewistaxation.com.au25.	EBIT
Earnings Before Interest, Depreciation and Taxwww.lewistaxation.com.au26.	EBIDT
Earnings Before Interest, Tax, Depreciation & Amortisation.www.lewistaxation.com.au27.	EBITDA
Calculated earnings before interest and tax plus principal’s wages, superannuation etcwww.lewistaxation.com.au28.	Adjusted EBIT
Items owned by the business used to generate business revenuewww.lewistaxation.com.au29.	Fixed Assets
Fixed Assets as a % of Total Assets – calculated:Fixed Assets		x	100		Total Assets			  1www.lewistaxation.com.au30.	Fixed Assets As A Percentage Of Total Assets
Expected profitability after making adjustment for unusual or non recurring items	Includes:Reasonable Management Salaries“Notional Rent” on Owned Premiseswww.lewistaxation.com.au31.	Future Maintainable Profits
Difference between sales and cost of goods soldwww.lewistaxation.com.au32.	Gross Profit
Measures gross profit earned on saleswww.lewistaxation.com.au33.	Gross Profit % Of Sales
Sales - Cost of Goods Sold = Gross Profit, thenwww.lewistaxation.com.au34.	Gross Profit Ratio
Borrowings expressed as a percentage of assets:	Assets worth		$100,000	Borrowings		$  62,000Calculated:Assets Worth	x	100		  Borrowings		  1		Gearing is:		=	62%www.lewistaxation.com.au35.	Gearing
Measures increase from previous year.	Factors effecting growth includes:CompetitionBusiness PresentationCatchment Area GrowthCustomer Buying HabitsAdvertisingwww.lewistaxation.com.au36.	Growth - Sales
Original cost of assetswww.lewistaxation.com.au37.	Historical Cost
Industry group according to the Australian & New Zealand Standard Industry Classification Coding System of the Australian Bureau of Statistics.www.lewistaxation.com.au38.	Industry Categories
Number of times interest charges are covered by EBITwww.lewistaxation.com.au39.	Interest Cover
Goods purchased or manufactured for sale to customerswww.lewistaxation.com.au40.	Inventory (Stock On Hand)
Detailed review and comparison of a business against a “pool of similar businesses”www.lewistaxation.com.au41.	Inter Firm Comparisons
Amounts owing by the firmwww.lewistaxation.com.au42.	Liabilities
Ability to pay financial obligationswww.lewistaxation.com.au43.	Liquidity
Current Assets to Current Liabilitieswww.lewistaxation.com.au44. Liquid Ratio
Amounts owed not due for repayment within the next twelve monthswww.lewistaxation.com.au45.	Long Term Liabilities
People who look like current customers. They are normally the first group of prospects targeted in a marketing campaign.www.lewistaxation.com.au46.	Low-Hanging Fruit
Amount added to invoice costwww.lewistaxation.com.au47.	Mark - Up
Amount remaining after cost of goods sold and operating expenses have been deducted from saleswww.lewistaxation.com.au48.	Net Profit
Operating Profit or Loss after income tax.www.lewistaxation.com.au49.	Net Profit After Tax
Measures net profit before tax earned on each dollar of saleswww.lewistaxation.com.au50.	Net Profit Percentage Of Sales
Owner’s Funds as a percentage of total assets – calculated:Owner’s Funds	x	100		   Total Funds		  1www.lewistaxation.com.au51.	Owner’s Funds As A Percentage Of Total Assets
Include all expenditure to be paid from Gross Profit.www.lewistaxation.com.au52. Overheads
A measure of output generated from resourceswww.lewistaxation.com.au53.	Productivity
Net profit after tax divided by total revenue and multiplied by 100.www.lewistaxation.com.au54.	Profit Margin
Ratio between current assets minus stock and current liabilities minus bank overdraftwww.lewistaxation.com.au55.	Quick Ratio
The goods shall remain the property of the seller until all monies are paidwww.lewistaxation.com.au56.	Romalpa Clause
Realistic arms length salaries if external persons were appointedwww.lewistaxation.com.au57.	Reasonable Management Salaries
Relationship between net profit and total assetsReturn on Assets – calculated:Net Profit	x	100		   Assets		  1www.lewistaxation.com.au58.	Return On Assets
Relationship between net profit and owner’s equityReturn on Equity – calculated:Net Profit	x	100		   Equity		  1www.lewistaxation.com.au59.	Return On Equity (Investment)
Net profit after tax as a percentage of shareholder's funds.www.lewistaxation.com.au60.	Return On Funds
Net profit after tax as a percentage of total revenue.www.lewistaxation.com.au61.	Return On Revenue
Factors affecting staffing costsIncluding:StructuresMonitoringTrainingExperienceTurnoverproductivitywww.lewistaxation.com.au62. Staffing Profile
Goods purchased or manufactured to sell to customerswww.lewistaxation.com.au63.	Stock On Hand
Success of stock management including:DisplaysMixOrdering SystemsStocktakingSecuritywww.lewistaxation.com.au64.	Stock Indicators
Dissection of sales income into departmental sales and measures income to be contributed from each product groupwww.lewistaxation.com.au65. Sales Mix
Describes characteristics of retail store: Average customersAverage items per customerAverage sale per customerTrading daysTrading hoursFloor areaSales per floor area www.lewistaxation.com.au66. Store Profile
Shrinkage measures a business' ability to control its margins and pricing.  Strong stock management policies will reduce shrinkage. www.lewistaxation.com.au67. Shrinkage
Number of times the entire stock is sold and replacedwww.lewistaxation.com.au68.	Stock Turnover/Stock Turns
Shows ability of a borrower to service the interest cost of a loan out of the business’ profitTimes Interest Covered by Profit – calculated:Profit Before Tax And Interest			        Interestwww.lewistaxation.com.au69.	Times Interest Covered By Profit
Based on prior year’s performance:CompetitionManagementBusiness PlanningBusiness ReinvestmentDemographic Informationwww.lewistaxation.com.au70. Trend Analysis
Excess of current assets over current liabilitiesCalculated:	Current Assets less Current Liabilities	= Working Capitalwww.lewistaxation.com.au71.	Working Capital

More Related Content

Accounting Terminology

  • 1. ACCOUNTING REPORTS AND TERMINOLOGYAccounting Terminology
  • 2. Any period of time utilised to measure accounting performancewww.lewistaxation.com.au1. Accounting Period
  • 3. Short term financial obligationswww.lewistaxation.com.au2. Accounts Payable (Sundry Creditors)
  • 4. Amounts owed to the firm by customerswww.lewistaxation.com.au3. Accounts Receivable (Sundry Debtors)
  • 5. Acquired by the firm to accomplish its business objectiveswww.lewistaxation.com.au4. Assets
  • 6. The comparison of operating figures from one firm with anotherwww.lewistaxation.com.au5. Benchmarks
  • 7. Sales to cover all variable and fixed expenseswww.lewistaxation.com.au6. B.O.S. (Before Owners’ Salary)
  • 8. Sales to cover all variable and fixed expenseswww.lewistaxation.com.au7. Break – Even Sales
  • 9. Future maintainable profit expressed at a capitalisation rateRate of return required by a prudent investorReflects a mark up on prevailing interest ratesItems which affect rate of return:RiskLack of negotiabilityEconomic conditionswww.lewistaxation.com.au8. Capitalisation Rate
  • 10. Items which affect rate of return (cont’d):Restrictions on entrySize of the share parcelGeneral business riskswww.lewistaxation.com.au8. Capitalisation Rate cont'd...
  • 11. Review your performance during each benchmark periodwww.lewistaxation.com.au9. Comparative Analysis
  • 12. Opening StockPlus:PurchasesFreight InwardsLess:Closing StockEquals – Cost Of Goods Soldwww.lewistaxation.com.au10. Cost Of Goods Sold
  • 13. Average days to pay creditors divided into 365 dayswww.lewistaxation.com.au11. Creditors Turnover
  • 14. Usually turned into cash within twelve monthswww.lewistaxation.com.au12. Current Assets
  • 15. Normally paid within twelve monthswww.lewistaxation.com.au13. Current Liabilities
  • 16. Indication of LiquidityCalculatedCurrent Assets Current Liabilities = Current Ratiowww.lewistaxation.com.au14. Current Ratio
  • 17. Business’ valuation of assetswww.lewistaxation.com.au15. Current Market Value
  • 18. Shows how a business is paying its creditorsCalculated: Creditors Average Daily Credit Purchase = Days Creditors Outstandingwww.lewistaxation.com.au16. Days Creditors Outstanding
  • 19. Calculated: Debtors Average Daily Credit Sales = Days Debtors Outstandingwww.lewistaxation.com.au17. Days Debtors Outstanding
  • 20. Percentage of debtors outstanding compared to credit salesDebtors Ratio – calculated:Debtors x 100 Credit Sales 1www.lewistaxation.com.au18. Debtors’ Ratio
  • 21. Amounts owed to the firm by customerswww.lewistaxation.com.au19. Debtors
  • 22. Debtor Ratio to Borrowed FundsWorking Capital Ratio to Borrowed FundsDebt to Equity RatioOther key performance indicators applicablewww.lewistaxation.com.au20. Debt Covenants
  • 23. Percentage of external debt to equityDebt to Equity % - calculated:Total Debt x 100 Equity 1www.lewistaxation.com.au21. Debt To Equity Percentage
  • 24. Record department’s:SalesCost of Goods SoldGross ProfitsTo determine GP% for each departmentwww.lewistaxation.com.au22. Departmental Gross Profit %
  • 25. Costs incurred in producing net profitwww.lewistaxation.com.au23. Expenses
  • 26. Measures financial commitments:ProfitabilityExposure to DebtInterest RateOwners’ ReinvestmentIndicators to measure:Debt as % of SaleDebt as % of Equitywww.lewistaxation.com.au24. Financing Indicators
  • 27. Earning before Interest and Taxwww.lewistaxation.com.au25. EBIT
  • 28. Earnings Before Interest, Depreciation and Taxwww.lewistaxation.com.au26. EBIDT
  • 29. Earnings Before Interest, Tax, Depreciation & Amortisation.www.lewistaxation.com.au27. EBITDA
  • 30. Calculated earnings before interest and tax plus principal’s wages, superannuation etcwww.lewistaxation.com.au28. Adjusted EBIT
  • 31. Items owned by the business used to generate business revenuewww.lewistaxation.com.au29. Fixed Assets
  • 32. Fixed Assets as a % of Total Assets – calculated:Fixed Assets x 100 Total Assets 1www.lewistaxation.com.au30. Fixed Assets As A Percentage Of Total Assets
  • 33. Expected profitability after making adjustment for unusual or non recurring items Includes:Reasonable Management Salaries“Notional Rent” on Owned Premiseswww.lewistaxation.com.au31. Future Maintainable Profits
  • 34. Difference between sales and cost of goods soldwww.lewistaxation.com.au32. Gross Profit
  • 35. Measures gross profit earned on saleswww.lewistaxation.com.au33. Gross Profit % Of Sales
  • 36. Sales - Cost of Goods Sold = Gross Profit, thenwww.lewistaxation.com.au34. Gross Profit Ratio
  • 37. Borrowings expressed as a percentage of assets: Assets worth $100,000 Borrowings $ 62,000Calculated:Assets Worth x 100 Borrowings 1 Gearing is: = 62%www.lewistaxation.com.au35. Gearing
  • 38. Measures increase from previous year. Factors effecting growth includes:CompetitionBusiness PresentationCatchment Area GrowthCustomer Buying HabitsAdvertisingwww.lewistaxation.com.au36. Growth - Sales
  • 39. Original cost of assetswww.lewistaxation.com.au37. Historical Cost
  • 40. Industry group according to the Australian & New Zealand Standard Industry Classification Coding System of the Australian Bureau of Statistics.www.lewistaxation.com.au38. Industry Categories
  • 41. Number of times interest charges are covered by EBITwww.lewistaxation.com.au39. Interest Cover
  • 42. Goods purchased or manufactured for sale to customerswww.lewistaxation.com.au40. Inventory (Stock On Hand)
  • 43. Detailed review and comparison of a business against a “pool of similar businesses”www.lewistaxation.com.au41. Inter Firm Comparisons
  • 44. Amounts owing by the firmwww.lewistaxation.com.au42. Liabilities
  • 45. Ability to pay financial obligationswww.lewistaxation.com.au43. Liquidity
  • 46. Current Assets to Current Liabilitieswww.lewistaxation.com.au44. Liquid Ratio
  • 47. Amounts owed not due for repayment within the next twelve monthswww.lewistaxation.com.au45. Long Term Liabilities
  • 48. People who look like current customers. They are normally the first group of prospects targeted in a marketing campaign.www.lewistaxation.com.au46. Low-Hanging Fruit
  • 49. Amount added to invoice costwww.lewistaxation.com.au47. Mark - Up
  • 50. Amount remaining after cost of goods sold and operating expenses have been deducted from saleswww.lewistaxation.com.au48. Net Profit
  • 51. Operating Profit or Loss after income tax.www.lewistaxation.com.au49. Net Profit After Tax
  • 52. Measures net profit before tax earned on each dollar of saleswww.lewistaxation.com.au50. Net Profit Percentage Of Sales
  • 53. Owner’s Funds as a percentage of total assets – calculated:Owner’s Funds x 100 Total Funds 1www.lewistaxation.com.au51. Owner’s Funds As A Percentage Of Total Assets
  • 54. Include all expenditure to be paid from Gross Profit.www.lewistaxation.com.au52. Overheads
  • 55. A measure of output generated from resourceswww.lewistaxation.com.au53. Productivity
  • 56. Net profit after tax divided by total revenue and multiplied by 100.www.lewistaxation.com.au54. Profit Margin
  • 57. Ratio between current assets minus stock and current liabilities minus bank overdraftwww.lewistaxation.com.au55. Quick Ratio
  • 58. The goods shall remain the property of the seller until all monies are paidwww.lewistaxation.com.au56. Romalpa Clause
  • 59. Realistic arms length salaries if external persons were appointedwww.lewistaxation.com.au57. Reasonable Management Salaries
  • 60. Relationship between net profit and total assetsReturn on Assets – calculated:Net Profit x 100 Assets 1www.lewistaxation.com.au58. Return On Assets
  • 61. Relationship between net profit and owner’s equityReturn on Equity – calculated:Net Profit x 100 Equity 1www.lewistaxation.com.au59. Return On Equity (Investment)
  • 62. Net profit after tax as a percentage of shareholder's funds.www.lewistaxation.com.au60. Return On Funds
  • 63. Net profit after tax as a percentage of total revenue.www.lewistaxation.com.au61. Return On Revenue
  • 64. Factors affecting staffing costsIncluding:StructuresMonitoringTrainingExperienceTurnoverproductivitywww.lewistaxation.com.au62. Staffing Profile
  • 65. Goods purchased or manufactured to sell to customerswww.lewistaxation.com.au63. Stock On Hand
  • 66. Success of stock management including:DisplaysMixOrdering SystemsStocktakingSecuritywww.lewistaxation.com.au64. Stock Indicators
  • 67. Dissection of sales income into departmental sales and measures income to be contributed from each product groupwww.lewistaxation.com.au65. Sales Mix
  • 68. Describes characteristics of retail store: Average customersAverage items per customerAverage sale per customerTrading daysTrading hoursFloor areaSales per floor area www.lewistaxation.com.au66. Store Profile
  • 69. Shrinkage measures a business' ability to control its margins and pricing. Strong stock management policies will reduce shrinkage. www.lewistaxation.com.au67. Shrinkage
  • 70. Number of times the entire stock is sold and replacedwww.lewistaxation.com.au68. Stock Turnover/Stock Turns
  • 71. Shows ability of a borrower to service the interest cost of a loan out of the business’ profitTimes Interest Covered by Profit – calculated:Profit Before Tax And Interest Interestwww.lewistaxation.com.au69. Times Interest Covered By Profit
  • 72. Based on prior year’s performance:CompetitionManagementBusiness PlanningBusiness ReinvestmentDemographic Informationwww.lewistaxation.com.au70. Trend Analysis
  • 73. Excess of current assets over current liabilitiesCalculated: Current Assets less Current Liabilities = Working Capitalwww.lewistaxation.com.au71. Working Capital