Principal Stockholder
A principal stockholder is an individual or entity that owns a significant percentage of a company's shares, typically 10% or more, according to the Securities and Exchange Commission (SEC) rules.
Principal Sum
The principal sum refers to the core amount of a debt or financial obligation. In finance, it is the initial amount of money borrowed without interest. In insurance, it designates the amount specified to be paid to the beneficiary under the policy, such as the death benefit.
Principal, Interest, Taxes, and Insurance Payment (PITI)
A periodic, typically monthly, payment required by an amortizing loan that includes escrow deposits. Each periodic payment includes a principal and interest payment plus a contribution to the escrow account set up by the lender to pay insurance premiums and property taxes on the mortgaged property.
Principle
Principle refers to a fundamental rule or general standard adhered to in most areas of human conduct. These can be ethical declarations, such as 'Do unto others as you would have them do unto you.'
Print Money
Strictly speaking, to engrave and produce physical currency. Connotatively, it means adding to the supply of money and credit for the purpose of monetizing debt or stimulating spending, implicitly leading to inflation or, at worst, hyperinflation.
Printer
A printer is a device that produces a hard copy (printed paper) of documents stored in electronic form, usually on physical print media such as paper. Printers are a common peripheral in computing, available in various types with differing technologies and capabilities.
Printout
A printout refers to the process of producing hard copy output from a computer, involving the selection and printing of information from computer files or displaying the current content on a computer screen.
Prior Period Adjustment
A prior period adjustment is an accounting term used to describe a correction to an error in previously issued financial statements. These adjustments are necessary to accurately reflect the financial status of a company or organization.
Prior Service Cost
Prior service cost refers to the obligations a company incurs for employee benefits under a pension plan related to service provided by the employee before a specific date.
Prior-Period Adjustments
Adjustments applicable to prior accounting periods due to changes in accounting policies or correction of material errors. These are not normal recurring adjustments or corrections of accounting estimates.
Prior-Preferred Stock
A type of preferred stock that has a higher claim on assets and dividends compared to other issues of preferred stock or common stock, often referred to as preference shares.
Priority
A multifaceted concept predominately characterized by the sequence of preference in various legal and financial settings including bankruptcy proceedings, and the right to be paid before other creditors.
Priority Mail
Priority Mail is a class of mail offered by the U.S. Postal Service for letters and parcels, ensuring quick and reliable delivery for packages weighing up to 70 pounds.
Priority of Tax Lien
A federal tax lien for nonpayment of taxes has priority over most other liens but is not valid against specific lien holders until properly recorded. Certain superpriorities may have precedence over a tax lien.
Privacy Laws
Privacy laws refer to the regulations enacted to protect the personal information and privacy of individuals. In the United States, these laws have been introduced following the recommendations of the Privacy Protection Study Commission established by the Privacy Act of 1974.
Private Accountants
Private accountants are in-house accountants employed by an organization to maintain financial control and supervise the organization's accounting system.
Private Brands
Private brands are product brands owned by a retailer or wholesaler rather than the manufacturer. They are typically sold at a lower price compared to national brands.
Private Carrier
A private carrier is a transportation system owned and operated by a company for its own shipping requirements, specifically transporting goods or passengers exclusively for that company's business purposes.
Private Equity Firm
Private equity firms are investment firms that acquire controlling stakes in companies, typically using leverage, to restructure and eventually sell them for profit.
Private Equity Fund
A Private Equity Fund is a collective investment scheme used primarily for acquiring or providing business capital, usually structured as a limited partnership, that receives capital from various accredited and institutional investors.
Private Finance Initiative (PFI)
Private Finance Initiative (PFI) is a procurement method used by the public sector to fund major infrastructure projects with private capital. It involves long-term contracts between private partners and government entities.
Private Finance Initiative (PFI)
A Private Finance Initiative (PFI) is a way of funding public infrastructure projects with private capital, typically structured under long-term contracts between the public and private sectors.
Private Foundation
A private foundation is a non-profit organization, typically family- or corporate-based, that is engaged in charitable activities. It operates under stricter contribution limitations and is subject to several penalty and excise taxes.
Private Good
Private goods are objects or services that possess typical characteristics including excludability and rivalrous consumption. These goods are consumed by individuals, and the consumption by one person prevents others from consuming the same unit or gaining similar benefits.
Private Issue
A private issue, also known as a private placement, refers to the sale of securities to a relatively small number of chosen investors as a way of raising capital.
Private Law
Private Law governs the relationships between private individuals, companies, or organizations. Unlike Public Law, it does not involve government intervention and encompasses various legal disciplines including contract, tort, property, and family law.
Private Ledger
A private ledger is a subset of an accounting ledger that holds confidential and sensitive financial information, isolated from the general ledger for security and privacy reasons.
Private Limited Company
A private limited company is a type of business entity which has limited liability and restricted ownership, preventing it from offering shares to the public.
Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is a type of insurance required primarily for homebuyers who obtain conventional loans with a down payment of less than 20% of the home's purchase price. It protects the lender in case the borrower defaults.
Private Mortgage Insurance (PMI)
Insurance on conventional loans, provided by private insurance companies to protect lenders against loss if a borrower defaults on their loan.
Private Offering
A private offering, also known as private placement, refers to an investment or business offered for sale to a small group of investors, generally under exemptions to registration allowed by the Securities and Exchange Commission (SEC) and state securities registration laws.
Private Ruling
A private ruling is a written response from the Internal Revenue Service (IRS) regarding the tax implications of a specific proposed transaction. Initially kept private, these rulings are now publicly accessible.
Privatization (Denationalization)
A comprehensive guide detailing the transition of a publicly owned company or asset to private sector ownership, including economic and political motivations, examples, FAQs, related terms, and learning resources.
Privilege
A right or prerogative to perform specific actions that are exclusive to an individual or a group. It often stems from wealth, status, or specific societal structures.
Privity
Privity refers to the direct relationship between parties that is necessary for legal liability or mutual interest to exist. It's a fundamental concept in different domains of law, especially contract and property law.
Prize Broker
A prize broker arranges the exchange of an advertiser's merchandise for free broadcast time or publicity plugs on radio or television shows, often called a barter broker.
Pro Forma
Pro Forma refers to the presentation of financial data that adheres to a specific format and often includes hypothetical or projected numbers to provide a basis for analysis and planning.
Pro Rata
Pro rata refers to the proportionate allocation of a particular expense or resource among individuals or entities based on their respective shares or contributions.
Pro Rata Cancellation
Pro rata cancellation refers to the revocation of an insurance policy by an insurance company, which returns to the policyholder the unearned premium without reducing for expenses already paid.
Pro Rata Distribution Clause
A provision in many property insurance policies that automatically distributes coverage over insured property at various locations in proportion to their value.
Pro-Forma Financial Statements
Pro-forma financial statements are financial reports prepared in advance, containing estimates and projections to inform and guide decision-making.
Proactive
Proactively engaging in future-oriented strategies to anticipate and address potential issues before they arise.
Probability
Probability is the likelihood that a particular outcome will occur, quantified on a scale from 0 (indicating certainty that it will not occur) to 1 (indicating certainty that it will occur). It is a key concept in decision-making models, often subjective in nature.
Probability Density Function
In statistics, a probability density function (PDF) defines the likelihood of a discrete or continuous random variable taking specific values or a range of values, respectively.
Probate
Probate is the legal process by which a will is proved valid or invalid, encompassing all procedures necessary to authenticate the document and administer the estate of the deceased.
Probate Assets
Probate assets are those assets within an estate that are subject to probate and court disposition, and thus become part of public records.
Probate Estate
A probate estate includes all property that passes under a will or by state intestate succession laws from a decedent to their heirs or other beneficiaries. It is distinct from the gross estate.
Probate Value
A valuation of all the assets included in the estate of a deceased person at the date of his or her death, taking into account any restrictions on the use of the assets. This value is primarily agreed upon with HM Revenue and Customs for the purpose of calculating inheritance tax.
Probationary Employee
A probationary employee refers to an individual who is in a preliminary period of employment, during which their performance and suitability for a permanent role is evaluated. This term can also apply to current employees placed on probationary status as a form of disciplinary action.
Problem Child
In the context of the Boston Consulting Group (BCG) Matrix, a 'Problem Child' represents a business unit, product line, or project that holds a small market share in a high-growth market. These units or products have the potential to grow but require significant investment to gain market share.
Problem Resolution Program (PRP)
The Problem Resolution Program (PRP) is an avenue provided by the IRS for aggrieved taxpayers who have difficulty getting their voices heard, providing them with assistance and advocacy.
Proceeds
Proceeds refer to the amount of money or capital generated from a transaction or a series of transactions, typically calculated after applicable costs, fees, and commissions have been deducted.
Process Control System
Process control systems are computerized sensing systems that monitor specialized devices and processes within a controlled environment. These systems have the capability of automatically making adjustments to maintain preset environmental specifications.
Process Costing
A costing system applied to production carried out by a series of chemical or operational stages or processes. Characterized by the accumulation of costs for the whole production process and computation of average unit costs at each stage.
Process Costing
Process costing is a method of cost accounting used where production is continuous, and the cost per unit is derived by spreading production costs equally across all units produced in a specific time period.
Process Division
A method of dividing the productive procedures in a manufacturing organization into organizational segments to optimize efficiency and specialization.
Process Innovation
Process innovation refers to the implementation of a new or significantly improved production or delivery method. This can include changes in techniques, equipment, or software and aims to increase efficiency and effectiveness in an organization.
Procurement
Procurement is the acquisition of goods, services, or works from an external source, typically through a bidding process. It involves the process of finding, agreeing on terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.
Procuring Cause
Procuring Cause is a legal term predominantly used in real estate to determine whether a broker is entitled to a commission. It refers to the action that resulted directly in achieving a specific goal, such as the sale or lease of a property.
PRODIGY
An early online service provider, now owned by AT&T (formerly SBC Corporation), that left an indelible mark on the digital age by pioneering online community and internet access.
Produce
The term 'produce' refers to both the act of creating or manufacturing goods and the classification of agricultural products like fruits and vegetables.
Producer Cooperative
An organization of producers who cooperate in the areas of buying supplies and equipment and of marketing. These cooperatives aim to achieve greater efficiency and market influence than they could individually.
Producer Goods
Producer goods, also known as intermediate or capital goods, are newer machinery and equipment bought for business use. These are durable goods used in business production to assist in the production of consumer goods and services.
Producer Price Index (PPI)
The Producer Price Index (PPI) measures wholesale prices across various stages of production and distribution before goods and services reach the consumer market. It is released monthly by the U.S. Bureau of Labor Statistics.
Product
An item, sub-assembly, part, or cost unit manufactured or sold by an organization.
Product Advertising
Product advertising is targeted specifically at promoting individual products or services, highlighting their features, benefits, and performance to attract customers and drive sales.
Product Costs
The costs of production when charged to the cost units and expressed as costs of individual products. Product costs may include both direct costs and indirect costs (overhead); many different costing methods, such as absorption costing, activity-based costing, and process costing, are used in computing product costs.
Product Development Process
The structured sequence of stages involved in bringing a new product or service concept to market, encompassing market analysis, targeting, development, distribution, and feedback analysis.
Product Differentiation
Product differentiation is a strategic process employed by businesses to set their products apart from competitors through unique features, branding, and quality.
Product Image
A product image is a visual representation used in marketing and advertising to promote and describe a product.
Product Liability
Product liability refers to the legal responsibility of manufacturers, wholesalers, or retailers to ensure that their products are safe for consumers. It arises under the law of torts and holds parties strictly liable for defects that cause injury.
Product Life Cycle
The Product Life Cycle (PLC) is a theory that postulates the development of a product through various stages, guiding marketing managers in devising effective strategies and decisions. It encompasses introduction, growth, maturity, and decline stages.
Product Line
A product line refers to a group of products manufactured by a firm that are closely related in use and in production and marketing requirements. The depth of the product line indicates the number of different products offered within that line.
Product Manager
A Product Manager is responsible for the planning, development, and overall strategic execution of a product throughout its lifecycle, ensuring that it meets market needs and aligns with the company's business objectives.
Product Mix
The assortment of merchandise made or held for sale by a business; a crucial element of marketing strategy.
Product Research and Development (PR&D)
Product Research and Development (PR&D) involves activities performed by a team of professionals working to transform a product idea into a technically sound and promotable product. This process, also referred to as Research & Development (R&D), is essential for innovation and maintaining competitive advantage in the market.
Product-Sustaining-Level Activities
Product-sustaining-level activities are activities that are necessary to support a specific product regardless of the volume of production. These activities ensure the possible production and effective marketing of the product.
Production
Production refers to the processes and methods employed to transform inputs (like raw materials, labor, and machinery) into finished products or services. The volume of production can be quantified in units, direct labor hours, machine hours, or direct labor costs.
Production and Operations Management (POM)
The planning, coordination, and controlling of an organization's resources to efficiently facilitate the production process, encompassing key issues such as location, labor, transportation costs, and production forecasting.
Production Budget
A critical component of an organization's operating budget, the production budget outlines the volumes and costs associated with producing goods within a set period, ensuring effective budgetary control.
Production Builder, Production Home
A production builder refers to a construction professional or company that builds homes based on a set of pre-planned designs and specifications, often using an efficient, assembly-line process. This model contrasts with custom builders who design and build homes according to individual customer specifications.
Production Control
Production control involves planning, routing, scheduling, dispatching, and inspecting the operations or items being manufactured to ensure efficiency and quality in the production process.
Production Cost
The total of all the costs incurred in producing a product or cost unit. In a manufacturing account, the production cost is represented by the total of the direct cost of sales and the manufacturing overhead.
Production Cost Centre
A pivotal area within an organization where production activities are conducted, focusing on tracking and managing production-related expenses.
Production Cost Variance in Standard Costing
Production Cost Variance in standard costing measures the difference between standard costs and actual costs for production. Understanding this variance helps in identifying efficiency levels and cost management effectiveness.
Production Department
A section of an organization in which production is carried out, focusing on transforming raw materials into finished goods through various processes and workflows.
Production Forecasting
Production forecasting is the process of judging how much production is required to meet estimated sales in a particular forecasting period. Considerations include previous sales, the general state of the economy, consumer preferences, and competitive products. Production forecasting decisions affect budgetary and scheduling decisions.
Production Function
A mathematical formula that describes the relationship between various inputs and the output they produce, often used to analyze the efficiency and productivity of firms or entire industries.
Production Herd
A group of living animals or other livestock kept for their products, such as milk or wool, or for their young. It can be treated as a capital asset.
Production Order
A detailed directive issued to the production department specifying the production tasks to be completed, including operations, quantities, timelines, and completion deadlines essential for streamlined manufacturing processes and efficient resource utilization.
Production Overhead
Production overhead, also known as manufacturing overhead, refers to the indirect costs associated with manufacturing a product. These costs are not directly tied to the production process but are necessary expenses for running a manufacturing operation.
Production Planning
Production planning is the administrative operation that ensures material, labor, and other resources necessary for the production process are available when and where needed in the required quantities.
Production Possibility Frontier
A graphical representation that shows the various combinations of outputs that an economy can produce given the available resources and technology.
Production Profit/Loss
Production Profit/Loss refers to the financial gain or loss that results from manufacturing activities. It equals the difference between total production revenue and total production costs.
Production Rate
The production rate is a vital metric in manufacturing, representing the speed at which a production line manufactures products. It informs stakeholders about productivity efficiency and capacity utilization.
Production Worker
Production workers are employees directly involved in the manufacturing processes of an organization, executing tasks necessary to produce goods. These individuals are distinct from supervisory and clerical employees and are often referred to as production line workers.
Production-Oriented Organization
An in-depth look at organizations primarily focused on the production of goods and services, their operations, and their strategic significance.
Production-Possibility Curve
A graphic representation of various possible outputs of two goods with a fixed supply of resources that are fully employed. Also called a transformation curve, it is useful for determining possible product mixes.
Production-Unit Method (Units of Production Method of Depreciation)
The Production-Unit Method is a technique for calculating depreciation where the depreciation charge is based on the number of units produced by machinery over its useful life.
Production-Volume Ratio (PV Ratio)
The Production-Volume Ratio (PV Ratio), also known as the Contribution Margin Ratio, is a performance metric that measures the proportion of sales revenue that exceeds variable costs. It's an essential indicator in assessing the profitability of products or services in cost-volume-profit analysis.

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.