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GLOSSARY OF FINANCIAL AND BANKING TERMS
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| A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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| Abandonment | This refers to two possible situations:
a) the relinquishing of real property without any intention of repossession; and
b) the withdrawal of a claim or legal action. |
| Abatement | A mitigation of financial cost; for example, the cancellation or reduction of expenditure, tax, charge, or levy. |
| Abatement Clause | A pre-agreed term of a lease whereby the tenant is released from the obligation to pay rent when an “Act of God” event prevents occupancy. |
| Abnormal Spoilage | An unusual deterioration of raw materials or inventory that surpassed operational level expected under normal business operations and sales. |
| Above-The-Line | An expense or a source of income that is current or routine. |
| Abrogation of Agreement | The rescinding or cancellation of a contract or of a section of the contract. |
| Absolute Liability | Also known as strict liability, this refers to liability without fault; that is, where the insurer has an obligation to pay for damages without any assessment of blame or prove of responsibility. |
| Absolute Title | An unconditional ownership. |
| Absorption Costing | Also known as full costing, this refers to the practice of allocating all the manufacturing costs, including materials, labour and overhead to the units produced. |
| Abstract Of Title | A listing of legal actions with respect to a piece property, including title transfers, mortgages and liens. |
| Accelerate | The bringing forward of the repayment date of a loan from a later period to the current immediate date. Such a policy of acceleration commonly arises in an event of default. |
| Accelerated Depreciation | A method of depreciating an asset at a rate faster than under the straight-line method. |
| Acceptance | Often known as Bill Of Acceptance, its acceptance obliges the drawee to undertake payment upon the maturity of the bill of exchange. Such acceptance can also be made by endorsement, as in the case of Bankers’ Acceptance where the bank has endorsed the bill and guarantees payment. |
| Accepting House | These are financial institutions specializing in endorsing acceptances of their customer’s bills so that they can be discounted at favourable rates in the discount market. |
| Accommodation Paper | A note, trade acceptance or draft endorsed by a person when the borrower’s credit is not substantial enough to warrant a loan in order to induce a bank to issue a loan to a borrower. |
| Account | Record used to summarize all increases and decreases in a particular asset. |
| Account Payable | Money owed to the creditors comprising mainly the company’s suppliers. |
| Account Receivables | Money owed to the business by the company’s debtors. |
| Accounting Cycle | This is defined as the period that stretches from the onset of business transactions to the final preparation of financial statements. It involves the sequencing of accounting procedures for purposes of recording, classifying, and summarizing accounting information. |
| Accounting Equation | Accounting system premised on the broad universal formulation: Assets equal Liabilities plus Owner's Equity |
| Accounting Period | The period of time covered by the Profit & Loss Statement from one balance sheet to the next. The accounting period usually runs for a period of 12 months. |
| Accounting Reports | The Balance Sheet and Profit & Loss Account. |
| Accounting System | The organization of financial information that tracks and summarizes the business and financial operations of the company in a meaningful format needed as input for decision makers like the shareholders, lenders, investors and management. It possesses a set methodological and procedural operating framework. |
| Accounts Receivable Financing | Loans/advances made against the pledge of accounts receivables. |
| Accrual Accounting | The recording of expenses together with revenue at the time they are generated rather than at the time when they are paid or received. |
| Accrual Liability | Liability that is due but unpaid at the date of the financial statement eg creditors. |
| Accrued Depreciation | See accumulated depreciation. |
| Accrued Expenses | Obligation to pay business expenses incurred but not paid during an accounting period |
| Accrued Income | Income that is due but not received at the date of the financial statement. |
| Accrued Interest | Interest that has been earned/incurred but not received/paid yet. |
| Accumulated Amortization | Deduction from intangible assets to show total amount of periodic charges to income over estimated useful lives of those assets |
| Accumulated Depreciation | Total depreciation charged on an asset since the asset was originally acquired. |
| Accumulated Profit | Balance of profit retained in the business. |
| Acid Test Ratio | An indication of a company’s ability to meet its obligations. The ratio is calculated by dividing the total of cash, receivables and marketable securities with the total current liabilities. |
| Acquisition | The purchase of an asset. |
| Additional Paid-in Capital | Total excess of the shareholders’ investment in the company over the par or stated value of its common and preferred stock |
| Adjusted Trial Balance | Listing of all ledger account balances after the amounts have been adjusted to include adjusting entries made at the end of the period. |
| Adjusting Entries | Entries required at the end of the period to update the accounts before the financial statements are prepared |
| Administrative Expense | Expenses attributable to the directing and controlling of a business. It is an allowable deduction from income for tax purposes. |
| Advance | Loan, overdraft or any other credit facility given by banks. |
| Advice | A note advising a customer that a transaction has been debited or credited into his account. |
| Advise a Credit | In relation to Letters of Credit: a Letter of Credit is said to be advised when the Advising Bank passes the Letter of Credit to the Beneficiary, who is normally the seller/exporter. |
| Advising Bank | In relation to Letters of Credit: it is the bank that advises/passes the Letter of Credit to the Beneficiary, who is normally the seller/exporter. |
| Affiliate | Related corporation whereby ownership is not more than 50%. |
| After Closing Trial Balance | Trial balance prepared after all closing entries have been made |
| Aging the Accounts Receivable | Process of classifying accounts receivable by age groups, e.g. current, past due |
| Allotment | Allocation of new securities/shares to an applicant for a new issue. |
| Allowance for Doubtful Accounts | Amounts deducted from total accounts receivable balance in order to recognize that some customers will not pay their debt |
| Allowance for Doubtful Debts | Valuation or contra account relating to accounts receivable and showing the portion of the receivables that are doubtful |
| Amalgamation | The merger of 2 or more companies into 1. |
| Amendment | Changes made to the terms of a credit at the opener’s instruction for the beneficiary concerned. |
| Amortization | While depreciation involves periodic charges set against tangible assets, amortization mainly relates to periodic charges made against income over the estimated useful life of an intangible asset. |
| Amortization of Discount | Process of systematically writing off to interest expense each period a portion of the discount on a note payable |
| Annual Report & Accounts | As required by law, these publications are issued to shareholders annually, detailing the activities and financial performance of the company over its last financial accounting period. |
| Annuity | Continuous cash flows of a stipulated amount over a specific period of time in the future. |
| Antidilution (to Earnings Per Common Share) | Increase in earnings per common share that assumes that convertible securities are converted, stock options and warrants exercised or other shares are issued upon satisfaction of certain conditions. |
| Appraisal | An assessment of the value of an asset or liability. |
| Appreciation | A gain in the value of an asset. |
| Appropriation Account | It is a statement of accumulated profit. |
| Arbitrage | Purchasing and selling simultaneously the same or equivalent items for the purpose of profiting from differences in market prices. Taking advantage of price differential. |
| Arrangements | Arrangements made between correspondents about reciprocal business and reimbursement for payments made on each other’s behalf. |
| Arrears | Payments outstanding on bills or invoices that have yet to be settled by their due dates. Sometimes, penalties in the form of interest are imposed for late payments. |
| Asset | This is a balance sheet item with continuing value to its owner or a business. These items include tangibles (as in the case of plants), receivables (as in claims on outsiders) or intangibles (like goodwill). They are effectively economic resources that are expected to generate income or provide benefit to the business. |
| Asset Backing | A handy indicator of corporate worth. It can be ascertained by dividing net assets of a company with the number of shares issued. |
| Associate | A partly-owned company whereby the parent company has a less-than-50% ownership. In Malaysia, it is generally defined as those companies in which the holding company has a long-term equity interest of not less than 20% and not exceeding 50% and where it has the power to exercise significant influence over the financial and operating policies through Board representation. |
| At Sight | This refers to a specified condition of disbursement which is payable on demand. |
| Audit | A systematic and independent examination of a company’s financial performance, accounting record and other evidence relating to the business to ascertain that the disclosures in the reports are fairly stated and in accordance to generally accepted accounting principles. It is the expression of an impartial expert opinion with regards to the reliability of the financial accounts. |
| Auditors' Report | Report issued by a firm of certified public accountants after auditing the financial statements of a business |
| Authorised Positions | The extent of the position in any currency, approved by the management |
| Authorized Capital | This is the maximum amount of capital that a company has been approved by its shareholders to issue. As and when required, this cap can be increased subject to shareholders’ further approval. |
| Available for Sale | Securities that are not classified as held-to-maturity or trading |
| Average Cost Method | Is a method of inventory valuation, weighted-average unit cost is computed by dividing total cost of good available for sale by the number of identical units available for sale |
