Backcharge
To charge a person or a firm an amount of money in order to make adjustments for a previous transaction.

Backlog
The value of unfilled orders placed with a manufacturing company. Whether a firm's backlog is rising or falling is a clue to its future sales and earnings.

Bad Debt
Is an open account balance or loan receivable that has proven to be uncollectible and is written off.

Balance 
a. Equality between the totals of the credit and debit sides of an account; or, b. The difference between the totals of the credit and debit sides of an account. Books are said to be in-balance when debits equal credits.

Balance of Payments
The total payments of the businesses, people, and government of one country, less the total payments made by all other countries. A country with a favorable balance of payments receives more money than it pays out to other countries.

Balance of Payments/Balance of Trade
The difference between a country's total export dollar value and its total import dollar value, generally or with respect to a particular trading partner. A positive balance means a net inflow of capital, while a negative means capital flows out of the country.

Balance of Trade
The difference between the amount of goods a country imports and exports. If a country imports more than it exports, it has a negative balance of trade. If it exports more, it has a favorable balance.
 

Balance Sheet
An itemized statement that lists the total assets and the total liabilities of a given business to portray its net worth at a given moment of time. The amounts shown on a balance sheet are generally the historic cost of items and not their current values. It represents a statement of financial condition at a given time.

Balloon
Being or having a final installment that is much larger than preceding ones in an installment or term loan.

Balloon Payment
A final loan payment that is considerably higher than prior regular payments, in order to pay off the loan.

Bank Balance
The amount of money in a bank account on a particular date as recorded by a financial institution on a bank statement.

Bank Collection
The collection of a check by the bank on behalf of a depositor.

Bank Discount Rate
The rate a bank charges customers for the use of banker’s acceptances and other financial instruments.

Bank Draft
A check written by a bank that draws on funds the bank holds in another bank. For example, if a customer in Houston, TX needed funds immediately, a bank in New York might issue a bank draft on its account in Houston so that the customer could get the money more quickly.

Bank Guarantee
Is an irrevocable commitment by a bank to pay a specified sum of money in the event that the party requesting the guarantee fails to perform the promise or discharge the liability to a third person in case of the requestor's default.

Bank Reconciliation
The verification process of a bank statement balance and the depositor’s checkbook balance.

Bankruptcy
The legal procedure for deciding how to handle the debts of a business or individual who cannot meet credit obligations. If the debtor is declared insolvent, the property is placed under the control of a trustee or receiver so it can be distributed to creditors. Bankruptcy is a state of insolvency of an organization or individual, i.e. an inability to pay debts. In the U.S., bankruptcy can take either of three forms:

A) Chapter 7 is involuntary liquidation forced by creditor(s). Some companies are so far in debt that they can't continue their business operations. They are likely to "liquidate" and are forced to file under Chapter 7. The courts take over and administers through a court appointed trustee. Their assets are sold for cash by a court appointed trustee. Administrative and legal expenses are paid first, and the remainder goes to creditors;

B) Chapter 11 is voluntary by the debtor. Unless the court rules otherwise, the debtor stays in control of the enterprise. The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt.; and,

C) Chapter 13 bankruptcy, a debtor proposes a 3-5 year repayment plan to the creditors offering to pay off all or part of the debts from the debtors' future income. The amount to be repaid is determined by several factors including the debtors' disposable income. To file under this chapter you must have a "regular source of income" and have some disposable income. Like in a Chapter 7, corporations and partnerships may not file under this chapter.

Barter System (see Trade Exchange).

Base Amount
Is the fundamental numerical assumption from which something is begun or developed or calculated or explained, e.g. base pay.

Base Capital
For corporations, it includes (1) shares that (a) are non-cumulative, non-retractable, non-redeemable and, if convertible, are only convertible into common shares, and (b) have been issued and paid for; base capital also includes (2) contributed surplus, and (3) retained earnings.

Base Rate
For indexing purposes, the interest rate used to establish the price of bank loans. For example, many banks use the prime rate—the rate banks charge their most trustworthy customers for commercial loans—as the base rate for determining mortgage rates.

Base Tax Year
The tax year prior to the subject tax year.

Basic Earnings Power (BEP)
Is useful for comparing firms in different tax situations and with different degrees of financial leverage. This ratio is often used as a measure of the effectiveness of operations. Basic Earning Power measures the basic profitability of Assets because it excludes consideration of interest and tax. This ratio should be examined in conjunction with turnover ratios to help pinpoint potential problems regarding asset management.

Basic Net Income Per Share
Is always reported as net income per share on an undiluted basis. The calculation of diluted net income per share includes the effect of common stock equivalents such as outstanding stock options, while the calculation of basic net income per share does not.

Basic Tenets of Accounting
Are four in number: 1. Assets = Liabilities + Owner's Equity, 2. Debits = Credits, 3. Assets are on the left (debit side), and, 4. Liabilities and Equity are on the right (credit side).

Basis
Generally, is that figure or value that is the starting point in computing gain or loss, depreciation, depletion, and amortization of a company. Specifically, it is the financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. This new basis is called the ADJUSTED BASIS. Basis is the original cost of an asset, used to calculate capital gains and capital gains taxes.

Basis 
In investments, is the cost or book value of an investment. The gain or loss on an investment is the sale price less the basis. Basis is often called "cost basis."

Basis Point
Is 0.01% in yield, the smallest percentage point for quoting bond yields. For example, in increasing from 5.00% to 5.05%, the yield increases by five basis points. If a bond yield changes from 6.00 to 6.85 percent, it has moved 85 basis points in yield.

Batch Costing
Is the identification and assignment of those costs incurred in completing the manufacture of a specified batch of components. Having arrived at the batch cost, the unit cost is simply derived by dividing it by the number of components in the batch.

Batching
In accounting, is the gathering and organizing of incoming invoices prior to processing.

BBA
Depending on the usage BBA can mean: Bachelor of Business Administration, Balanced Budget Act of 1997, Budget Activity Account, Budget By Account, British Bankers Association, Black Business Association, etc.

Behavioural Accounting
Is the explanation and prediction of human behavior in all possible accounting contexts, e.g., adequacy of disclosure, usefulness of financial statement data, attitudes about corporate reporting practices, materiality judgements, and decision effects of alternative accounting procedures.

Below the Line
In accounting, denotes credits or debits affecting balance sheet accounts rather than the income statement. Extraordinary items may also appear below the net profit line in the income statement, but accounting standards-setters have increasingly favored reflecting most such items in periodic net income.

Bearer Bond
A bond that belongs to the person who has it in hand. Bearer bonds are not registered to individuals or institutions. To receive payment, the bearer must present the bond. By contrast, owners of registered bonds are sent payments automatically when they fall due.

Bearer Instrument
A financial instrument, such as a bearer bond, payable to the person who possesses it. Bearer instruments are not registered to any party and do not need to be endorsed before payment is made.

Beneficial Owner
Is the person who enjoys the benefits of ownership even though title is in another name (often used in risk arbitrage).

BENEFICIARY
One who benefits from the terms of a trust, pension or provident fund, or other deferred income plan, or an insurance policy upon the death of the owner or policyholder. In banking, it is the person in whose favor a letter of credit is issued or a draft is drawn.

Bequest
A gift of money or personal items made in a will.

Best Practices
The generally understood operational characteristics of corporations which have been successful in terms of high repayment rates, significant outreach, and progress towards surplus generation.

Beta
In securities it is a measure of how volatile the price of an investment or stock is, as compared with the entire market. If the price changes dramatically, the investment has a “high beta.” If the price is stable, it has a “low beta.” The overall beta of the market equals 1. Further, it is a statistical measurement correlating a stock's price change with the movement of the stock market. The beta is an indicator or statistical measure of the relative volatility of a stock, fund, or other security in comparison with the market as a whole. The beta for the market is 1.00. Stocks with betas above 1.0 are more responsive to the market, but are also more risky investments. Stocks with a beta below 1.0 tend to move in the opposite direction of the market. For example, if the market moves 10%, a stock with a beta of 3.00 will move 30%; a stock with a beta of .5 will move 5%.

Bifurcated
Generally means to be divided into or made up of two parts. In accounting an example would be: to split the cash account in the accounting records into two accounts, cash – principal and cash – income.

Big Bath
Is a business strategy in which a company manipulates its income statement to make poor results look even worse. Strategy being that the following year will show significant improvement. Big bath is sometimes employed by new CEOs to make their first years results more impressive by employing big bath accounting to prior year results.

Bill
Is a) to enter in an accounting system the preparation of a bill of (charges) or "invoice", b) to submit a bill of charges to, c) to enter (as freight) in a waybill, d) to issue a bill of lading to or for; e.g., "billable expenses" are those expenses for which reimbursement invoices are issued.

Billable
Those costs and/or expenses that are covered under a contractual agreement between two entities that may be billed to the receiving entity.

Billback
In e-commerce and credit card transactions, is a means of recovering or reducing interchange fees for transactions clearing differently than planned. The processing company (FDC) passes through the charges to the merchant.

Billings
Generally, is the request for payment of a debt. In accounting, it is sales for which invoicing has been issued.

Bill of Lading
The contract between the owner of the goods and the cargo carrier to move the goods to a specified destination. A clean bill of lading is issued by the carrier verifying receipt of the merchandise in apparent good condition (without visually apparent damage or defect). Bills of lading can sometimes be made to cover the whole trip, or separate bills of lading can be prepared for each carrier. Ocean shipments generally require two, an Inland Bill of Lading covering land transportation to the port and an Ocean Bill of Lading covering the ship portion. Bills of lading are negotiable while cargo is in transit.

Bills Payable
In merchant accounts, are all bills which have been accepted, and promissory notes which have been made, are called "bills payable," and are entered in a ledger account under that name, and recorded in a book bearing the same title.

Bills Receivable
In merchant accounts, are all promissory notes, bills of exchange, bonds, and other evidences or securities which a merchant or trader holds, and which are payable to him.

Black Hole Expenditure
Is a capital R&D expenditure that does not give rise to a depreciable asset and is not otherwise deductible.

Blanket Authorization
The direct authority to act without having to gain approval for each action. For example: "Blanket authorization was given to him for all his business travel".

Blind Trust
A trust where assets are not disclosed to their owner.

Blue Sky Law
A law providing for state regulation and supervision of the issuance of investment securities.




 

Board of Directors
Advisors elected by stockholders to manage an incorporated company. The board of director’s job is to represent stockholder interests and oversee the company’s management. Even small firms owned and operated by a single person sometimes have boards because boards can often be an invaluable source of advice and information.

Bona Fide Guaranty
Covers a specific element of a secured transaction, for example, the integrity of receivables or the accuracy of inventory count.

Bond
Is a commonly used form of long term debt financing. An interest-bearing certificate of public or private indebtedness. Bonds pay a fixed interest rate and are redeemable after a certain time period.

Bond Covenant
Agreements within a bond that can either be negative or positive in the view of the bondholder, e.g., a negative bond covenant is a bond covenant that prevents certain activities unless agreed to by the bondholders.

Bond Discount
A bond sold for less than the value its issuer promises to pay when the bond reaches maturity.  It is the excess of a bond face value over issued price.

Bonded
To: a) secure payment of duties and taxes on (goods) by giving a bond; or, b) convert into a debt secured by bonds; or, c) provide a bond for or cause to provide such a bond (e.g., to bond an employee) that guarantees any monetary loss caused by intentional acts by the bonded employee.

Bond, Fidelity or Surety
Binding promises that “principal(s)” will perform certain acts to “obligee(s),” with the obligee(s) being paid sums of money if the principal(s) do not fulfill their obligations. Fidelity bonds pay employers in case their bonded employees prove to be dishonest. Surety bonds guarantee that the principal, often an employer, will fulfill certain duties.

Bond Indenture
The title specifying all the obligations of the issuing company to the bondholder.

Bond Issue
Bonds of the same type of class offered at the same time.

Bond Premium
A bond sold for more than the value its issuer promises to pay when the bond reaches maturity. It is the excess of the issue price over the face value of the bond.

Bond Rating
A ranking system for assessing the financial solvency of bonds. AAA is the highest ranking. Bonds are ranked by Standard & Poor’s and Moody’s Investor’s Service, among others.

Bond Sinking Fund
Is a provision to repay a bond.

Book(s)
When used as a noun refers to journals or ledgers (for example: cash book). When used a verb it refers to the recording of an entry (for example: to book the sale).

Book Cost
Normally, is the cost at the time an asset is purchased or realized, i.e. the total amount paid to acquire an asset.




 

Book Income
The income reported within the financial statements of the taxable entity, i.e., taxable income normally is not aligned with the financial income (book income) reported within financial statements.

Book Inventory (See Book Value)
The acquisition cost of all inventory less liabilities associated with the inventory.

Bookkeeping
The recording of business transactions in a ledger. It is also is the art, practice, or labor involved in the systematic recording of the transactions affecting a business.

Books of Record
Are all mandatory entries into those documents that track the activity, events, or decisions pertaining to the subject for which the records are maintained, e.g., board of director minutes, births or deaths, and marriage licenses.

Book Value
Is an accounting term which usually refers to a business' historical cost of assets less liabilities. The book value of a stock is determined from a company's records by adding all assets (generally excluding such intangibles as goodwill), then deducting all debts and other liabilities, plus the liquidation price of any preferred stock issued. The sum arrived at is divided by the number of common shares outstanding and the result is the book value per common share. Book value of the assets of a company may have little or no significant relationship to market value. Book Value could be summed as the original value of an asset less the accumulated depreciation. The book value is the value of an asset on the balance sheet. The book value is different from the market value.

Tangible Book Value is different than Book Value in that it deducts from asset value intangible assets, which are assets that are not hard (e.g., goodwill, patents, capitalized start-up expenses and deferred financing costs).

Economic Book Value allows for a Book Value analysis that adjusts the assets to their market value. This valuation allows valuation of goodwill, real estate, inventories and other assets at their market value.

Bottom Line
In accounting/finance, is specifically net income after taxes. In general, it is an expression as to the end results of something, e.g. the net worth of a corporation on a balance sheet, sales generated from a marketing campaign, or final decision on most any subject (Often said: “give me the bottom line”).

Bounced Check
A check written for an amount exceeding the checking account balance that is subsequently rejected for payment due to insufficient funds.

Break-Even Analysis 
An analysis method used to determine the number of jobs or products that need to be sold to reach a break-even point in a business.

Break-Even Point
The volume point at which revenues and costs are equal; a combination of sales and costs that will yield a no profit/no loss operation

Bridge Loan (Bridging Loan)  
An equity loan secured to solve short-term financing problem. It is a short-term loan provided while long-term financing is being finalized. Homeowners who have purchased a new home but have yet to sell the old one can get a bridge loan to tide themselves over until the old home is sold and the proceeds from the old home arrive. Sometimes entrepreneurs buying businesses use bridge loans as a short-term source of funding, too.

British-American Model
An accounting model. There are other accounting systems which differ from the U.S. accounting model. U.S. GAAP and FASB standards are not the only accounting principles used internationally; for example, many countries reverse the U.S. debit and credit system. Many countries with high rates of inflation account for inflation in financial reports much more than the U.S. does. Also, for any company operating internationally there is the currency exchange translation problem when consolidating financial statements.

Brought Forward
The recognition of a value that was determined in the past, e.g. an accumulated balance brought forward at the start of a new accounting period.

Budgetary Accounting
Contrary to financial accounting, looks forward: it measures the cost of planned acquisitions and the use of economic resources in the future.

Bullet Loan
A loan for which the principal is paid in one payment, in one lump sum. For example, a ten-year bullet loan would probably require regular interest payments but wouldn’t require any principal payments until the end of the ten years.

Bullion
Uncoined gold or other precious metals in bars or ingots.

Business Entity
A selection of the legal form under which a business is to operate: sole proprietorship, general partnership, corporation, S corporation (in the U.S.), or, a limited liability company.

Business Entity Principle
Where the business is seen as an entity separate from its owner(s) that keeps and presents financial records and prepares the final accounts and financial statements. The accounting is kept for each entity as a whole (groups of companies must present consolidated accounts and consolidated financial statements).




 

Business Matrix
Often used in business incubators, is where separate business entities join forces to advance the development of a start-up, e.g.., one firm may offer offices, another marketing/sales assistance or manufacturing expertise, etc. Such a matrix may receive compensation in the form of equity from the start-up being assisted by that business matrix.

Business Plan
A plan explaining to loan officers how a new business or a business that is restructuring will use the loan money. See the “Business Planning” page for more information. A business plan is a description of a business (normally over a 1-5 year period). A basic business plan includes: product(s) and/or service(s), the market, competitor analysis, the key people involved, financing needs, and the financial rewards if the business plan is implemented successfully. A well-prepared business plan plays two important roles, firstly, it is a useful management tool that can help management plot a course for the company, and secondly, it is a vital sales tool that will impress funding sources, e.g., venture capitalists or the board of directors, with management's planning ability and general competence. Other things being equal, a well prepared business plan will increase a company's chances of obtaining a financial commitment to fund the business.

By-Laws
A rule adopted by an organization chiefly for the government of its members and the management of its affairs. It could also be said that the by-laws are the provisions of corporate policies.