Financial Glossary

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O ( 39 DEFINITIONS )

Objectivity
Objectivity is a combination of quantifiability, verifiability, and freedom from bias. top

Obsolescence
Obsolescence is a condition in which, because of new inventions and improvements, a capital asset can no longer be used to produce goods or services with a competitive advantage. top

Occurrence
An occurrence is also known as control failure, deviation, error, and exception. This refers to a departure from a prescribed internal control procedure in a particular case. top

Off-balance sheet financing
Off-balance sheet financing is the ability to acquire assets through operating leases, allowing full and unfettered use of the assets without having to report the assets (and related debt obligations) on the balance sheet. top

Off-main diagonal
The off-main diagonal is the set of entries in a square matrix or table that runs from the upper right to the lower left. top

Offsetting (netting)
Offsetting, or netting, is the reporting of an asset and liability as the net amount of the two added together. Offsetting is only allowed if the legal right to offset exists and the entity plans to settle on a net basis. top

On demand (short term)
On demand means due on request from the lender after a short delay of 7 to 30 business days. top

Online processing
Online processing is an approach to inputting data whereby the data on each source document is inputted as soon as the document is available. top

Operating activities
Operating activities is one of the sections of the cash flow statement. It may be formatted using the direct or indirect method. It reflects cash generated by operations during the period. top

Operating cycle of a business
The operating cycle of a business is the average time a business takes to pay cash for salaries of employees or to pay for merchandise and then to receive cash from customers in exchange for the sale of the services or merchandise. top

Operating department
An operating department is a department or similar unit in an organization within which the central purposes of the organization are carried out. top

Operating hedge
An operating hedge is a hedge against foreign exchange risk on cash outflow/inflow commitments by generating sales or purchases in the same currency. It is when operations provide the source of funds in the correct currency against up coming commitments. top

Operating lease
An operating lease is a short-term lease that is similar to a rental agreement. The contractual commitment covers a time span that is relatively short in relation to the economic life of the asset, leaving the lessor to absorb any risk of obsolescence. top

Operating leverage
Operating leverage is the relative proportion of fixed and variable costs in a particular firm or industry. High operating leverage implies a high proportion of fixed costs. Operating leverage is also known as cost structure. top

Operating lines of credit
Operating lines of credit are loans granted to finance working capital. The borrowings are available to the company at any time up to the pre-approved maximum. top

Operating margin
The operating margin is a measure of the net income of an enterprise in relation to revenue generated. top

Operation costing
Operation costing is a costing system used when products are manufactured in batches and when the products have some common characteristics and some individual characteristics. This system handles individualized characteristics the same as in job-order costing and the common characteristics the same as in process costing. top

Operational auditing
Operational auditing is also known as internal auditing, management auditing, and performance auditing. It is the study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives, and compliance with company policies. top

Opportunity (with reference to fraud)
Opportunity with reference to fraud is an open door for solving the not shareable problem in secret by violating a trust. top

Opportunity cost
Opportunity cost is the benefit forgone when an action is taken. Opportunity costs are not captured by the accounting system. Nevertheless, they may be relevant to certain types of decisions and will need to be determined or approximated. top

Option
An option is the right to purchase or sell a security at a predetermined price within a given time span or at a specified future date. It is the holder's prerogative to decide whether or not the option is actually exercised. top

Option contract
An option contract is an agreement between two parties to perform an obligation at the demand of one of the parties. It is a form of derivative contract. top

Ordinary annuity
An ordinary annuity is a payment stream in which the payments (or receipts) occur at the end of each interest-compounding period. top

Ordinary negligence
Ordinary negligence is the lack of reasonable care in the performance of professional accounting tasks. top

Organization costs
Organization costs are those expenditures made in setting up a business. top

Organizational architecture
Organizational architecture is the administrative system that substitutes for market forces within a given firm. These systems must measure performance, reward and punish performance, and partition decision rights. top

Organizational chart
An organizational chart is a visual diagram of a firm's organizational structure that depicts formal lines of reporting, communication, and responsibility between managers. top

Other comprehensive income
Other comprehensive income is another statement in the financial statement package that shows the sum of net income and other adjustments. Other comprehensive income is a statement completely separate from the standard income statement. top

Other income and deductions
Other income and deductions cannot be generally defined. However, its scope is extremely limited and encompasses the few specific items referred to in sections 56 to 66 of the ITA. Other income embodys such items as superannuation and pension receipts (including Old Age Security (OAS) and Canada Pension Plan benefits (CPP)), Employment Insurance benefits, alimony payments, receipts from RRSPs, and deferred profit sharing plans (DPSP). Other deductions include RRSP contributions, alimony payments, child care expenses, and moving expenses. top

Other property
Other property includes capital property, other than personal-use or listed personal property, acquired for the purpose of earning income. It includes business assets and capital investments such as buildings, rental properties, machinery, and financial instruments that are not inventory and does not include eligible capital property. top

Output devices
Output devices are the means by which information is taken out of the accounting system and made available for use. top

Outsourcing
Outsourcing is the strategic use of outside resources to perform functions usually done in-house. top

Outstanding cheques
Outstanding cheques are cheques that were written (or drawn) by the depositors, deducted on the depositor's records, and sent to the payees; however, they had not reached the bank for payment and deduction from the bank statement before the statement date. top

Over reliance
Over reliance is the result of assessing control risk too low and restricting other audit procedures when they actually should perform more work in order to arrive at a correct opinion. top

Over-the-counter market
The over-the-counter market is an electronically connected market consisting of dealers who are in constant contact with each other and who arrange for the trading of securities that are not listed on organized exchanges. top

Overapplied overhead
Overapplied overhead is a credit balance in the Manufacturing overhead account that arises when the amount of overhead cost applied to Work in progress is greater than the amount of overhead cost actually incurred during a period. top

Overdraft
An overdraft, as in a bank overdraft, is a negative bank balance reported as a current liability. It is considered part of cash on the cash flow statement. top

Overhead application
Overhead application is the charging of manufacturing overhead cost to the job cost sheets and to the Work in progress account. top

Ownership (as a financial statement assertion)
Ownership, as a financial statement assertion, is another name for the rights assertion. It is the assertion that the auditee's possession of legal title to assets does indeed exist. top