Premises
Premises are commonly understood as land and its appurtenances, including structures thereon. The term also refers to any place where an employee may go in the course of his employment for purposes of Workers' Compensation.
Premium
In accounting and finance, the term 'premium' can refer to the consideration payable for a contract of insurance, an amount in excess of the nominal value of a share, or an amount in excess of the issue price of a share or other security. Premiums play a significant role in insurance policies and in the valuation of shares and securities.
Premium Bond
A premium bond is a type of bond that sells for more than its face or redemption value. For example, if a bond with a face value of $1,000 sells for $1,050, it is considered a premium bond. The premium can be amortized on a straight-line basis over the life of the bond for tax purposes.
Premium Income
Premium income refers to the income received by an investor who sells a put option or a call option. This income serves as compensation for the risk taken by writing the options.
Premium on Capital Stock
Premium on capital stock refers to the excess amount received from stockholders over the par value of the stock issued. It is reflected in the balance sheet under the paid-in-capital section of stockholders' equity and should not be regarded as income.
Premium Pay
Premium pay refers to special pay rates provided to employees for working during weekends, holidays, late shifts, or engaging in hazardous work. Also known as penalty pay, it serves as an incentive for employees to work during less desirable times or in high-risk occupations.
Premium Rate
A premium rate refers to the price per unit of insurance coverage or, in finance, the premium fee applied to certain stocks when borrowed for trading activities such as short selling.
Prenuptial Agreement
A prenuptial agreement, also known as a prenup, is a legal contract between future spouses detailing the handling of financial affairs during the marriage and in the event of divorce.
Prepackaged Bankruptcy
Prepackaged bankruptcy under Chapter 11 involves a pre-negotiated agreement between creditors and the debtor regarding the terms of reorganization before filing for bankruptcy.
Prepaid Expenses
Prepaid expenses refer to amounts that are paid prior to the period they cover, such as insurance and rent. These expenses are assets on the balance sheet and become tax deductible during the appropriate period.
Prepaid Income
Prepaid income refers to rents, interest, or other forms of compensation received in advance for services or deliveries to be provided at a later date. It is generally included in taxable income in the year it is received.
Prepaid Interest
Prepaid interest is the interest paid in advance before it is earned, often seen in loan agreements and mortgage practices. Generally, prepaid interest is not tax deductible, except for the customary points paid by a borrower on the initial mortgage to purchase a principal residence.
Prepayment
A prepayment, also referred to as a payment in advance, is a payment made for goods or services before they are actually received. In accounting, it is treated as a deferred debit under the accruals concept and is shown as a debit balance under debtors in the current assets section of the balance sheet.
Prepayment Clause
A prepayment clause is a provision in a bond or mortgage that allows the borrower to pay off the loan before its scheduled due date. In some cases, there may be penalties for prepayment, such as the waiver of interest that is not yet due.
Prepayment Penalty
A prepayment penalty is a fee paid by a borrower for the privilege of retiring a loan early. It is not a tax-deductible interest expense.
Prepayment Privilege
Prepayment privilege refers to the right of a borrower to repay a loan before its scheduled maturity date without incurring penalties.
Prequalify
A preliminary process used to estimate the most expensive home a buyer can afford based on their income and available liquid assets. This exercise outlines potential pricing but does not guarantee specific financing nor obligate the buyer to accept it.
Prerogative
An unquestioned right or privilege that belongs to an individual, often due to their position, status, or membership in a particular group.
Presale
Presale refers to the sale of proposed properties, such as condominiums, before construction begins. It is a common practice used by developers to secure funds and gauge market interest in their projects.
Prescription
Prescription refers to several distinct legal and medical terms, including the means of acquiring an easement through long-term use, a legal remedy, and a written authorization for pharmaceutical products.
Prescriptive Right
A 'prescriptive right' refers to the entitlement to use and access a property based on continuous and historic use over a certain period, without the permission from the rightful owner. Typically recognized in property law, such rights can affect land ownership and usage disputes.
Present Fairly
A term used in the auditor's report to signify sufficient disclosure, reasonable detail, and absence of bias, ensuring the integrity and accuracy of financial statements.
Present Value (Discounted Value)
Present value, also known as discounted value, is the current worth of a sum of money or a stream of cash flows that will be received or paid in the future, calculated using a specific discount rate. It is an essential concept in finance, particularly in discounted cash flow (DCF) analysis.
Present Value (Worth)
Today's value of a future payment or stream of payments, discounted at an appropriate compound interest or discount rate; also known as the time value of money.
Present Value (Worth) of 1
Today's value of an amount to be received in the future, based on a compound interest rate. For example, at a 12% interest rate, the receipt of one dollar one year from now has a present value of $0.89286.
Present Value (Worth) of Annuity
The present value (PV) of an annuity is the current value of a series of future payments, discounted at a specific interest rate over a specific number of periods. It is a fundamental concept in finance and accounting, allowing individuals and businesses to evaluate the worth of future payments in today's terms.
Present-Value Factor
The present-value factor is an accounting term that represents the multiplier used to determine the present value of a series of future cash flows, considering a specific discount rate.
Presentation
A presentation involves setting forth in words and visuals a speech designed to enlighten an audience and/or persuade them to commit themselves to a course of action.
Presentation Currency
The currency in which the financial statements of an entity are presented, which can differ from the functional currency, especially in multinational groups with subsidiaries in different countries. It often requires a common presentation currency for consolidated financial statements.
Presentment
Presentment refers to the process of presenting a financial instrument for payment. It's commonly used in online billing where invoices are sent to customers digitally after their orders have been fulfilled.
President
The President is the highest-ranking officer in a corporation after the Chairman of the Board, unless the title of Chief Executive Officer (CEO) is used. In that case, the CEO can outrank the President. The President is appointed by the Board of Directors and usually reports directly to them.
Presidential Election Cycle Theory
The Presidential Election Cycle Theory posits that major stock market moves are influenced by the four-year presidential election cycle, with stocks expected to rise in anticipation of economic recovery efforts by the incumbent president before election day.
Presold Issue
A presold issue refers to the issuance of municipal bonds or government bonds that is completely sold out before the price or yield is publicly announced. This typically happens through prerelease sales to institutional investors.
Presort First-Class Mail
Presort First-Class Mail is a service offered by the United States Postal Service (USPS) that provides a reduced rate for first-class mail that meets specific sorting and quantity requirements.
Press Kit
A press kit, also known as a media kit, is a collection of promotional materials a company produces to provide information about itself to members of the press or media.
Press Relations
Press Relations involves the strategic management of communication between an organization and the public through the media. This process includes interactions with reporters, editors, and media administrators.
Prestige Advertising
Advertising designed to enhance the prestige of a company or a company's products or services, aiming to elevate the perceived reliability, quality, and reputation.
Prestige Pricing
Prestige pricing is a pricing strategy that entails setting prices at a higher level to reflect the assumption that consumers associate higher prices with higher quality. This strategy targets consumers who value premium products and are willing to pay more for perceived superior quality.
Presumption
Presumption refers to assumptions or inferences drawn from available information until proven incorrect. It can also denote impertinent or irritating opinions, conduct, or speech.
Pretax Earnings
Pretax earnings, also known as pretax profit or profit before tax (PBT), refer to a company's earnings before any federal or state income taxes have been deducted. It is a key measure of a company's financial performance and highlights the profit generated from its operations excluding tax-related expenses.
Pretax Income
Pretax income, also known as earnings before tax (EBT), represents the amount of income earned from business or investments before the deduction of any applicable income taxes.
Pretax Rate of Return
The pretax rate of return is the percentage yield or capital gain generated by a particular investment or security before considering the impact of taxes.
Prevention Costs
Expenditures incurred by an organization to prevent defects in its products or services, which form an integral part of the Cost of Quality and are sometimes related to Environmental Costs.
Preventive Maintenance
Preventive maintenance involves regular and routine check-ups on equipment and property to ensure they are in good working condition, thereby minimizing the need for costly repairs or replacements. This practice helps extend the lifespan of systems and machinery.
Price Discrimination
Price discrimination is the practice of charging different customers different prices for the same products or services. When this practice is used to reduce competition, it may violate antitrust laws.
Price Elasticity
Price elasticity measures the sensitivity of the quantity demanded of a good to a change in its price. It helps determine how changes in price affect total expenditure on that good in the market.
Price Flexibility
Price flexibility refers to the economic circumstance where prices are permitted to vary considerably in response to changes in supply and demand.
Price Index
A price index traces the relative changes in the price of an individual good, or a market basket of goods, over time. Common examples include the Consumer Price Index (CPI) and the Producer Price Index (PPI).
Price Inelasticity
Price inelasticity refers to a situation in which the demand for a product or service is not significantly affected by changes in its price. This phenomenon occurs when consumers have few or no substitutes for the product or when it represents a small portion of their budget.
Price Leader
In an oligopolistic industry, a price leader is the firm whose output pricing decisions are most likely to be matched by other firms. This role sets the industry standard for pricing and significantly influences market dynamics, leading to reduced competition.
Price Level
Price level refers to the average of current prices across the entire spectrum of goods and services produced in the economy. It is often utilized as a gauge to measure inflation or deflation by comparing it to previous time periods.
Price Stabilization
Price stabilization refers to a collection of government policies designed to halt or slow down rapid changes in prices, usually during inflationary episodes or shortages.
Price Support
A government-set price floor designed to aid farmers or other producers of goods, ensuring minimum revenue and market stability.
Price System
A price system is an economic mechanism in which market-determined prices guide the allocation of resources, typically seen in capitalist economies.
Price Variance
Price variance is a common term in cost accounting that represents the difference between the actual cost of acquiring an asset or service and the budgeted or standard cost. It highlights whether an organization is paying more or less than previously anticipated for a particular expense.
Price War
A price war occurs when competing companies reduce their prices in a bid to attract customers, often leading to reduced profits and potentially driving some businesses out of the market.
Price-Dividend Ratio (P/D Ratio)
The Price-Dividend Ratio (P/D Ratio) is a financial metric used to determine the relative valuation of a company's stock by comparing its current share price to the dividends it pays to shareholders.
Price-Dividend Ratio (PDR)
The Price-Dividend Ratio (PDR), also known as the Price/Dividend (P/D) ratio, is the current market price of a company's share divided by the dividend per share for the previous year. It measures the investment value of the share.
Price-Earnings (P/E) Ratio
The P/E ratio is a measure of a company's current share price relative to its per-share earnings, often used by investors to assess a company's valuation.
Price-Earnings (P/E) Ratio
The Price-Earnings (P/E) Ratio signifies the price of a stock divided by its earnings per share (EPS), acting as a multiple. It offers insights into market expectations regarding a company’s future earning power.
Price-Earnings Ratio (P/E Ratio)
An essential metric in fundamental analysis, the Price-Earnings Ratio (P/E Ratio) compares a company's current share price to its per-share earnings, helping investors determine whether a stock is under or overvalued.
Price-Fixing
Price-fixing is an illegal activity under federal antitrust laws in the United States. It occurs when competing businesses agree, collude, or conspire to set or maintain the price of a commodity or service, rather than allowing market forces to determine price. The purpose and effect of price-fixing are to manipulate prices in a way that eliminates competition and harms consumers by maintaining higher prices or controlling the supply of goods or services in interstate commerce.
Price-Level Accounting
An accounting system designed to account for changes in general price levels (inflation or deflation), making it an alternative to historical-cost accounting.
Price-Sensitive Information
Information (usually unpublished) about a company that is likely to cause its share prices to move. It is often critical and confidential, impacting investor decisions and market valuation.
Price/Book Ratio
The Price/Book Ratio is a financial metric used to evaluate if a stock is undervalued or overvalued by comparing the stock's market price to its book value per share.
PricewaterhouseCoopers (PwC)
An international network of professional services firms recognized as one of the Big Four, alongside Deloitte, Ernst & Young, and KPMG. PwC offers assurance, tax, deals, and consulting services globally.
PricewaterhouseCoopers (PwC)
PricewaterhouseCoopers (PwC) is one of the world's largest professional services networks, offering auditing, assurance, tax, consulting, and advisory services.
Pricey
Pricey refers to products or services offered at prices at or near the top of what the market will bear, or in investment terms, offering or bidding prices that are significantly above or below the current market value.
Pricing
Understanding the different methodologies for setting selling prices for products and services supplied by an organization.
Pricing Above (Below) the Market
A retail pricing strategy to attract customers either with a high price image, strong personal service, and merchandise quality or by underbidding the competition in the case of below-the-market pricing.
Pride of Ownership
Pride of ownership refers to the sense of well-being and pleasure that some people derive from owning a home or other real property, encompassing intangible benefits such as social status, financial accomplishment, and community commitment.
Prima Facie
The term 'prima facie' refers to something that appears to be true at first glance and can be accepted until disproved or rebutted. It describes a circumstance or evidence that is sufficient to establish a fact or a case unless contradicted by further evidence.
Primary Auditor
The primary auditor is the main auditor responsible for the audit opinion on a holding company's consolidated financial statements.
Primary Beneficiary
A primary beneficiary is the individual or entity first in line to receive benefits from a trust, retirement account, or life insurance policy upon the policyholder's death.
Primary Boycott
A primary boycott is a union's organized effort to encourage members and supporters to refuse to use, purchase, or transport an employer's products, goods, or services as a form of protest against the employer. Unlike a secondary boycott, this type of boycott focuses only on the entity directly involved in the labor dispute.
Primary Data
Original data compiled and studied for a specific purpose. For example, a structured survey might be conducted for the purpose of discovering current attitudes on a particular topic; raw survey responses would be primary data.
Primary Demand
Primary demand refers to the total market demand by consumers for non-capital goods rather than specific brands, focusing on the intrinsic need for a product category as a whole.
Primary Distribution
Primary distribution refers to the sale of a new issue of stocks or bonds, distinguishing it from secondary distribution, which involves previously issued stock. All issuances of bonds are primary distributions, and it is also known as a primary offering. It should not be confused with an initial public offering (IPO), which is a corporation's first distribution of stock to the public.
Primary Earnings Per (Common) Share
Primary earnings per (common) share refers to the earnings available to common stockholders divided by the number of common shares outstanding.
Primary Earnings Per Share (EPS)
Primary Earnings Per Share (EPS) is a commonly used metric in financial analysis that measures the profitability of a company by indicating how much profit has been allocated per outstanding share of common stock.
Primary Lease
A primary lease refers to the initial lease agreement established between an owner (landlord) and a tenant, which may then be sublet by the tenant to another party.
Primary Market
The market where new issues of securities are initially sold to investors. It contrasts with the secondary market where existing securities are traded among investors.
Primary Market Area (PMA)
In advertising and business, the 'Primary Market Area' refers to the major area of editorial and advertising coverage for publications or the main sales and distribution area for a product or service.
Primary Metropolitan Statistical Area (PMSA)
A Primary Metropolitan Statistical Area (PMSA) is a geographic entity designated by the federal Office of Management and Budget for use by federal statistical agencies. It is a subunit of a larger metropolitan area that has a census population of one million or more.
Primary Package
The primary package is the immediate container of a product which is in direct contact with the goods and is used for the final consumer sale. For example, a bag of potato chips is the primary package, while the carton in which the bags of potato chips are shipped is the outer package.
Primary Residence
A primary residence refers to the main home a person inhabits most of the year, also known as a principal residence. It contrasts with second homes and vacation homes.
Primary Storage Devices
Primary storage devices, such as Random Access Memory (RAM), are where current data is stored temporarily as the computer operates. These devices use volatile memory chips to manage active processes and data.
Prime Contractor
A prime contractor, often referred to as the general contractor, is the main contractor responsible for overseeing the overall construction project, managing subcontractors, and ensuring completion in compliance with contract specifics and legal requirements.
Prime Cost
Prime cost is a crucial accounting term reflecting the direct costs of production, typically including direct materials and direct labor expenses.
Prime Documents in Accounting
Prime documents are the foundational elements used to initiate and record accounting entries in both accounting and management accounting systems. They include documents such as sales invoices, materials requisitions, materials returns notes, and direct charge vouchers.
Prime Paper
Prime Paper refers to the highest quality commercial paper, rated by major credit rating agencies like Moody's Investor's Service. It is considered investment-grade and is categorized based on its quality level.
Prime Rate
The prime rate refers to the interest rate that commercial banks charge their most creditworthy customers, typically large corporations. It serves as a key benchmark in determining lending rates for consumers and businesses.
Prime Tenant
A prime tenant in a shopping center or office building is the lessee who occupies the most space. Prime tenants are typically credit-worthy and attract significant traffic to the venue.
Principal
The term 'principal' in accounting can refer to either the initial sum of money on which interest is paid or to a person who has authorized another to act on their behalf, especially in the context of an agency relationship.
Principal Amount
The principal amount is the face value of a financial obligation such as a bond or a loan that is required to be repaid at its maturity date, distinct from the interest accrued.
Principal and Interest Payment (P&I)
A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to amortization of the principal balance; commonly used with amortizing loans.
Principal Budget Factor (Limiting Factor)
The principal budget factor, also known as the limiting factor or constraint, refers to the element or resource that imposes a limitation on the organization’s budgeting process and overall production capabilities.
Principal Place of Business
A principal place of business refers to the primary location where an individual conducts the administrative or management activities of a trade or business. It is a key criterion for determining if a home office is tax-deductible.
Principal Private Residence (PPR)
A principal private residence (PPR) refers to an individual's main private dwelling house where they typically reside the majority of the time. Gains arising from the sale of a PPR are usually exempt from capital gains tax (CGT).
Principal Residence
Formerly referred to as the primary residence, a principal residence is the main home where an individual lives and spends the majority of their time. Certain tax benefits and legal protections can be tied to the designation of a property as a principal residence.

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.