A Priori Statement
A conclusion or judgment that is deemed to be true based on reasoning or theoretical deduction independent of empirical evidence. These statements are accepted as valid without needing to be substantiated or invalidated through direct experience or observational proof.
A Priori Theories of Accounting
Theories used in measurement and valuation systems of accounting that are based on deductive reasoning from certain axioms or assumptions rather than experience. The 1960s was a particularly fruitful period for a priori research in financial accounting.
A Shares
A shares represent the most important class of ordinary shares in the USA, typically carrying greater voting power and various privileges compared to B shares, playing a crucial role in corporate governance.
AAPA
AAPA stands for the Association of Authorized Public Accountants or an Associate of the Association of Authorized Public Accountants, recognizing professionals within the accounting sector.
Abacus
An ancient device for performing arithmetic calculations by sliding beads along rods or in grooves. Despite the spread of electronic calculators and computers, the abacus is still widely used in the Far East.
Abandonment
Abandonment involves the voluntary and intentional surrender of property or rights to property without naming a successor as owner or tenant. The property will typically revert to someone with a prior interest or, if no owner is apparent, to the state.
Abatement
Abatement refers to the reduction, lessening, or termination of something. Specifically, in legal and tax contexts, it typically pertains to the suspension or reduction of lawsuits or taxes.
Abbreviated Accounts
Abbreviated accounts were formerly a simplified form of annual accounts that small qualifying companies could file under the Companies Act to cut costs and save time, while minimizing the disclosure of business information.
ABC Method
Activity-Based Costing (ABC) is a method of assigning overhead and indirect costs—such as salaries and utilities—to products and services.
Ability to Pay
Ability to pay refers to a financial criterion used in various contexts such as finance, taxation, industrial relations, municipal bonds, and public policy. It represents the capacity of an individual or entity to meet financial obligations based on their income or economic status.
Ability-to-Pay
The principle that taxes should be levied based on the taxpayer's ability to pay, suggesting that as income or wealth increases, the marginal utility decreases, allowing for higher tax rates on higher income tiers.
Abnormal Loss
Abnormal loss is the loss arising from a manufacturing or chemical process through abnormal waste, shrinkage, seepage, or spoilage in excess of the normal loss. It is usually valued on the same basis as the good output.
Above Par
The term 'above par' refers to a situation where a security, typically a bond, is trading at a price above its face value or par value. This can indicate a strong demand for the security and may reflect favorable market conditions or high credit quality of the issuer.
Above the Line Deductions
In general, amounts on a tax return that are deductible from gross income before arriving at Adjusted Gross Income (AGI), such as IRA contributions, half of the self-employment tax, self-employed health insurance deduction, Keogh retirement plan and self-employed SEP deduction, penalty on early withdrawal of savings, and alimony paid.
Above-the-Line
Above-the-line entries refer to those listed above the horizontal line on a company's profit and loss account, reflecting normal business activities. This accounting practice is critical for understanding how a company's earnings are generated.
Abridged Accounts
Abridged accounts are a simplified form of annual accounts allowed under the EU Accounting Directive (2014) for entities qualifying as small companies. These accounts exclude certain detailed financial information from both the balance sheet and profit and loss statement, provided this exclusion is unanimously agreed upon by shareholders.
Abrogate
Abrogate refers to the annulment, repeal, or abolition of a contract, rule, order, law, or treaty, thereby rendering it void or inoperative.
Absence Rate
The absence rate measures the frequency of employees failing to report to work when they are scheduled. Rates above 5 percent are typically considered high, indicating potential issues within the workforce or workplace environment.
Absentee Owner
An absentee owner is an individual or entity that owns real estate but does not personally manage or reside at the owned property. Such ownership requires the delegation of management tasks and often involves the hiring of property managers.
Absolute Address in a Spreadsheet
An Absolute Address in a spreadsheet refers to a fixed location that does not change when a formula is copied to another location. This is in contrast to a Relative Cell Reference which adjusts based on the new location of the formula.
Absolute Advantage
In international economics, the capability of one producer to produce a given good using fewer resources than any other producer.
Absolute Auction
An absolute auction is a type of auction where the property is sold to the highest bidder without any reserve price, meaning that the highest bid will win regardless of its amount.
Absolute Cell Reference
An absolute cell reference in a spreadsheet program refers to a fixed location that will not change when a formula is copied to another location. In Microsoft Excel, absolute references are indicated by placing dollar signs before the column and row indicators.
Absolute Liability
Absolute liability, also known as strict liability, refers to a type of liability where a party can be held responsible for damages or injuries without proof of fault or negligence. This legal principle is often applied when actions are deemed contrary to public policy, regardless of intent.
Absolute Sale
An absolute sale is a transaction where the ownership of property is transferred to the buyer immediately upon the completion of an agreement between the seller and the buyer.
Absorb in Accounting
To assimilate or incorporate amounts in an account or a group of accounts so that they are absorbed and lose their identity.
Absorbed Overhead
Absorbed overhead (also known as applied overhead or recovered overhead) refers to the amount of overhead costs allocated to a specific production process or cost unit within an organization during an accounting period, using the technique of absorption costing.
Absorption Account
An absorption account is utilized in double-entry cost accounting to track the amount of overhead costs absorbed by production activities.
Absorption Costing
Absorption costing, also known as full absorption costing or total absorption costing, is a cost accounting method where all overheads of an organization are charged to production by means of absorption.
Absorption Costing
Absorption costing, also known as full costing, encompasses an accounting process where all manufacturing costs, both fixed and variable, are absorbed by the product. This method assigns a portion of fixed overhead costs to each unit produced, resulting in a more comprehensive understanding of product costs.
Absorption Rate: Understanding Overhead Absorption Rates
Absorption rate, also known as overhead absorption rate or recovery rate, is a crucial concept in absorption costing systems used to allocate overhead costs to production. This detailed guide covers the calculation methods, usage, and comparisons with modern costing systems.
Abstention
Abstention is the act or instance of deliberately refraining from an action or practice, often seen in the context of voting and decision-making.
Abstract of Record
An Abstract of Record is a condensed history of a case, taken from the trial court records and prepared for use by the Appellate Court.
Abstract of Title
An Abstract of Title is a condensed history of the legal ownership of a piece of land, including all conveyances, transfers, grants, wills, judicial proceedings, encumbrances, and liens, as well as evidence of satisfaction and other facts affecting the title.
Abuse of a Dominant Position
Abuse of a dominant position refers to anticompetitive practices by large corporations that hold significant market shares, contravening key regulatory frameworks like Article 102 of the Treaty on the Functioning of the European Union (TFEU) and the UK Competition Act 1998.
Abusive Tax Shelter
In the USA, an abusive tax shelter reduces liability to tax using complex transactions often judged to have no legitimate business purpose beyond tax avoidance. The IRS publishes a list of such transactions, making taxpayers liable for back taxes and interest. Similarly, the UK's GAAR aims to outlaw 'artificial and abusive' tax shelters.
Abut or Abutting
The term 'abut' or 'abutting,' frequently used in real estate and property law, refers to properties or parcels of land that adjoin or meet each other, sharing a common boundary.
Accelerated Cost Recovery System (ACRS)
The Accelerated Cost Recovery System (ACRS) is a method of tax depreciation introduced in 1981 and modified in 1984. It was used for tangible personal property placed in service between January 1, 1981, and December 31, 1986, and later replaced by the Modified Accelerated Cost Recovery System (MACRS) for assets placed in service after 1986.
Accelerated Cost Recovery System (ACRS)
The Accelerated Cost Recovery System (ACRS) was a method for depreciating property for tax purposes in the United States, allowing for accelerated depreciation schedules compared to traditional methods. This system has largely been replaced by the Modified Accelerated Cost Recovery System (MACRS).
Accelerated Cost Recovery System (ACRS)
The Accelerated Cost Recovery System (ACRS) is a depreciation method introduced by the Economic Recovery Tax Act of 1981 that allows taxpayers to recover the cost of an asset over a specified life that is shorter than the actual useful life of the asset, thereby reducing taxable income in the earlier years of an asset's life.
Accelerated Depreciation
Accelerated depreciation is a method of depreciating assets faster than the standard useful-life method, resulting in higher depreciation expenses earlier in the asset's life. This method is particularly useful for assets that lose their value quickly due to rapid innovation or technological change.
Acceleration
Acceleration is the action taken by a lender demanding early repayment of the entire loan balance when a borrower defaults on the terms of the loan agreement.
Acceleration Clause
An acceleration clause is a loan provision giving the lender the right to declare the entire amount immediately due and payable upon the violation of a specific provision of the loan, such as failure to make payments on time.
Accelerator, Accelerator Principle
The Accelerator Principle is an economic concept that proposes investment levels respond to growth in output, suggesting that changes in the rate of output growth result in changes in investment.
Acceptable Use Policy (AUP)
An Acceptable Use Policy (AUP) is a formal set of rules and guidelines that govern how a computer network, internet service, or other digital resources may be used. This policy aims to protect the integrity of the network and ensure it is used ethically and legally.
Acceptance
The voluntary act of receiving something or agreeing to certain terms in various contexts such as banking, contract law, and real property law.
Acceptance Credit
A means of financing international trade transactions through credit extended by a commercial or merchant bank to a foreign importer deemed creditworthy.
Acceptance Sampling
Acceptance sampling is a statistical procedure utilized in quality control that involves testing a batch of data to determine if the proportion of units having a particular attribute exceeds a given percentage.
Acceptance Supra Protest (Acceptance for Honour)
The practice of accepting or paying a bill of exchange after it has been dishonoured, by an individual aiming to preserve the honour of the drawer or an endorser.
Access Right
Access Right refers to the legal ability of a property owner to enter and exit their property, ensuring unobstructed access to and from a public road or path.
Access Time
Access time refers to the duration a computer system requires to retrieve data from memory or storage and can also denote the time necessary to transfer data within the device to an appropriate storage location.
Accident and Health Benefits
Accident and Health Benefits refer to fringe benefits provided for accidental injury, accidental death, or sickness. These benefits typically cover payment of medical, surgical, and hospital expenses, along with income payments.
Accommodation Bill
An accommodation bill is a type of bill of exchange signed by an individual who acts as a guarantor, ensuring the bill’s payment in case the acceptor fails to pay at maturity. These bills are often called windbills or windmills.
Accommodation Endorser, Maker, or Party
An accommodation party is an individual who signs a financial instrument, such as a note, as a favor to another party without receiving any compensation or benefit, thus guaranteeing the debt of another individual.
Accommodation Paper
Accommodation paper is a type of negotiable instrument signed by a party—without receiving value: to facilitate another party in obtaining money or credit.
Accommodation Party
An accommodation party is an individual who signs an accommodation bill as the drawer, acceptor, or endorser, thereby acting as a guarantor to assure the payment of that bill.
Accord and Satisfaction
Accord and satisfaction is a legal concept that enables one party to a contract to fulfill their contractual duty differently than originally agreed, provided the other party consents. This concept involves two components: an accord and a satisfaction.
Account
An account is a financial statement of indebtedness from one person to another. It documents transactions and is integral to recording and maintaining financial records.
Account Balance
Account balance refers to the amount of money available in a financial account at a given point in time. It is an essential concept in personal and business finance, indicating the net value of the account.
Account Code
An account code is a unique number assigned to an account in the chart of accounts, facilitating quick identification and classification of financial transactions based on various features such as asset type, location, or department.
Account Executive
An account executive (AE) is responsible for managing client relationships within an organization, serving as the primary contact point, ensuring customer satisfaction, and overseeing the delivery of services.
Account Number
An account number is a unique identifier assigned to each customer, supplier, lender, or other entity to facilitate the tracking and management of transactions and activities associated with that entity. These account numbers can be coded in various ways and often contain relevant information about the associated entity.
Account Payee Only
An instruction printed on a cheque that makes it non-transferable, ensuring that the cheque can only be deposited into the account of the individual or entity named on the cheque, adding an additional layer of security.
Account Reconciliation
Account reconciliation is a critical accounting procedure used to ensure that balances in financial records correspond with the actual account balances, typically those presented in bank statements. It is essential for maintaining the accuracy and integrity of a company's financial data.
Account Statement
An Account Statement is a detailed record of financial transactions for a specific period. It provides a summary of all activities within an account, showing the resulting balances and transactions.
Accountability
An obligation to give an account. In the context of limited companies, it's assumed that the directors are accountable to the shareholders, fulfilled partially through annual reports and accounts.
Accountancy
A profession regulated by accountancy bodies that oversees the activities of accountants, encompassing the process of accounting.
Accountancy and Actuarial Discipline Board (AADB)
The UK body responsible for investigating cases of alleged misconduct by members of the accounting and actuarial professions that raise public concern.
Accountancy Bodies
Organizations, established worldwide, to regulate the activities of accountants. Members are entitled to use various professional titles such as Chartered Accountant, Chartered Certified Accountant, or Certified Public Accountant. Membership is controlled by examination, and compliance with the body's regulations is expected.
Accountancy Investigation and Discipline Board (AIDB)
The Accountancy Investigation and Discipline Board (AIDB), now known as the Accountancy and Actuarial Discipline Board (AADB), is a UK-based entity responsible for overseeing the professional conduct and disciplinary processes for accountants and actuaries.
Accountant
An Accountant is a qualified professional responsible for collating, recording, and communicating financial information. They prepare analyses for decision-making purposes and must have passed examinations from recognized accountancy bodies and completed required work experience.
Accountant's Opinion
An Accountant's Opinion is a statement signed by an independent Certified Public Accountant that describes the scope of the examination of an organization's books and records. It provides important assurance to lenders or investors.
Accountant’s Lien
An accountant's lien is the right to retain possession of a client's goods or property until the client fulfills their financial obligations to the accountant.
Accountants' Report
A comprehensive report prepared by accountants that includes financial information, often required to be included in a company's prospectus as mandated by the London Stock Exchange.
Accounting
Accounting is the process of identifying, measuring, recording, and communicating economic transactions. Typically, this is done using monetary terms and involves the preparation of financial statements such as profit and loss accounts and balance sheets.
Accounting and Finance Association of Australia and New Zealand (AFAANZ)
AFAANZ is a professional organization dedicated to fostering excellence in accounting and finance practices across Australia and New Zealand through research, education, and community engagement.
Accounting and Financial Women's Alliance (AFWA)
The Accounting and Financial Women's Alliance (AFWA) is a U.S. organization focused on promoting the career advancement of women in accounting and related fields through education, networking, and publicity.
Accounting and Tax Index
The Accounting and Tax Index was a quarterly publication by the American Institute of Certified Public Accountants (AICPA) from 1992 to 2004, serving as a bibliography of books and articles on accounting and tax subjects. It has been succeeded by the online database ProQuest Accounting and Tax.
Accounting Bases
Accounting bases refer to the methods and techniques used to apply fundamental accounting concepts to financial transactions and items when preparing financial statements. The specific bases adopted by an organization form its accounting policies.
Accounting Change
An accounting change refers to the modification in accounting principles, estimates, or the reporting entity. Proper disclosure is required to justify and clarify the financial impact of these changes.
Accounting Code
In modern accounting systems, an accounting code serves as a numerical reference given to each account, facilitating the streamlined recording of voluminous accounting transactions by computer.
Accounting Concepts
An overview of basic theoretical ideas devised to support the activity of accounting. These concepts form the fundamental principles needed for producing comparable, relevant, reliable, and understandable financial information.
Accounting Council
The Accounting Council is a body established to provide advice on accounting and financial reporting policies, aiding the Financial Reporting Council (FRC) in the development of Financial Reporting Standards.
Accounting Cushion
An accounting cushion refers to the practice of recording larger provisions for expenses in one fiscal year to minimize expenses in future years. This practice results in understated earnings for the current period but overstates earnings in subsequent periods.
Accounting Cycle
The accounting cycle is the sequence of steps in accounting for a financial transaction entered into by an organization. It involves recording transactions in the books of account and aggregating them in financial statements for a financial period.
Accounting Directive (EU Directive 2014/95/EU)
The Accounting Directive (2014/95/EU) aims to simplify the disclosure requirements for small companies, notably through the introduction of abridged accounts, and includes special rules for micro-entities. The directive was incorporated into UK law in 2015 and applies to financial periods beginning on or after 1 January 2016.
Accounting Entity
The accounting entity concept is the principle that financial records are prepared for a distinct unit or entity regarded as separate from the individuals that own it, ensuring clear financial reporting.
Accounting Equation (Balance Sheet Equation)
The Accounting Equation forms the foundation of the balance sheet and illustrates how assets, liabilities, and equity are interrelated, ensuring that the balance sheet remains balanced.
Accounting Error
An accounting error is an inaccurate measurement or representation of an accounting-related item not caused by intentional fraud. Errors can stem from negligence or the misapplication of Generally Accepted Accounting Principles (GAAP). These errors may manifest as dollar discrepancies or compliance issues in employing accounting policies and procedures.
Accounting Ethics
Principles of morally right conduct in the accounting profession, emphasizing the need for accountants to act in the public interest while operating in a commercial environment.
Accounting Event
An accounting event is a transaction or change, either internal or external, that is recognized by the accounting recording system. It involves recording entries as debits and credits.
Accounting Exposure
Accounting exposure, also known as translation exposure, is the risk that a company's financial statements can be affected by exchange rate fluctuations when the company has foreign subsidiaries or international dealings.
Accounting Manual
A comprehensive document detailing a business's accounting policies and procedures, often including account codes and a chart of accounts. Key aspects include methods for treating depreciation and other asset-related processes.
Accounting Method
An accounting method refers to the rules a company follows in reporting revenues and expenses, which are crucial for computing income and determining taxable income.
Accounting Package
An accounting package is a type of business software designed to help businesses manage their accounting processes including invoicing, payroll, accounts payable, accounts receivable, and general ledger functions.

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.