Glossary of Accounting Terms ACCOUNTS PAYABLE ACCOUNTS PAYABLE VOUCHER APV

Glossary of Accounting Terms ACCOUNTS PAYABLE ACCOUNTS PAYABLE VOUCHER (APV) ACCRUAL BASIS ACQUISITION COST ACTUAL COST Specific obligations (liabilities) to outside vendors. A sequentially numbered voucher supporting payment for goods and/or services purchased and with the appropriate accounting distribution. An accounting convention which requires the recording of revenues/expenses in the period when earned/incurred rather than in the period when received/paid. The cash or cash equivalent value exchanged to acquire goods or services and have them available for use. Cost incurred in the current manufacturing period. For example, actual material cost is actual pounds consumed times actual average unit price. Assigning costs or revenues according to benefits received, responsibilities, or other logical base. To charge off a portion of the cost of an asset over its useful life. Also, to retire an expense over a period of time. Medium through which capital expenditures are authorized to a specified dollar ceiling. Sometimes called a perpetual or running inventory. A continuous record of the amount of materials and goods on hand. The difference between the actual amount incurred and the budgeted amount. Dollars approved by Management indicating the expected expenditure required to operate during a given period under assumed conditions. Physical volume, which an installation is capable of producing. Capacity terms such as "Practical", "Theoretical", "Name-plate", etc. have special meaning. Last date that data will be accepted for entry into the current month's accounting records. A method of preparing income statements, which separates variable costs from, fixed costs to emphasize the importance of cost behavior patterns for purposes of planning and control. Excess of sales price over variable cost. Also called marginal income. May be expressed as a total, as a ratio, or on a per-unit basis. A cost, which may be directly regulated at a given level of managerial authority, either in the short run or in, the long run. An account containing primarily totals of a series of transactions, the detail of which appears in a subsidiary ledger or its equivalent. Its balance equals the sum of the balances of the detail accounts. (Reconciliation between subsidiary and controlling account is required). The total Cost of Manufacture excluding direct materials cost. The smallest unit of activity or area of responsibility for which costs are accumulated. A subsidiary ledger containing accounts used in computing or summarizing the Cost of Manufacture. Cost charged to a semi-finished or finished product inventory. It includes all material, labor and overhead directly related to the manufacturing processes, or related to the facilities used in producing the product. Aggregate of Cost of Goods Sold, Period Expense-Other, Selling Expense, Research and Development Expense, Finished Product Distribution Expense, Departmental Management Expense, Corporate Administrative Expense, Interest Expense, Exchange Gains/ Losses, etc. Monthly statement summarizing the elements of production costs and ALLOCATION AMORTIZE APPROPRIATION REQUEST BOOK INVENTORY BUDGET VARIANCE BUDGETED COST CAPACITY CLOSING DATE (CUT-OFF) CONTRIBUTION APPROACH CONTRIBUTION MARGIN CONTROLLABLE COST CONTROLLING ACCOUNT CONVERSION COST COST CENTER COST LEDGER COST OF MANUFACTURE COST OF SALES COST SHEET Glossary of Accounting Terms units produced and charged into each semi-finished and finished product inventory. A document used to record entries from one sub-account to another sub-account within the same general ledger account. Mill Entry Voucher (MEV) serves the same purpose. A measure of accounts receivable investment in terms of current and prior months' average daily sales, which remain unpaid (outstanding) at month end. An expenditure not recognized as a cost of operations of the period in which incurred but carried forward to be reflected as an expense in one or more future periods. Management reports produced monthly for each industrial department by Accounting Services Section. Statements reflect U.S., European and Latin America/Asia Pacific (OTE) operations for each significant product group sold or transferred by the industrial department on a worldwide basis. The amortization of the original capitalized cost of plant, property, and equipment to the particular periods and/or products that benefit from the utilization of assets. This charge recognizes the decline in value of assets due to wear and obsolescence based on their expected useful life. Any cost that is directly identifiable with a product or operation; generally excludes any allocated or distributed costs. Method of accounting which assigns only variable production costs to inventories. Fixed costs, which are considered a function of time rather than production, are recognized in the period in which they were incurred without assigning them to specific units produced. All operating labor, which is directly related and specifically and conveniently traceable to specific products. A method of adjusting cash flows for the time value of money using such techniques as internal rate of return (IRR) or net present value (NPV). Accounts set up to accumulate indirect or common costs, which will later be distributed on an equitable basis to the direct accounts they serve. Sale of Company products or services to customers in the United States, District of Columbia, and U.S. Possessions (e.g., Puerto Rico). "Sale" of a department's products or services to another department or domestic subsidiary in the United States, District of Columbia, and U.S. Possessions (e.g., Puerto Rico). Use variance applied to labor and variable overhead. Fringe benefits, such as hospitalization, pension, FICA, vacation pay, etc., borne by the Company. Difference between actual and standard expense for the actual mix and volume attained. Sales of Company products or services to customers outside the United States, District of Columbia, and U.S. Possessions (e.g., Puerto Rico). The professional rule-making body, which has primary responsibility for setting financial, accounting and reporting standards by business enterprises in the United States. The cost of those functions directly related to the movement and storage of finished product between the time it is packaged at the end of the production line and the time it is delivered to the customers facility, including allocation of directly related overhead and management expenses. A document used to record changes to the Company's permanent CROSS ENTRY VOUCHER (CEV) DAYS SALES OUTSTANDING DEFERRED CHARGE DEPARTMENTAL EARNINGS STATEMENTS DEPRECIATION DIRECT COST DIRECT COSTING DIRECT LABOR DISCOUNTED CASH FLOW DISTRIBUTIVE (COMMON AREA) ACCOUNTS DOMESTIC SALES DOMESTIC TRANSFERS EFFICIENCY VARIANCE EMPLOYEE BENEFITS EXPENSE VARIANCE EXPORT SALES FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) FINISHED PRODUCT DISTRIBUTION EXPENSE FIXED ASSET VOUCHER (FAV) Glossary of Accounting Terms FIXED COST FIXED VALUE INVENTORIES FLEXIBLE BUDGET investment and related depreciation reserve. Costs that tend to remain constant for a period of time and within a relevant range of activity (rent, property tax, etc.) Inventories which are valued at each physical inventory by pricing out the existing inventory at its current replacement price. Interim purchases are charged to cost. A set of different budgets indicating costs to be incurred at different levels of operations. The flexible budget enables one to compare actual results to results expected at a specific level of operations. Refers to the practice of charging certain stores items to Cost of Manufacture rather than to inventory when received. Freight paid on incoming shipments, treated as an element of cost of goods or materials received. Freight paid or allowed by the seller on shipments to customers. The Company's principal record of asset, liability (including stockholders' equity), revenue, and expense accounts. A statement containing all general ledger account balances at a certain date. The body of accounting rules, methods, and procedures, which is sanctioned by the accounting profession, either by convention or by the authoritative literature, as a guide to the preparation of financial statements. The recorded value of an item of permanent investment, generally comprised of bare equipment value, installation cost, and an appropriate share of project distributives (overhead, etc.), before deduction of accumulated depreciation. Sales less variable costs. (Also known as Marginal Income.) Cost incurred at the time of acquisition. An allocated or distributed cost not attributed to the production of specific goods or services but to an activity associated with production. Labor costs which do not affect the construction or composition of a product but are incident to and necessary for production, i.e., workers employed in service departments or jobs (janitors, watchmen). Raw materials, stores, finished and semi-finished goods on hand, in transit, in storage, or consigned to others at the end of an accounting period and owned by the Company. An approach to assuring the effective and efficient acquisition and use of inventory through the systematic employment of accounting documents and a physical review of a plant and its distribution operations. Trial Balance reclassifications of balances out of plant inventory accounts to Prepaid Expenses, Construction, Accounts Payable, etc. A document showing the description, quantity, price, terms, nature of delivery, and other particulars of goods sold or of services rendered. The detailed record for the accumulation of job costs; e.g. the material, labor and overhead cost incurred on a job or specific production. A document used to record transactions between accounts in the Company's general ledger. The difference between actual wage rate and standard wage rate multiplied by the actual hours of direct labor used. A probable future sacrifice of economic benefits arising from a present obligation to transfer assets or provide services to an outside party in the future as a result of past transactions or events. A method of inventory valuation and costing based on the flow of costs theory. It assumes that earliest-acquired stock is still on hand, and the latest-acquired stock is assume to have been used immediately. It FREE ISSUE FREIGHT-IN FREIGHT-OUT GENERAL LEDGER GENERAL LEDGER TRIAL BALANCE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) GROSS BOOK VALUE GROSS MARGIN HISTORICAL COST INDIRECT COST INDIRECT LABOR COST INVENTORY INVENTORY CONTROL INVENTORY "CUT OUTS" INVOICE (SALES) JOB COST SHEET JOURNAL ENTRY VOUCHER (JEV) LABOR RATE VARIANCE LIABILITY LIFO (LAST-IN, FIRST-OUT) Glossary of Accounting Terms attempts to match current costs of obtaining inventory against current revenues. Expenditures necessary to achieve the originally anticipated useful life of a fixed asset. Maintenance is concerned with restoration or prevention of destruction of parts that deteriorate faster than the whole property unit. The difference between the actual unit price for materials and the established standard unit price multiplied by the actual number of units acquired (or used in production). The difference between the actual unit usage VARIANCE of parts and materials and the established standard unit usage multiplied by the standard unit price. The document used to record entries between one sub-account and another sub-account within the same general ledger account. Cross Entry Voucher (CEV) serves the same purpose. Gross book value less associated depreciation reserve. Value obtained by deducting from actual current inventory sales price the related Selling and Finished Product Distribution Expense, cash discounts, volume discounts, trade discounts and any further processing costs. Development of new products or processes with the objective of commercializing new business ventures. Charges are expensed in the period incurred. A normal complement of items of equipment, regardless of cost, with a useful life in excess of 24 months kept in the operating area to retain normal flexibility of the equipment served and to meet changes in production schedules, or where it is the intent and purpose to rotate the item with like equipment in the operation for cleaning, adjusting, resurfacing, refurbishing, etc. Includes (1) reserves for taxes other than Federal and State taxes on income, (2) liability to customers for outstanding returnable containers, (3) accrued but unpaid payroll, (4) accrued vacation pay, (5) accrued sales freight, royalties and interest payable on Notes and Debentures, and (6) a variety of reserves where a liability is known to exist and which is properly applicable to current cost but where a substantial future expenditure will be made, e.g., boiler repairs, maintenance shutdowns, product warranties, etc. The cash cost associated with a course of action. The amount by which overhead cost distributed to products exceeded actual overhead cost incurred. Any material used to protect, restrain, or support one or more packages. Some examples of packaging material are: wrapping film, polyethylene bags, corrugated boxes, and cans. Period expenses are not part of the manufacturing process, and are recorded as either Period Expense - Other (e.g., Pre operating and Start-Up Expenses) or Wilmington/Departmental Expenses. Departmental expenses are those expenditures incurred by an industrial department related to administration, marketing, distribution and research functions of the business. A book inventory kept in continual agreement with stock on hand by physical quantities. The inventory dollar balance results from the method of valuation applied to inventory quantities. A physical count (or other physical measure) of all inventories on hand. This verifies the book balance and is usually done on an annual basis. An estimate of the period over which an asset will maintain its functional capacity. MAINTENANCE MATERIAL PRICE VARIANCE MATERIAL QUANTITY MILL ENTRY VOUCHER (MEV) NET BOOK VALUE NET REALIZABLE VALUE NEW VENTURE DEVELOPMENT OPERATING/SERVICE SPARES OTHER ACCRUED LIABILITIES (O.A.L) OUT-OF-POCKET COST OVERAPPLIED OVERHEAD PACKAGING MATERIAL PERIOD EXPENSES PERPETUAL INVENTORY ACCOUNT PHYSICAL INVENTORY PHYSICAL LIFE Glossary of Accounting Terms PLANT COST STATEMENT POWER COST (UTILITIES) Statement prepared by the plant monthly, summarizing the cost of an organization, function, service, activity, product or center. Cost includes materials (purchased electricity, fuel, coal, water, etc.), labor, and other applicable expenses related to generation or procurement of electricity, steam, etc. An inventory or permanent investment classification consisting of gold, silver, platinum and other precious metals used as catalysts, ingredients, and laboratory and process equipment. A rate used to apply overhead to specific situations; e.g., projects. It is obtained by dividing the expected overhead costs by the chosen base; e.g., units produced, labor dollars, etc. Costs associated with new and/or expanded commercial facilities, incurred before facilities are essentially complete and capable of producing acceptable product. Unabsorbed costs and prepayments. Actual quantity purchased or consumed times the difference between actual and standard unit prices. Or actual vs. forecast or actual vs. prior period price comparisons. A method of cost accounting whereby costs (either actual or standard) are charged to process operations and averaged over units produced. It is usually used when there is continuous mass production of like units that pass in consecutive order through a series of production steps. One or more production units that perform an identifiable function within a cost center, i.e., grinder, evaporator, digester, etc. A cost center may have one or more process steps. Total of all production costs directly or indirectly related to products used to determine product inventory value. Sales less variable costs. Also called Contribution Margin. The percentage obtained by dividing earnings by sales and transfers. Total actual hours of direct labor used times the difference between actual and standard wage rates paid. 1) The determination of the items necessary to bring the balances of two or more related accounts or statements into agreement. 2) A statement of the details of the difference between any two or more accounts. The percentage ratio of cumulative depreciation accruals to the related gross permanent investment. A system of reporting, which is tailored to an organizational structure so that costs and revenues are reported at the level having the related responsibility within the organization. The variance due to a change in actual versus forecast sales pattern when products have varying price and/or profit ratios. Difference due to changes in actual and forecast sales volume. The cash inflow expected from the sale of materials, permanent investment, etc., which are no longer useful to the Company. A method of forming an opinion about a group of items on the basis of an examination of fewer than all of the items, with or without the use of mathematical procedures. Small collections of stores and operating supplies outside the Central Stores location. The cost incurred in promotion and consummation of sales of finished products and certain services to customers and non-consolidated affiliated companies. Examples include direct selling effort, advertising, technical services, travel expenses, product samples, etc. An item of labor or indirect expense that varies, but not proportionately, with quantities produced. The costs increase stepwise as volume increases. PRECIOUS METALS PREDETERMINED OVERHEAD RATE PREOPERATING EXPENSES PREPAID EXPENSES PRICE VARIANCE PROCESS COSTING PROCESS STEP PRODUCT COST PROFIT CONTRIBUTION PROFIT MARGIN RATE VARIANCE RECONCILIATION RESERVE RATIO (DEPRECIATION) RESPONSIBILITY ACCOUNTING SALES MIX VARIANCE SALES VOLUME VARIANCE SALVAGE VALUE SAMPLING SATELLITE STORES (SUBSTORES) SELLING EXPENSE SEMIVARIABLE COST Glossary of Accounting Terms SHUTDOWN COST All costs and expense directly associated with the decision to terminate operations, such as, severance pay, dismantlement and decontamination costs. Difference between actual and standard overhead expense based on actual volume. A forecast of the cost of performance, which should be attained under projected conditions as determined by reasonable estimates or engineering studies. An accounting technique whereby costs are recorded on the basis of predetermined standards while deviations from such standards are identified separately for analysis and control. Cost of maintaining facilities in a standby condition at zero production volume awaiting return to normal operations or disposition. That portion of production costs incurred during the start-up of new or expanded facilities representing the cost of excess capacity or abnormal yields not used in production of acceptable product. Inventories of maintenance materials, supplies, small parts, etc., that normally do not become an integral part of the finished product. Examples are pipe and fittings, electrical supplies, lumber. A ledger consisting of a group of accounts showing the detail which supports a control account in the general ledger. Small collections of stores operating supplies not on perpetual inventory system, located at points in the plants other than Central Stores. Sub stores are valued annually at time of physical inventory. The price at which goods and services are transferred within the Company. Represent "sale" of products between (1) profit centers, (2) industrial departments, (3) parent Company and consolidated subsidiaries, and (4) consolidated subsidiaries. Domestic Transfers - Sale of an industrial department's products or services to another industrial department within the U.S. or trust territories. Export Transfers - Sale of parent Company products or services to a foreign consolidated subsidiary. Intracompany - Transactions by departments within the same company. Intercompany - Represents products manufactured by one company and sold to another company, generally at market value, between parent Company and consolidated subsidiaries and between consolidated subsidiaries. The cost of freight, handling charges, etc., relating either to goods, which are purchased, in process, or sold. Those products shipped to customers but for which billing has not been rendered. The amount of overhead cost incurred in excess of the amount of overhead cost applied. Total cost of production divided by units produced. A department or subsidiary's profit on the transfer of products to another department/ subsidiary, which is not realized by the consolidated entity until products are sold to outside parties. Difference between actual quantities used and standard quantities allowed for the number of good units produced times standard unit price. Costs directly and indirectly related to and variable with levels of production (e.g., materials, operating labor, direct power, etc.) which would not be incurred if the operation did not exist. Sometimes called out-of-pocket, marginal, or incremental costs. SPENDING VARIANCE STANDARD COST STANDARD COST SYSTEM STANDBY COST START-UP EXPENSES STORES SUBSIDIARY LEDGER SUBSTORES TRANSFER PRICE TRANSFERS TRANSPORTATION CHARGES UNBILLED SHIPMENTS UNDERAPPLIED OVERHEAD UNIT COST UNREALIZED TRANSFER PROFIT (UTP) USE (EFFICIENCY) VARIANCE VARIABLE COST