(See related pages)
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| Accelerated depreciation method (p. 418) | Computes more depreciation expense in the early years of the asset's life than in the later years. |
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| Accounts payable (p. 385) | Amounts owed to creditors for services or items purchased. |
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| Accounts receivable (p. 385) | Amount owed by customers to a business from previous sales. |
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| Accumulated depreciation (p. 413) | Amount of depreciation that has accumulated on plant and equipment assets. |
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| Acid test (p. 396) | Current assets less inventory less prepaid expenses divided by current liabilities. |
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| Addends (p. 8) | Numbers that are combined in the addition process. Example: 8 + 9 = 17, of which 8 and 9 are the addends. |
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| Adjustable rate mortgage (p. 366) | Rate of mortgage is lower than a fixed rate mortgage. Rates adjusted without refinancing. Caps available to limit how high rate can go for each adjustment period over term of loan. |
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| Adjusted bank balance (p. 96) | Current balance of checkbook after reconciliation process. |
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| Amortization (p. 346) | Process of paying back a loan (principal plus interest) by equal periodic payments (see amortization schedule). |
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| Amortization schedule (p. 371) | Shows monthly payment to pay back loan at maturity. Payment also includes interest. Note payment is fixed at same amount each month. |
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| Amount financed (p. 342) | Cash price less down payment. |
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| Annual percentage rate (APR) (p. 343) | True or effective annual interest rate charged by sellers. Required to be stated by Truth in Lending Act. |
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| Annual percentage rate (APR) table (p. 343) | Effective annual rate of interest on a loan or installment purchase as shown by table lookup. |
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| Annual percentage yield (APY) (p. 301) | Truth in savings law forced banks to report actual interest in form of APY. Interest yield must be calculated on actual number of days bank has the money. |
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| Annuities certain (p. 318) | Annuities that have stated beginning and ending dates. |
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| Annuity (p. 317) | Stream of equal payments made at periodic times. |
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| Annuity due (p. 318) | Annuity that is paid (or received) at the beginning of the time period. |
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| Assessed value (p. 456) | Value of a property that an assessor sets (usually a percent of property's market value) that is used in calculating property taxes. |
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| Asset cost (p. 413) | Amount company paid for the asset. |
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| Assets (p. 384) | Things of value owned by a business. |
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| Asset turnover (p. 396) | Net sales divided by total assets. |
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| ATM (p. 89) | Automatic teller machine that allows customers of a bank to transfer funds and make deposits or withdrawals. |
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| Average daily balance (p. 352) | Sum of daily balances divided by number of days in billing cycle. |
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| Average inventory (p. 458) | Total of all inventories divided by number of times inventory taken. |
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| Balance sheet (p. 384) | Financial report that lists assets, liabilities, and equity. Report reflects the financial position of the company as of a particular date. |
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| Bank discount (p. 282) | The amount of interest charged by a bank on a note. (Maturity value x Bank discount rate x Number of days bank holds note) ÷ 360. |
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| Bank discount rate (p. 280) | Percent of interest. |
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| Banker's Rule (p. 260) | Time is exact days/360 in calculating simple interest. |
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| Bank reconciliation (p. 96) | Process of comparing the bank balance to the checkbook balance so adjustments can be made regarding checks outstanding, deposits in transit, and the like. |
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| Bank statement (p. 95) | Report sent by the bank to the owner of the checking account indicating checks processed, deposits made, and so on, along with beginning and ending balances. |
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| Bar graph (p. 515) | Visual representation using horizontal or vertical bars to make comparison or to show relationship on items of similar makeup. |
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| Base (p. 144) | Number that represents the whole 100%. It is the whole to which something is being compared. Usually follows word of. |
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| Beneficiary (p. 467) | Person(s) designated to receive the face value of the life insurance when insured dies. |
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| Biweekly (p. 236) | Every 2 weeks (26 times in a year). |
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| Biweekly mortgage (p. 367) | Mortgage payments made every 2 weeks rather than monthly. This payment method takes years off the life of the mortgage and substantially reduces the cost of interest. |
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| Blank endorsement (p. 91) | Current owner of check signs name on back. Whoever presents checks for payment receives the money. |
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| Bodily injury (p. 467) | Auto insurance that pays damages to people injured or killed by your auto. |
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| Bond discount (p. 496) | Bond selling for less than the face value. |
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| Bond premium (p. 496) | Bond selling for more than the face value. |
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| Bonds (p. 495) | Written promise by a company that borrows money usually with fixed-interest payment until maturity (repayment time). |
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| Bond yield (p. 496) | Total annual interest divided by total cost. |
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| Book value (p. 413) | Cost less accumulated depreciation. |
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| Breakeven point (p. 219) | Point at which seller has covered all expenses and costs and has made no profit or suffered a loss. |
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| Cancellation (p. 47) | Reducing process that is used to simplify the multiplication and division of fractions. Example: |
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| Capital (p. 384) | Owners' investment in the business. |
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| Cash advance (p. 309) | Money borrowed by holder of credit card. It is recorded as another purchase and is used in the calculation of the average daily balance. |
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| Cash discount (p. 179) | Savings that result from early payment by taking advantage of discounts offered by the seller; discount is not taken on freight or taxes. |
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| Cash dividend (p. 493) | Cash distribution of company's profit to owners of stock. |
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| Cash value (p. 469) | Except for term insurance, this indicates the value of the policy when terminated. Options fall under the heading of nonforfeiture values. |
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| Centi-(Appendix D) | Prefix indicating .01 of a basic metric unit. |
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| Chain or series discount (p. 176) | Two or more trade discounts that are applied to the balance remaining after the previous discount is taken. Often called a series discount. |
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| Check register (p. 89) | Record-keeping device that records checks paid and deposits made by companies using a checking account. |
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| Checks (p. 89) | Written documents signed by appropriate person that directs the bank to pay a specific amount of money to a particular person or company. |
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| Check stub (p. 89) | Provides a record of checks written. It is attached to the check. |
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| Circle graph (p. 517) | A visual representation of the parts to the whole. |
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| Closing costs (p. 368) | Costs incurred when property passes from seller to buyer such as for credit reports, recording costs, points, and so on. |
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| CM (p. 97) | Abbreviation for credit memorandum. The bank is adding to your account. The CM is found on the bank statement. Example: Bank collects a note for you. |
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| Coinsurance (p. 474) | Type of fire insurance in which the insurer and insured share the risk. Usually there is an 80% coinsurance clause. |
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| Collision (p. 477) | Optional auto insurance that pays for the repairs to your auto from an accident after deductible is met. Insurance company will only pay for repairs up to the value of the auto (less deductible). |
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| Commissions (p. 238) | Payments based on established performance criteria. |
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| Common denominator (p. 40) | To add two or more fractions, denominators must be the same. |
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| Common stocks (p. 386) | Units of ownership called shares. |
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| Comparative statement (p. 387) | Statement showing data from two or more periods side by side. |
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| Complement (p. 174) | 100% less the stated percent. Example: 18% → 82% is the complement (100% — 18%). |
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| Compounding (p. 299) | Calculating the interest periodically over the life of the loan and adding it to the principal. |
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| Compound interest (p. 299) | The interest that is calculated periodically and then added to the principal. The next period the interest is calculated on the adjusted principal (old principal plus interest). |
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| Comprehensive insurance (p. 477) | Optional auto insurance that pays for damages to the auto caused by factors other than from collision (fire, vandalism, theft, and the like). |
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| Compulsory insurance (p. 476) | Insurance required by law—standard coverage. |
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| Constants (p. 116) | Numbers that have a fixed value such as 3 or -7. Placed on right side of equation; also called knowns. |
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| Contingent annuities (p. 318) | Beginning and ending dates of the annuity are uncertain (not fixed). |
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| Contingent liability (p. 282) | Potential liability that may or may not result from discounting a note. |
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| Contribution margin (p. 219) | Difference between selling price and variable cost. |
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| Conversion periods (p. 297) | How often (a period of time) the interest is calculated in the compounding process. Example: Daily—each day; monthly—12 times a year; quarterly—every 3 months; semiannually— every 6 months. |
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| Corporation (p. 384) | Company with many owners or stockholders. Equity of these owners is called stockholders' equity. |
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| Cost (p. 204) | Price retailers pay to manufacturer or supplier to bring merchandise into store. |
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| Cost of merchandise (goods) sold (p. 391) | Beginning inventory + Net purchases - Ending inventory. |
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| Credit card (p. 350) | A piece of plastic that allows you to buy on credit. |
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| Credit memo (CM) (p. 97) | Transactions of bank that increase customer's account. |
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| Credit period (end) (p. 179) | Credit days are counted from date of invoice. Has no relationship to the discount period. |
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| Cumulative preferred stock (p. 492) | Holders of preferred stock must receive current year and any dividends in arrears before any dividends are paid out to the holders of common stock. |
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| Current assets (p. 384) | Assets that are used up or converted into cash within 1 year or operating cycle. |
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| Current liabilities (p. 385) | Obligations of a company due within 1 year. |
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| Current ratio (p. 396) | Current assets divided by current liabilities. |
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| Daily balance (p. 352) | Calculated to determine customer's finance charge: Previous balance + Any cash advances + Purchases - Payments. |
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| Daily compounding (p. 299) | Interest calculated on balance each day. |
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| Debit card (p. 89) | Transactions result in money being immediately deducted from customer's checking account. |
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| Debit memo (DM) (p. 97) | A debit transaction bank does for customers. |
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| Deca- (Appendix D) | Prefix indicating 10 times basic metric unit. |
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| Deci- (Appendix D) | Prefix indicating .1 of basic metric unit. |
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| Decimal equivalent (p. 69) | Decimal represents the same value as the fraction. Example: .05=(5/100) |
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| Decimal fraction (p. 67) | Decimal representing a fraction; the denominator has a power of 10. |
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| Decimal point (p. 2, 65) | Center of the decimal system—located between units and tenths. Numbers to left are whole numbers; to the right are decimal numbers. |
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| Decimal system (p. 2) | The U.S. base 10 numbering system that uses the 10 single-digit numbers shown on a calculator. |
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| Decimals (p. 65) | Numbers written to the right of a decimal point. Example: 5.3, 18.22. |
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| Declining-balance method (p. 417) | Accelerated method of depreciation. The depreciation each year is calculated by book value beginning each year times the rate. |
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| Deductibles (p. 477) | Amount insured pays before insurance company pays. Usually the higher the deductible, the lower the premium will be. |
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| Deductions (p. 237) | Amounts deducted from gross earnings to arrive at net pay. |
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| Deferred payment price (p. 343) | Total of all monthly payments plus down payment. |
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| Denominator (p. 35) | The number of a common fraction below the division line (bar). Example: 8/9, of which 9 is the denominator. |
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| Deposit slip (p. 90) | Document that shows date, name, account number, and items making up a deposit. |
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| Deposits in transit (p. 97) | Deposits not received or processed by bank at the time the bank statement is prepared. |
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| Depreciation (p. 413) | Process of allocating the cost of an asset (less residual value) over the asset's estimated life. |
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| Depreciation causes (p. 413) | Normal use, product obsolescence, aging, and so on. |
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| Depreciation expense (p. 413) | Process involving asset cost, estimated useful life, and residual value (salvage or trade-in value). |
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| Depreciation schedule (p. 414) | Table showing amount of depreciation expense, accumulated depreciation, and book value for each period of time for a plant asset. |
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| Difference (p. 9) | The resulting answer from a subtraction problem. Example: Minuend less subtrahend equals difference. 215 - 15 = 200 |
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| Differential pay schedule (p. 238) | Pay rateis based on a schedule of units completed. |
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| Digit (p. 3) | Our decimal number system of 10 characters from 0 to 9. |
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| Discounting a note (p. 283) | Receiving cash from selling a note to a bank before the due date of a note. Steps to discount include: (1) calculate maturity value, (2) calculate number of days bank waits for money, (3) calculate bank discount, and (4) calculate proceeds. |
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| Discount period (p. 180, 283) | Amount of time to take advantage of a cash discount. |
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| Distribution of overhead (p. 439) | Companies distribute overhead by floor space or sales volume. |
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| Dividend (p. 14) | Number in the division process that is being divided by another. Example: 5/15, in which 15 is the dividend. |
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| Dividends (p. 495) | Distribution of company's profit in cash or stock to owners of stock. |
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| Dividends in arrears (p. 492) | Dividends that accumulate when a company fails to pay dividends to cumulative preferred stockholders. |
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| Divisor (p. 14) | Number in the division process that is dividing into another. Example: 5/15, in which 5 is the divisor. |
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| DM (p. 97) | Abbreviation for debit memorandum. The bank is charging your account. The DM is found on the bank statement. Example: NSF. |
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| Dollar markdown (p. 216) | Original selling price less the reduction to price. Markdown may be stated as a percent of the original selling price. Example: Dollar markdown/Original selling price. |
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| Dollar markup (p. 205) | Selling price less cost. Difference is the amount of the markup. Markup is also expressed in percent. |
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| Down payment (p. 342) | Amount of initial cash payment made when item is purchased. |
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| Drafts (p. 89) | Written orders like checks instructing a bank, credit union, or savings and loan institution to pay your money to a person or organization. |
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| Draw (p. 239) | The receiving of advance wages to cover business or personal expenses. Once wages are earned, drawing amount reduces actual amount received. |
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| Drawee (p. 90) | One ordered to pay the check. |
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| Drawer (p. 90) | One who writes the check. |
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| Due date (p. 180) | Maturity date or when the note will be repaid. |
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| Earnings per share (p. 493) | Annual earnings ÷ Total number of shares outstanding. |
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| Effective rate (p. 281, 301) | True rate of interest. The more frequent the compounding, the higher the effective rate. |
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| Electronic deposits (p. 98) | Credit card run through terminal which approves (or disapproves) the amount and adds it to company's bank balance. |
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| Electronic funds transfer (EFT) (p. 95) | A computerized operation that electronically transfers funds among parties without the use of paper checks. |
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| Employee's Withholding Allowance Certificate (W-4) (p. 241) | Completed by employee to indicate allowance claimed to determine amount of FIT that is deducted. |
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| End of credit period (p. 180) | Last day from date of invoice when customer can take cash discount. |
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| End of month—EOM (also proximo)(p. 184) | Cash discount period begins at the end of the month invoice is dated. After the 25th discount period, one additional month results. |
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| Endorse (p. 91) | Signing the back of the check; thus ownership is transferred to another party. |
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| Endowment life (p. 469) | Form of insurance that pays at maturity a fixed amount of money to insured or to the beneficiary. Insurance coverage would terminate when paid—similar to term life. |
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| Equation (p. 116) | Math statement that shows equality for expressions or numbers, or both. |
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| Equivalent (fractional) (p. 38) | Two or more fractions equivalent in value. |
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| Escrow account (p. 368) | Lending institution requires that each month of the 1/12 insurance cost and real estate taxes be kept in a special account. |
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| Exact interest (p. 260) | Calculating simple interest using 365 days per year in time. |
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| Excise tax (p. 455) | Tax that government levies on particular products and services. Tax on specific luxury items or nonessentials. |
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| Expression (p. 116) | A meaningful combination of numbers and letters called terms. |
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| Extended term insurance (p. 470) | Resulting from nonforfeiture, it keeps the policy for the full face value going without further premium payments for a specific period of time. |
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| Face amount (p. 467) | Dollar amount stated in policy. |
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| Face value (p. 279) | Amount of insurance that is stated on the policy. It is usually the maximum amount for which the insurance company is liable. |
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| Fair Credit and Charge Card Disclosure Act of 1988 (p. 351) | Act that tightens controls on credit card companies soliciting new business. |
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| Fair Labor Standards Act (p. 237) | Federal law has minimum wage standards and the requirement of overtime pay. There are many exemptions for administrative personnel and for others. |
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| Federal income tax (FIT) withholding (p. 242) | Federal tax withheld from paycheck. |
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| Federal Insurance Contribution Act (FICA) (p. 241) | Percent of base amount of each employee's salary. FICA taxes used to fund retirement, disabled workers, Medicare, and so on. FICA is now broken down into Social Security and Medicare. |
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| Federal Unemployment Tax Act (FUTA) (p. 244) | Tax paid by employer. Current rate is .8% on first $7,000 of earnings. |
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| Federal withholding tax (p. 242) | See Income tax. |
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| Finance charge (p. 343) | Total payments - Actual loan cost. |
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| Fire insurance (p. 472) | Stipulated percent (normally 80%) of value that is required for insurance company to pay to reimburse one's losses. |
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| First-in, first-out (FIFO) method (p. 433) | This method assumes the first inventory brought into the store will be the first sold. Ending inventory is made up of goods most recently purchased. |
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| Fixed cost (p. 219) | Costs that do not change with increase or decrease in sales. |
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| Fixed rate mortgage (p. 367) | Monthly payment fixed over number of years, usually 30 years. |
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| FOB destination (p. 173) | Seller pays cost of freight in getting goods to buyer's location. |
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| FOB shipping point (p. 173) | Buyer pays cost of freight in getting goods to his location. |
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| Formula (p. 116) | Equation that expresses in symbols a general fact, rule, or principle. |
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| Fraction (p. 35) | Expresses a part of a whole number. Example: 5/6 expresses 5 parts out of 6 |
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| Freight terms (p. 173) | Determine how freight will be paid. Most common freight terms are FOB shipping point and FOB destination. |
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| Frequency distribution (p. 515) | Shows by table the number of times event(s) occurs. |
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| Full endorsement (p. 91) | This endorsement identifies the next person or company to whom the check is to be transferred. |
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| Future value (FV) (p. 299) | Final amount of the loan or investment at the end of the last period. Also called compound amount. |
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| Future value of annuity (p. 318) | Future dollar amount of a series of payments plus interest. |
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| Graduated-payment mortgage (p. 367) | Borrower pays less at beginning of mortgage. As years go on, the payments increase. |
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| Graduated plans (p. 367) | In beginning years, mortgage payment is less. As years go on, monthly payments rise. |
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| Gram (Appendix D) | Basic unit of weight in metric system. An ounce equals about 28 grams. |
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| Greatest common divisor (p. 37) | The largest possible number that will divide evenly into both the numerator and denominator. |
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| Gross pay (p. 237) | Wages before deductions. |
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| Gross profit (p. 204) | Difference between cost of bringing goods into the store and selling price of the goods. |
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| Gross profit from sales (p. 392) | Net sales - Cost of goods sold. |
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| Gross profit method (p. 437) | Used to estimate value of inventory. |
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| Gross sales (p. 391) | Total earned sales before sales returns and allowances or sales discounts. |
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| Hecto- (Appendix D) | Prefix indicating 100 times basic metric unit. |
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| Higher terms (p. 38) | Expressing a fraction with a new numerator and denominator that is equivalent to the original. Example: 2/9 → 6/27 |
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| Home equity loan (p. 366) | Cheap and readily accessible lines of credit backed by equity in your home; tax-deductible; rates can be locked in. |
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| Horizontal analysis (p. 388) | Method of analyzing financial reports where each total this period is compared by amount of percent to the same total last period. |
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| Improper fraction (p. 35) | Fraction that has a value equal to or greater than 1; numerator is equal to or greater than the denominator. Example: 6/6 or 14/9 |
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| Income statement (p. 389) | Financial report that lists the revenues and expenses for a specific period of time. It reflects how well the company is performing. |
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| Income tax or FIT (p. 242) | Tax that depends on allowances claimed, marital status, and wages earned. |
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| Indemnity (p. 474) | Insurance company's payment to insured for loss. |
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| Index numbers (p. 517) | Express the relative changes in a variable compared with some base, which is taken as 100. |
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| Individual retirement account (IRA) (p. 316) | An account established for retirement planning. |
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| Installment cost (p. 342) | Down payment + (Number of payments x Monthly payment). Also called deferred payment. |
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| Installment loan (p. 342) | Loan paid off with a series of equal periodic payments. |
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| Installment purchases (p. 342) | Purchase of an item(s) that requires periodic payments for a specific period of time with usually a high rate of interest. |
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| Insured (p. 467) | Customer or policyholder. |
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| Insurer (p. 467) | The insurance company that issues the policy. |
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| Interest (p. 259) | Principal x Rate x Time. |
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| Interest-bearing note (p. 279) | Maturity value of note is greater than amount borrowed since interest is added on. |
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| Interest-only mortgage (p. 366) | Type of mortgage where in early years only interest payment is required. |
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| Inventory turnover (p. 438) | Ratio that indicates how quickly inventory turns: Cost of goods sold/Average inventory at cost |
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| Invoice (p. 171) | Document recording purchase and sales transactions. |
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| Just-in-time (JIT) inventory system (p. 435) | System that eliminates inventories. Suppliers provide materials daily as manufacturing company needs them. |
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| Kilo-(Appendix D) | Prefix indicating 1,000 times basic metric unit. |
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| Last-in, first-out (LIFO) method (p. 433) | This method assumes the last inventory brought into the store will be the first sold. Ending inventory is made up of the oldest goods purchased. |
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| Least common denominator (LCD) (p. 40) | Smallest nonzero whole number into which all denominators will divide evenly. Example: 2/3 and 1/4 LCD=12 |
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| Level premium term (p. 468) | Insurance premium that is fixed, say, for 50 years. |
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| Liabilities (p. 385) | Amount business owes to creditors. |
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| Liability insurance (p. 476) | Insurance for bodily injury to others and damage to someone else's property. |
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| Like fractions (p. 40) | Proper fractions with the same denominators. |
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| Like terms (p. 116) | Terms that are made up with the same variable: A + 2A + 3A = 6A |
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| Limited payment life (20-payment life) (p. 469) | Premiums are for 20 years (a fixed period) and provide paid-up insurance for the full face value of the policy. |
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| Line graphs (p. 516) | Graphical presentation that involves a time element. Shows trends, failures, backlogs, and the like. |
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| Line of credit (p. 283) | Provides immediate financing up to an approved limit. |
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| Liquid assets (p. 384) | Cash or other assets that can be converted quickly into cash. |
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| List price (p. 172) | Suggested retail price paid by customers. |
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| Liter (Appendix D) | Basic unit of measure in metric, for volume. |
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| Loan amortization table (p. 346) | Table used to calculate monthly payments. |
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| Long-term liabilities (p. 385) | Debts or obligations that company does not have to pay within 1 year. |
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| Lowest terms (p. 37) | Expressing a fraction when no number divides evenly into the numerator and denominator except the number 1. Example: 5/10 → 1/2 |
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| Maker (p. 279) | One who writes the note. |
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| Margin (p. 204) | Difference between cost of bringing goods into store and selling price of goods |
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| Markdowns (p. 204) | Reductions from original selling price caused by seasonal changes, special promotions, and so on. |
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| Markup (p. 204) | Amount retailers add to cost of goods to cover operating expenses and make a profit. |
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| Markup percent calculation (p. 205) | Markup percent on cost x Cost = Dollar markup; or Markup percent on selling price x Selling price = Dollar markup. |
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| Maturity date (p. 259, 279) | Date the principal and interest are due. |
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| Maturity value (MV) (p. 259, 279) | Principal plus interest (if interest is charged). Represents amount due on the due date. |
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| Maturity value of note (p. 279) | Amount of cash paid on the due date. If interest-bearing maturity, value is greater than amount borrowed. |
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| Mean (p. 512) | Statistical term that is found by: Sum of all figures/Number of figures |
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| Measure of dispersion (p. 520) | Number that describes how the numbers of a set of data are spread out or dispersed. |
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| Median (p. 512) | Statistical term that represents the central point or midpoint of a series of numbers. |
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| Merchandise inventory (p. 385) | Cost of goods for resale. |
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| Meter (Appendix D) | Basic unit of length in metric system. A meter is a little longer than a yard. |
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| Metric system (Appendix D) | A decimal system of weights and measures. The basic units are meters, grams, and liters. |
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| Mill (p. 457) | 1/10 of a cent or of a 1/1,000 dollar. In decimal, it is .001. In application: Property tax due = Mills x .001 x Assessed valuation |
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| Milli- (Appendix D) | Prefix indicating .001 of basic metric unit. |
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| Minuend (p. 9) | In a subtraction problem, the larger number from which another is subtracted. Example: 50 - 40 = 10 |
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| Mixed decimal (p. 69) | Combination of a whole number and decimal, such as 59.8, 810.85. |
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| Mixed number (p. 36) | Sum of a whole number greater than zero and a proper fraction: 2¼ or 3½ |
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| Mode (p. 513) | Value that occurs most often in a series of numbers. |
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| Modified Accelerated Cost Recovey System (MACRS) (p. 418) | Part of Tax Reform Act of 1986 that revised depreciation schedules of ACRS. Tax Bill of 1989 updates MACRS. |
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| Monthly (p. 236) | Some employers pay employees monthly. |
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| Mortgage (p. 367) | Cost of home less down payment. |
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| Mortgage note payable (p. 385) | Debt owed on a building that is a long-term liability; often the building is the collateral. |
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| Multiplicand (p. 13) | The first or top number being multiplied in a multiplication problem. Example: Product = Multiplicand x Multiplier 40 = 20 x 2 |
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| Multiplier (p. 13) | The second or bottom number doing the multiplication in a problem. Example: Product = Multiplicand x Multiplier 40 = 20 x 2 |
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| Mutual fund (p. 498) | Investors buy shares in the fund's portfolio (group of stocks and/or bonds). |
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| Net asset value (NAV) (p. 498) | The dollar value of one mutual fund share; calculated by subtracting current liabilities from current market value of fund's investments and dividing this by number of shares outstanding. |
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| Net income (p. 392) | Gross profit less operating expenses. |
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| Net pay (p. 237) | See Net wages. |
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| Net price (p. 172) | List price less amount of trade discount. The net price is before any cash discount. |
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| Net price equivalent rate (p. 176) | When multiplied times the list price, this rate or factor produces the actual cost to the buyer. Rate is found by taking the complement of each term in the discount and multiplying them together (do not round off). |
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| Net proceeds (p. 280) | Maturity value less bank discount. |
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| Net profit (net income) (p. 204) | Gross profit - Operating expenses. |
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| Net purchases (p. 392) | Purchases - Purchase discounts - Purchase returns and allowances. |
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| Net sales (p. 391) | Gross sales - Sales discounts - Sales returns and allowances. |
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| Net wages (p. 242) | Gross pay less deductions. |
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| Net worth (p. 384) | Assets less liabilities. |
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| No-fault insurance (p. 479) | Involves bodily injury. Damage (before a certain level) that is paid by an insurance company no matter who is to blame. |
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| Nominal rate (p. 301) | Stated rate. |
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| Nonforfeiture values (p. 471) | When a life insurance policy is terminated (except term), it represents (1) the available cash value, (2) additional extended term, or (3) additional paid-up insurance. |
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| Noninterest-bearing note (p. 280) | Note where the maturity value will be equal to the amount of money borrowed since no additional interest is charged. |
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| Nonsufficient funds (NSF) (p. 97) | Drawer's account lacked sufficient funds to pay written amount of check. |
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| Normal distribution (p. 521) | Data is spread symmetrically about the mean. |
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| Numerator (p. 35) | Number of a common fraction above the division line (bar). Example: 8/9, in which 8 is the numerator |
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| Omnibus Budget Reconciliation Act of 1989 (p. 420) | An update of MACRS. Unless business use of equipment is greater than 50%, straight-line depreciation is required. |
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| Open-end credit (p. 351) | Set payment period. Also, additional credit amounts can be added up to a set limit. It is a revolving charge account. |
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| Operating expenses (overhead) (p. 392) | Regular expenses of doing business. These are not costs. |
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| Ordinary annuities (p. 317) | Annuity that is paid (or received) at end of the time period. |
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| Ordinary dating (p. 182) | Cash discount is available within the discount period. Full amount due by end of credit period if discount is missed. |
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| Ordinary interest (p. 261) | Calculating simple interest using 360 days per year in time. |
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| Ordinary life insurance (p. 414) | See Straight life insurance. |
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| Outstanding balance (p. 351) | Amount left to be paid on a loan. |
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| Outstanding checks (p. 97) | Checks written but not yet processed by the bank before bank statement preparation. |
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| Overdraft (p. 95) | Occurs when company or person wrote a check without enough money in the bank to pay for it (NFS check). |
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| Overhead expenses (p. 439) | Operating expenses not directly associated with a specific department or product. |
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| Override (p. 237) | Commission that managers receive due to sales by people that they supervise. |
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| Overtime (p. 237) | Time-and-a-half pay for more than 40 hours of work. |
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| Owner's equity (p. 384) | See Capital. |
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| Paid-up insurance (p. 469) | A certain level of insurance can continue, although the premiums are terminated. This results from the nonforfeiture value (except term). Result is a reduced paid-up policy until death. |
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| Partial products (p. 13) | Numbers between multiplier and product. |
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| Partial quotient (p. 14) | Occurs when divisor doesn't divide evenly into the dividend. |
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| Partnership (p. 384) | Business with two or more owners. |
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| Payee (p. 90, 279) | One who is named to receive the amount of the check. |
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| Payroll register (p. 240) | Multicolumn form to record payroll data. |
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| Percent (p. 144) | Stands for hundredths. Example: 4% is 4 parts of one hundred, or 4/100 |
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| Percentage method (p. 242) | A method to calculate withholdings. Opposite of wage bracket method. |
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| Percent decrease (p. 149) | Calculated by decrease in price over original amount. |
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| Percent increase (p. 149) | Calculated by increase in price over original amount. |
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| Percent markup on cost (p. 205) | Dollar markup divided by the cost; thus, markup is a percent of the cost. |
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| Percent markup on selling price (p. 210) | Dollar markup divided by the selling price; thus, markup is a percent of the selling price. |
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| Periodic inventory system (p. 430) | Physical count of inventory taken at end of a time period. Inventory records are not continually updated. |
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| Periods (p. 297) | Number of years times the number of times compounded per year (see Conversion period). |
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| Perishables (p. 217) | Goods or services with a limited life. |
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| Perpetual inventory system (p. 430) | Inventory records are continually updated; opposite of periodic. |
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| Personal property (p. 456) | Items of possession, like cars, home, furnishings, jewelry, and so on. These are taxed by the property tax (don't forget real property is also taxed). |
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| Piecework (p. 238) | Compensation based on the number of items produced or completed. |
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| Place value (p. 3) | The digit value that results from its position in a number. |
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| Plant and equipment (p. 385) | Assets that will last longer than 1 year. |
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| Point of sale (p. 100) | Terminal that accepts cards (like those used at ATMs) to purchase items at retail outlets. No cash is physically exchanged. |
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| Points (p. 368) | Percentage(s) of mortgage that represents an additional cost of borrowing. It is a one-time payment made at closing. |
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| Policy (p. 467) | Written insurance contract. |
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| Policyholder (p. 467) | The insured. |
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| Portion (p. 144) | Amount, part, or portion that results from multiplying the base times the rate. Not expressed as a percent; it is expressed as a number. |
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| Preferred stock (p. 386) | Type of stock that has a preference regarding a corporation's profits and assets. |
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| Premium (p. 467) | Periodic payments that one makes for various kinds of insurance protection. |
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| Prepaid expenses (p. 385) | Items a company buys that have not been used are shown as assets. |
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| Prepaid rent (p. 385) | Rent paid in advance. |
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| Present value (PV) (p. 296) | How much money will have to be deposited today (or at some date) to reach a specific amount of maturity (in the future). |
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| Present value of annuity (p. 323) | Amount of money needed today to receive a specified stream (annuity) of money in the future. |
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| Price-earnings (PE) ratio (p. 492) | Closing price per share of stock divided by earnings per share. |
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| Price relative (p. 518) | The quotient of the current price divided by some previous year's price—the base year—multiplied by 100. |
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| Prime number (p. 41) | Whole number greater than 1 that is only divisible by itself and 1. Examples: 2, 3, 5. |
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| Principal (p. 259) | Amount of money that is originally borrowed, loaned, or deposited. |
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| Proceeds (p. 280) | Maturity value less the bank charge. |
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| Product (p. 13) | Answer of a multiplication process, such as: Product = Multiplicand x Multiplier 50 = 5 x 10 |
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| Promissory note (p. 279) | Written unconditional promise to pay a certain sum (with or without interest) at a fixed time in the future. |
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| Proper fractions (p. 35) | Fractions with a value less than 1; numerator is smaller than denominator, such as 5/9 |
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| Property damage (p. 476) | Auto insurance covering damages that are caused to the property of others. |
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| Property tax (p. 457) | Tax that raises revenue for school districts, cities, counties, and the like. |
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| Property tax due (p. 457) | Tax rate x Assessed valuation |
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| Proximo (prox) (p. 184) | Same as end of month. |
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| Purchase discounts (p. 391) | Savings received by buyer for paying for merchandise before a certain date. |
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| Purchase returns and allowances (p. 391) | Cost of merchandise returned to store due to damage, defects, and so on. An allowance is a cost reduction that results when buyer keeps or buys damaged goods. |
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| Pure decimal (p. 69) | Has no whole number(s) to the left of the decimal point, such as .45. |
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| Quick assets (p. 396) | Current assets - Inventory - Prepaid expenses. |
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| Quick ratio (p. 396) | (Current assets - Inventory - Prepaid expenses) ÷ Current liabilities. |
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| Quotient (p. 14) | The answer of a division problem. |
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| Range (p. 520) | Difference between the highest and lowest values in a group of values or set of data. |
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| Rate (p. 144) | Percent that is multiplied times the base that indicates what part of the base we are trying to compare to. Rate is not a whole number. |
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| Rate of interest (p. 297) | Percent of interest that is used to compute the interest charge on a loan for a specific time. |
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| Ratio analysis (p. 395) | Relationship of one number to another. |
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| Real property (p. 456) | Land, buildings, and so on, which are taxed by the property tax. |
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| Rebate (p. 349) | Finance charge that a customer receives for paying off a loan early. |
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| Rebate fraction (p. 349) | Sum of digits based on number of months to go divided by sum of digits based on total number of months of loan. |
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| Receipt of goods (ROG) (p. 183) | Used in calculating the cash discount period; begins the day that the goods are received. |
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| Reciprocal of a fraction (p. 48) | The interchanging of the numerator and the denominator. Inverted number is the reciprocal. Example: 6/7 → 7/6 |
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| Reduced paid-up insurance (p. 470) | Insurance that uses cash value to buy protection, face amount is less than original policy, and policy continues for life. |
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| Remainder (p. 14) | Leftover amount in division. |
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| Repeating decimals (p. 67) | Decimal numbers that repeat themselves continuously and thus do not end. |
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| Residual value (p. 413) | Estimated value of a plant asset after depreciation is taken (or end of useful life). |
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| Restrictive endorsement (p. 91) | Check must be deposited to the payee's account. This restricts one from cashing it. |
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| Retail method (p. 437) | Method to estimate cost of ending inventory. The cost ratio times ending inventory at retail equals the ending cost of inventory. |
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| Retained earnings (p. 386) | Amount of earnings that is kept in the business. |
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| Return on equity (p. 396) | Net income divided by stockholders' equity. |
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| Revenues (p. 391) | Total earned sales (cash or credit) less any sales discounts, returns, or allowances. |
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| Reverse mortgage (p. 367) | Federal Housing Administration makes it possible for older homeowners to live in their homes and get cash or monthly income. |
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| Revolving charge account (p. 351) | Charges for a customer are allowed up to a specified maximum, a minimum monthly payment is required, and interest is charged on balance outstanding. |
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| ROG (p. 183) | Receipt of goods; cash discount period begins when goods are received, not ordered. |
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| Rounding decimals (p. 67) | Reducing the number of decimals to an indicated position, such as 59.59 → 59.6 to the nearest tenth. |
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| Rounding whole numbers all the way (p. 5) | Process to estimate actual answer. When rounding all the way, only one nonzero digit is left. Rounding all the way gives the least degree of accuracy. Example: 1,251 to 1,000; 2,995 to 3,000. |
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| Rule of 78 (p. 347) | Method to compute rebates on consumer finance loans. How much of finance charge are you entitled to? Formula or table lookup may be used. |
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| Safekeeping (p. 100) | Bank procedure whereby a bank does not return checks. Canceled checks are photocopied. |
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| Salaries payable (p. 385) | Obligations that a company must pay within 1 year for salaries earned but unpaid. |
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| Sales (not trade) discounts (p. 391) | Reductions in selling price of goods due to early customer payment. |
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| Sales returns and allowances (p. 391) | Reductions in price or reductions in revenue due to goods returned because of product defects, errors, and so on. When the buyer keeps the damaged goods, an allowance results. |
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| Sales tax (p. 454) | Tax levied on consumers for certain sales of merchandise or services by states, counties, or various local governments. |
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| Salvage value (p. 413) | Cost less accumulated depreciation. |
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| Selling price (p. 219) | Cost plus markup equals selling price. |
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| Semiannually (p. 236) | Twice a year. |
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| Semimonthly (p. 236) | Some employees are paid twice a month. |
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| Series discount (p. 176) | See chain discount. |
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| Short-rate table (p. 473) | Fire insurance rate table used when insured cancels the policy. |
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| Short-term policy (p. 472) | Fire insurance policy for less than 1 year. |
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| Signature card (p. 90) | Information card signed by person opening a checking account. |
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| Simple discount note (p. 283) | A note in which bank deducts interest in advance. |
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| Simple interest (p. 259) | Interest is only calculated on the principal. In I = P x R x T the interest plus original principal equals the maturity value of an interest-bearing note. |
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| Simple interest formula (p. 262) | Interest = Principal x Rate x Time Principal = Interest / (Rate x Time) Rate = Interest / (Principal x Time) Time = Interest / (Principal x Rate) |
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| Single equivalent discount rate (p. 177) | Rate or factor as a single discount that calculates the amount of the trade discount by multiplying the rate times the list price. This single equivalent discount replaces a series of chain discounts. The single equivalent rate is (1 - Net price equivalent rate). |
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| Single trade discount (p. 174) | Company gives only one trade discount. |
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| Sinking fund (p. 326) | An annuity in which the stream of deposits with appropriate interest will equal a specified amount in the future. |
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| Sliding scale commissions (p. 239) | Different commission. Rates depend on different levels of sales. |
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| Sole proprietorship (p. 384) | A business owned by one person. |
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| Specific identification method (p. 431) | This method calculates the cost of ending inventory by identifying each item remaining to invoice price. |
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| Standard deviation (p. 520) | Measures the spread of data around the mean. |
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| State unemployment tax (SUTA) (p. 244) | Tax paid by employer. Rate varies depending on amount of unemployment the company experiences. |
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| Stockbrokers (p. 492) | People who with their representatives do the trading on the floor of the stock exchange. |
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| Stockholder (p. 492) | One who owns stock in a company. |
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| Stockholders' equity (p. 384) | Assets less liabilities. |
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| Stocks (p. 492) | Ownership shares in the company sold to buyers, who receive stock certificates. |
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| Stock yield percent (p. 493) | Dividend per share divided by the closing price per share. |
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| Straight commission (p. 239) | Wages calculated as a percent of the value of goods sold. |
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| Straight life insurance (whole or ordinary) (p. 469) | Protection (full value of policy) results from continual payment of premiums by insured. Until death or retirement, nonforfeiture values exist for straight life. |
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| Straight-line method (p. 414) | Method of depreciation that spreads an equal amount of depreciation each year over the life of the assets. |
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| Straight-line rate (rate of depreciation) (p. 44) | One divided by number of years of expected life. |
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| Subtrahend (p. 9) | In a subtraction problem smaller number that is being subtracted from another. Example: 30 in 150 - 30 = 120 |
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| Sum (p. 8) | Total in the adding process. |
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| Tax rate (p. 456) | Budget needed/Total assessed value |
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| Term life insurance (p. 468) | Inexpensive life insurance that provides protection for a specific period of time. No nonforfeiture values exist for term. |
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| Term policy (p. 468) | Period of time that the policy is in effect. |
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| Terms of the sale (p. 179) | Criteria on invoice showing when cash discounts are available, such as rate and time period. |
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| Time (p. 260) | Expressed as years or fractional years, used to calculate the simple interest. |
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| Trade discount (p. 171) | Reduction off original selling price (list price) not related to early payment. |
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| Trade discount amount (p. 171) | List price less net price. |
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| Trade discount rate (p. 171) | Trade discount amount given in percent. |
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| Trade-in (scrap) (p. 413) | Estimated value of a plant asset after depreciation is taken (or end of useful life). |
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| Treasury bill (p. 281) | Loan to the federal government for 91 days (13 weeks), 182 days (26 weeks), or 1 year. |
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| Trend analysis (p. 394) | Analyzing each number as a percentage of a base year. |
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| Truth in Lending Act (p. 343) | Federal law that requires sellers to inform buyers, in writing, of (1) the finance charge and (2) the annual percentage rate. The law doesn't dictate what can be charged. |
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| Twenty-payment life (p. 469) | Provides permanent protection and cash value, but insured pays premiums for first 20 years. |
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| Twenty-year endowment (p. 469) | Most expensive life insurance policy. It is a combination of term insurance and cash value. |
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| Unemployment tax (p. 244) | Tax paid by the employer that is used to aid unemployed persons. |
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| Units-of-production method (p. 415) | Depreciation method that estimates amount of depreciation based on usage. |
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| Universal life (p. 470) | Whole life insurance plan with flexible premium and death benefits. This life plan has limited guarantees. |
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| Unknown (p. 116) | The variable we are solving for. |
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| Unlike fractions (p. 40) | Proper fractions with different denominators. |
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| Useful life (p. 413) | Estimated number of years the plant asset is used. |
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| U.S. Rule (p. 264) | Method that allows the borrower to receive proper interest credits when paying off a loan in more than one payment before the maturity date. |
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| U.S. Treasury bill (p. 281) | A note issued by federal government to investors. |
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| Value of an annuity (p. 317) | Sum of series of payments and interest (think of this as the maturity value of compounding). |
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| Variable commission scale (p. 239) | Company pays different commission rates for different levels of net sales. |
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| Variable cost (p. 220) | Costs that do change in response to change in volume of sales. |
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| Variable rate (p. 367) | Home mortgage rate is not fixed over its lifetime. |
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| Variables (p. 116) | Letters or symbols that represent unknowns. |
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| Vertical analysis (p. 387) | Method of analyzing financial reports where each total is compared to one total. Example: Cash is a percent of total assets. |
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| W-4 (p. 241) | See Employee's Withholding Allowance Certificate. |
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| Wage bracket method (In Handbook) | Tables used in Circular E to compute FIT withholdings. |
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| Weekly (p. 236) | Some employers pay employees weekly. |
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| Weighted-average method (p. 432) | Calculates the cost of ending inventory by applying an average unit cost to items remaining in inventory for that period of time. |
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| Weighted mean (p. 512) | Used to find an average when values appear more than once. |
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| Whole life insurance (p. 470) | See Straight life insurance. |
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| Whole number (p. 2) | Number that is 0 or larger and doesn't contain a decimal or fraction, such as 10, 55, 92. |
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| Withholding (p. 242) | Amount of deduction from one's paycheck. |
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| Workers' compensation (p. 244) | Business insurance covering sickness or accidental injuries to employees that result from on-the-job activities. |