Financial Glossary

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B ( 52 DEFINITIONS )

Backup
A backup is a retention system for files, programs, and documentation so that master files of computers can be reconstructed in case of accidental loss and processing can continue at another site if the computer centre is lost to fire or flood. top

Bad debts
Bad debts are accounts receivable from customers that are not collected. The amount is an expense of selling on credit. top

Balance column account
A balance column account is an account with debit and credit columns for recording entries and a third column for showing the balance of the account after each entry is posted. top

Balance sheet
The balance sheet is also known as the statement of financial position. It is an accounting statement describing the assets, liabilities, and shareholders' equity of an entity at a specific date. top

Balance sheet expenditure
A balance sheet expenditure is another name for a capital expenditure. It is an expenditure that results in an asset or an increase in an asset on the balance sheet. top

Balloon payment
A balloon payment is a final large lump sum payment at the end of a loan term. top

Bank discount
A bank discount is the amount of interest deducted in advance by the bank when discounting a note. top

Bank rate
The bank rate is the interest rate charged by the Bank of Canada for advances made to chartered banks. top

Bank reconciliation
A bank reconciliation is a schedule that analyses the firm's cash account and the bank's reported cash amount to ensure that transaction recording is complete and accurate. This is one means of internal control. top

Bankers' Acceptances
Bankers' Acceptances are short-term debt (promissory notes) issued by a firm on which a bank guarantees payment. They are traded on the money markets. top

Bargain purchase option
A bargain purchase option is a provision allowing a lessee to purchase the leased property for a price that is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable. This ensures that exercise of the option appears, at the inception of the lease, to be reasonably assured. top

Bargain renewal option
A bargain renewal option is a provision allowing a lessee, at its option, to renew a lease for a rental that is sufficiently lower than the expected fair rental of the property at the date the option becomes exercisable. This ensures that exercise of the option appears, at the inception of the lease, to be reasonably assured. top

Barter transaction
A barter transaction is an exchange of goods or services for other goods or services such that no money changes hands. top

Basic earnings per share
Basic earnings per share is earnings per share calculated as net income available to common shareholders (earnings less preferred share claims or other prior claims) divided by the weighted-average common shares outstanding. top

Basket sales of share capital
A basket sale of share capital is the sale of different types and/or classes of shares by a company as a bundled package. Since two or more classes and/or types of shares may be issued for a single lump sum amount, the consideration received must be allocated between the classes. top

Batch control totals
Batch control totals are totals of dollar numbers, nonsense numbers, or count of documents used to check the accuracy of a transaction entry in a batch. top

Batch processing
Batch processing is a process where all records to be processed are collected into groups (batches) of like transactions before input into a computer for processing. top

Batch-level activities
Batch-level activities are activities that are performed each time a batch of goods is handled or processed. Such activities would include purchase orders, set-ups of equipment, and shipments to customers. top

Bearer bonds
Bearer bonds are bonds that are made payable to whoever holds them (called the bearer); these bonds are not registered. top

Benchmarking
Benchmarking involves a firm searching for the best way of doing something by finding the best outside firm at doing a specific task and then isolating the practices of the outside firm with respect to that task. The firm then works at implementing those practices in their own organization. Benchmarking involves a process of planning, researching, observing, analyzing, adapting, and improving. top

Best estimate assumptions for actuarial valuations
The best estimate assumptions for actuarial valuations are the set of actuarial assumptions where each assumption reflects management's judgment of the most likely set of conditions affecting future events. Key assumptions include interest rates, salary increase rates, mortality rates, etc. top

Beta
Beta measures the co-movement between changes in the price of a security and changes in the market value of the market portfolio. Beta, therefore, is a value of the firm-specific risk. top

Betterment
A betterment is a cost incurred to enhance the service potential of a capital asset through the purchase and or installation of a significantly improved component. top

Bill of materials
A bill of materials is a specification of the materials authorized for production of a specific item. It is used as the source of authorization for the preparation of materials requisitions. top

Billings on contract
Billings on contract is a contra account to the construction in progress inventory account for long-term construction contracts. It represents cumulative billings to the final customer. top

Blended payments
Blended payments are payments on debt whereby the interest rate is fixed at the beginning of the loan term and regular equal annuity payments are made which include both principal and interest. top

Block sampling
Block sampling is a system of sampling that involves choosing segments of contiguous transactions for a sampling application. top

Blocked communication
Blocked communication is information that is costly to communicate. top

Bogey
A bogey is the threshold level of performance below which no bonus is paid. top

Bona fide business transaction
A bona fide business transaction is one that is made on the same terms and conditions as would apply to an arm's length individual. Generally, bona fide is tested based on open market terms and conditions. top

Bond
A bond is an interest-bearing debt of long maturity that is secured by specific assets. top

Bond indenture
A bond debenture is a formal bond agreement specifying the terms of the bonds and the rights and duties of both the issuer and the bondholder. top

Bond issue costs
Bond issue costs include legal, accounting, and underwriting costs incurred in connection with bond issuance. They may be deducted from net proceeds and thus are part of premium/discount or are treated as a separate asset amortized over the life of the bond. top

Bonus plan hypothesis
The bonus plan hypothesis states that all other things being equal, managers of firms with bonus plans are more likely to choose accounting procedures that shift reported earnings from future periods to the current period. top

Book of final entry
The book of final entry, also known as the ledger, is the collection of all accounts used by a business. top

Book of original entry
The book of original entry, also known as a journal, is a record in which the effects of transactions are first recorded; amounts are posted from the journal to the ledger. top

Book value
Book value, for each common share, equals the net worth of a firm as shown on the balance sheet, less the par value of outstanding preferred shares, divided by the number of common shares outstanding. top

Bookkeeping
Bookkeeping is the part of accounting that records transactions and other events, either manually or with computers. top

Borrowing opportunity rate (BOR)
The borrowing opportunity rate (BOR) is the rate that the borrower would have to pay its bank (or other lender) to borrow the same amount for the same period of time. It is also referred to as the market rate of interest. top

Breach of contract (auditing)
A breach of contract, in auditing, is a claim that accounting or auditing services were not performed in the manner agreed. top

Break-even point
The break-even point is the level of activity at which an organization neither earns a profit nor incurs a loss. The break-even point can also be defined as the point where total revenue equals total costs and as the point where total contribution margin equals total fixed costs. top

Broker
A broker is an individual who brings together buyers and sellers, and collects a commission for his efforts. Financial securities are normally traded through brokers who act on behalf of their clients. top

Budget
A budget is a detailed plan for the future, usually expressed in formal quantitative terms. top

Budget variance
A budget variance is a measure of the difference between the budgeted fixed overhead costs (as contained in the overhead flexible budget) and the actual fixed overhead costs incurred during a period. top

Budgetary slack
Budgetary slack is the difference between a budget set below an unbiased estimate of potential performance and the actual or estimated potential actual performance. top

Budgeting
Budgeting is the process of developing formal plans for future activities, which then serve as a basis for evaluating actual performance. top

Business
A business is defined as including a profession, calling, trade, manufacture, or undertaking of any kind whatever, and an adventure or concern in the nature of trade except for land held for resale or development, shares of a corporation deemed to be capital property, and foreign accrual property income, but does not include an income from office or employment. top

Business combination
A business combination is any transaction that results in one entity obtaining control over the net assets of another entity as a going concern. top

Business investment loss
A business investment loss is a special capital loss that results from the disposal of an arm's length or deemed arm's length sale of shares or debts of a small business corporation (SBC), which is not carrying on business and where it is reasonable to expect that the corporation will be dissolved or wound up and will not restart business operations. top

Business papers
Business papers, sometimes called source documents, are various kinds of documents and other papers that companies use when they conduct their business. top

Business process
A business process is a series of steps that are followed in order to carry out some task in a business. top

Business segment
A business segment is a portion of a company that can be separately identified by the products or services that it provides or a geographic market that it serves. top