Finance glossary
A – B – C – D – G – I – L – M – O – P – R – S – V
Account- Turnover The total transactions that take place on an account, both credits and debits during a specific period.
Accounting - The process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information.
Accounts- Bank A specified and unique code provided by a bank or financial institution to a customer to keep and hold money on behalf of the customer. The bank has a fiduciary or trustee responsibility towards the customer and acts on the instructions of the customer regarding the management of the account.
Accounts- bookkeeping A specified and unique code assigned within a bookkeeping system for the allocation of assets, liabilities, income or expenses.
Accounts payable- Creditor invoices received, but not yet paid.
Accounts receivable- Amounts that third parties owe the organisation, known as debtors. Accounts on which money is to be received (Abrev.:A/R). This concerns income already billed.
Accounts Safekeeping- A specified and unique code provided by a bank or financial institution to a customer to keep and hold certificates or documents representing financial assets or liabilities. e.g. bonds, loans, certificates of deposit.
Accrued Expenses- Estimated expenses or liabilities that are incurred during a financial period but that have not been invoiced by a creditor or that have not been paid during the same financial period. Accruals can exist only for the time of the balance sheet and they are meant to help to reflect the true financial situation of the company or association.
Accrued Income - Estimated income that is due to the organisation during the financial period but that has either not been invoiced to the debtor or has not been paid during the same financial period. Accruals can exist only for the time of the balance sheet and they are meant to help to reflect the true financial situation of the company or association
Assets - Anything owned by a person, company or body that has a monetary value.
AssetsCurrent - Assets such as cash, goods for resale or items that are easily converted into cash.
AssetsFixed - Equipment and objects which have a life of generally more than 2 years and will be used in the operation of the business. Contrary to current assets they are also more difficult to convert into cash.
Assets intangible - Assets that are not physical or directly measurable, such as the value of a trademark or reputation.
Assets tangible - Assets that are physical and measurable.
Balance Sheet - Reflection of the Financial Situation in a certain moment. The Balance Sheet changes with each transaction. It shows the momentary situation of assets versus liabilities.
Beginning Capital - Capital at the beginning of the year.
Bonds - Medium term to long term debt or loans that are sold in units and documented by a certificate. Bonds have a specified rate of interest that the borrower will pay to the holder of the bond. The actual "yield" received by the holder of the bond depends on how much he paid for it.
Bookkeeping - The recording of accounting data and maintaining the accounting records.
Budget - Specified amounts set for income and expenses according to defined activities and events planned by the Association throughout the year.
Budget process - Defined process to establish and monitor budgets of the Association, i.e. review of project list and chairs, call for budget input, preparation of the draft with income, expenses, projected loss/profit, suggestions of building or release of reserves, discussion and approval and evaluation of the yearend results.
Capital - Capital equals Assets minus Liabilities. An operating surplus will increase the capital and a deficit will decrease the capital. Capital in an Association can also be expressed as the membership equity.
CashFlow - The current status of cash or cash like assets on hand versus short term liabilities, especially payments due within the next 60 days.
Cheque book - A book issued by the bank containing cheques used to pay money out of a current account.
Closing Internal - An internal revue and reconciliation of the bookkeeping entries against the bank account statements on a periodic basis. The accounts are "closed" for the period of revue when it is agreed that the bookkeeping accounts reflect the correct and true allocation of all income and expense items, and that the entries match the statements provided by the bank.
ClosingLegal - An external revue of the organisations accounts conducted by licensed auditors. The purpose of the legal closing, or audit, is to confirm that generally accepted accounting and bookkeeping practices are being followed and that the accounts have been properly kept. This is determined by a spot checking of account entries and verifying supporting documentation as well as confirming the bank account balances against the bookkeeping entries.
CorporateTax - This is another expression for a business income tax.
Credit - The right hand side of the accounts in a double entry bookkeeping system.
Creditor - A person or organisation that is owed money.
Currencies - The different official means of settling payments as decided and authorised by national governments.
Current account - The bank account used for regular payments in and out of the bank.
Debit - The left hand side of the accounts in a double entry bookkeeping system.
Debtor - A person or organisation that owes money to another party, usually refers to a person or organisation that owes money to you or your organisation.
Deposit account - Bank account used for money to be held for a minimum period and to earn interest.
Depreciation - Fixed assets lose value through use and age. In the accounts this loss is claimed as an expense of doing business. After deducting depreciation of the fixed assets the present value in case of sale is expressed. If the asset is sold at a higher price than written in the books an extra-ordinary income is made. The difference between the book value and the real value can be seen as a hidden reserve.
Directdebit - The permission granted by a member or client to an organisation, to debit his/her bank account for a fixed amount and a fixed period. Example: many German members have granted EDTNA/ERCA the right to "direct debit" their accounts each year for the membership renewal fee.
Double Entry Bookkeeping - A system where each transaction is entered twice, once on the debit side and once on the credit side.
General ledger - All accounts (bookkeeping) other than those for customers. i.e. internal accounts.
Goodwill - An extra amount paid or valued for an organisation or trademark above the value of its other assets.
Gross Earnings - All earnings before deductions and returns.
InputVAT - VAT that is paid to suppliers of goods or services and is usually reclaimed.
Interest - The cost of borrowing money that is paid to the lender.
Investment - Placing money in an object or financial instrument with the expectation of making a profit or earning revenue.
Invoice - A document showing the details of goods or services sold. The invoice should include at a minimum the name and address of the issuer (creditor) and receiver of the goods (debtor), a unique invoice number, date of delivery, of the goods/services.
Liabilities - Amounts owed to creditors and to the owners of the business, i.e. shareholders or members in the case of an association.
Liabilities Long term - Amounts that need to be paid over a period longer than 12 months.
Liabilities Current - Amounts that need to be paid within the next 6 to 12 months.
Membership Equity - The amount of money which belongs to the members as the owners of the Association after reception of all moneys due and payment of all financial obligations.
Operating Statement - A statement showing the results of all income versus all expense accounts for a specific period of time. The term more commonly used for business organisations is a "profit and loss" or "P&L" statement.
Output VAT- VAT that is owed to the government on goods or services sold and is usually charged to the receiver of the goods or services.
Payment Approval - The formal authorisation allowing payment of an open debt. The authority giving permission to pay and the party making the payment may not be the same.
Petty cash- Cash money kept on hand for payments of small, incidental amounts.
Prepaid Expenses - Expenses which need to be prepaid for an upcoming service (rent, management etc.) are shown as assets to reflect the real current situation in a balance sheet. This service provider who has received payment does owe this an amount in case we cannot use the service.
Prepaid Income - Income already received but destined for services to be rendered later. Income would have to be reimbursed if service can not be rendered.
Profit - Revenue in excess of expenses. Referred to in a not-for-profit organisation as a "surplus".
Profit and Loss Statement - A statement showing the results of all income versus all expense accounts for a specific period of time. The term more commonly used for not-for-profit organisations is an "operating statement".
Reserves - Special amounts taken as an expense in the operating statement and added to the assets in anticipation of a future need for the reserve. Reserves are typically taken for large future payments of an unknown timing. Example: to build up a reserve fund against future financial risks or to set-aside funds for future major capital investments.
Revenue - Money earned by the organisation.
Settlement account - A bookkeeping account used to track entries that are unclear or are temporary, until they can be fully allocated and booked. Settlement accounts are a type of "holding" account and should always be brought to a zero balance.
Surplus- Revenue in excess of expenses. Referred to in the business world as "profit".
VAT - Value Added Tax - Value added tax is owed by the supplier of goods and services to the government collecting the tax at a rate stipulated by the government. The rate of tax is applied to the sale value of the goods that are VAT liable. Organisation may be exempt (not liable to pay or reclaim VAT), zero rated (not liable to pay VAT but able to claim back VAT paid to suppliers, or fully VAT liable. VAT regulations vary from country to country.