Accounting glossary - dictionary_9

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Accounting glossary - dictionary_9http://www.ventureline.com/glossary.aspadjusting entry serves to correctly allocate an expense, so the financialstatements are correct.For example: X Company has a payroll department, and cuts checks every twoweeks after tabulating hours, and calculating net pay. A large number ofallocations have to be made to various withholding accounts. The accountantsdont want to interfere with the operations of the payroll department. And theemployees also want the department to run efficiently so they can get their paychecks on time.At the end of the year the accountants need to appropriately allocate payrollexpenses, plus taxes due and payable. Rather than interfere with the payrolldepartment the calculation is made on paper (or computer), and entered as anadjusting entry. It is marked to be reversed. After the closing entries are made,the first entries of the new year are the reversing entries. They undo the effectsof the adjusting entry.If the adjusting entry is not reversed, the books will not be correct. Both theaccountants and payroll department will be making entries related to payroll. Thereversing entry effectively allows the accountants to make adjusting entrieswithout causing the books to be incorrect; the payroll department continues tomake routine entries, and doesnt need to make any special entries orallocations.REVERSION ASSET see ASSET REVERSION.REVIEW is an accounting service providing some assurance to the Board ofDirectors and interested parties as to the reliability of financial data without theCPA conducting an examination in accordance with generally acceptedaccounting standards. The AICPA auditing standards board formulates reviewstandards for public companies while the AICPA Accounting and ReviewServices Committee provides review standards for non-public businesses.REVOCABLE LETTER OF CREDIT is a letter of credit which can be cancelledor altered by the drawee (buyer) after it has been issued by the drawees bank.REVOLVING COLLATERAL are accounts receivable or inventory which changefrom day to day.REVOLVING LINE OF CREDIT in commercial banking is a contractualagreement between a bank and, usually, a company where the bank agrees toprovide loans up to a specified maximum over a specified period, usually a yearor more. In consumer banking, it is a loan account requiring monthly paymentsless than the full amount of the loan, and the balance is carried forward with afinance charge on that balance. 161http://www.ventureline.com/glossary.aspREVOLVING FINANCING is financing secured by collateral.REVOLVING FUND is money that is renewed as it is used.REVOLVING LOAN is a loan that is automatically renewed upon maturity.RFP is Request for Proposal.RISK is the measurable possibility of losing or not gaining value. Risk is differentfrom uncertainty. Uncertainty is not measurable.RISK ADJUSTED RETURN is when we subtract from the rate of return on anasset a rate of return from another asset that has similar risk. This gives anabnormal rate of return that shows how the asset performed over and above abenchmark asset with the same risk. We can also use the beta against thebenchmark to calculate an alpha which is also risk adjusted performance.ROA see RETURN ON ASSETS.ROBUST is when a business is considered fully developed and healthy.ROCC is an acronym for Return On Committed Capital.ROE see RETURN ON EQUITY.ROG, in business, is an acronym meaning “Receipt Of Goods”.ROI (Return on Investment) can be calculated in various ways. The mostcommon method is Net Income as a percentage of Net Book Value (total assetsminus intangible assets and liabilities).ROIC see RETURN ON INVESTED CAPITAL.ROLL FORWARD BUDGET see CONTINUOUS BUDGET.ROLLING STOCK is the equipment available for use as transportation, asautomotive vehicles, locomotives, or railroad cars, owned by a particularcompany or carrier. Does not include aircraft or water borne craft.ROLLOVER is: a. in U.S. real estate tax law, a delayed tax that allows you toapply the profit you make selling your old house to pay for the new one withoutpaying capital gains taxes on the profit. In order to rollover the profits, the newhouse must be more expensive than the old and the two sales must occur withintwo years of each other; b. in investments, it is the transferring of funds from oneinvestment to another such as rolling over the proceeds from a bond which hasmatured into another bond, or the rolling over of the proceeds of a share sale into 162http://www.ventureline.com/glossary.aspa tax-efficient investment vehicle like a Venture Capital Trust; or, c. in banking, itis the term used when a borrower obtains authority from a bank to delay aprincipal payment on a loan.ROYALTY is the share of the product, or of the proceeds realized from theproduct, reserved by an owner for permitting another entity to exploit and usethat entity’s property, i.e. it is the rental paid to the original owner of propertybased upon a percentage of sales, profit or production. Royalty can involveliterary works, inventions, and other intellectual property, as well as miningleases and conveyances.RUNNING RATE is a sustained constant rate, often the only important singlerate except for zero observed under a given schedule (as in some ratioperformances); also known as stream rate.RUNNING TOTAL is the sum of any given set of numbers that isincremented/decremented as additional numbers become available over time.For example, a retail store makes sales throughout a time period, the runningtotal is the sum of their sales, including returns/credits, at any given point of timeduring that time period: day, week, month, quarter, yea ...