Definition of zero-balance account

zero-balance account

Regional bank account to which just enough funds are transferred daily to pay each day’s bills.

Zero-balance account (ZBA)

A checking account in which zero balance is maintained by transfers of funds
from a master account in an amount only large enough to cover checks presented.

Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.

Accounting earnings

Earnings of a firm as reported on its income statement.

Accounting insolvency

Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
the books.

Accounting liquidity

The ease and quickness with which assets can be converted to cash.

Accounts payable

Money owed to suppliers.

Accounts receivable

Money owed by customers.

Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.

Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.

Average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices.

Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.

Balance of trade

Net flow of goods (exports minus imports) between countries.

Balance sheet

Also called the statement of financial condition, it is a summary of the assets, liabilities, and
owners' equity.

Balance sheet exposure

See:accounting exposure.

Balance sheet identity

Total Assets = Total Liabilities + Total Stockholders' Equity

Balanced fund

An investment company that invests in stocks and bonds. The same as a balanced mutual fund.

Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a
balanced fund.

Basic balance

In a balance of payments, the basic balance is the net balance of the combination of the current
account and the capital account.

Capital account

Net result of public and private international investment and lending activities.

Compensating balance

An excess balance that is left in a bank to provide indirect compensation for loans
extended or services provided.

Concentration account

A single centralized account into which funds collected at regional locations
(lockboxes) are transferred.

Cumulative Translation Adjustment (CTA) account

An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the FASB No. 52 rule.

Current account

Net flow of goods, services, and unilateral transactions (gifts) between countries.

Discretionary account

accounts over which an individual or organization, other than the person in whose
name the account is carried, exercises trading authority or control.

Double-declining-balance depreciation

Method of accelerated depreciation.

Generally Accepted Accounting Principals (GAAP)

A technical accounting term that encompasses the
conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

IRA/Keogh accounts

Special accounts where you can save and invest, and the taxes are deferred until money
is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of
contributions. Withdrawals of tax deferred contributions are taxed as income, including the capital gains from
such accounts.

Joint account

An agreement between two or more firms to share risk and financing responsibility in
purchasing or underwriting securities.

Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

Money market demand account

An account that pays interest based on short-term interest rates.

Net cash balance

Beginning cash balance plus cash receipts minus cash disbursements.

Off-balance-sheet financing

Financing that is not shown as a liability in a company's balance sheet.

Omnibus account

An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission house.

Open account

Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt,
and the seller records the sale in the sales ledger.

Purchase accounting

Method of accounting for a merger in which the acquirer is treated as having purchased
the assets and assumed liabilities of the acquiree, which are all written up or down to their respective fair
market values, the difference between the purchase price and the net assets acquired being attributed to goodwill.

Receivables balance fractions

The percentage of a month's sales that remain uncollected (and part of
accounts receivable) at the end of succeeding months.

Regulatory accounting procedures

accounting principals required by the FHLB that allow S&Ls to elect
annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the
asset sold.

Remaining principal balance

The amount of principal dollars remaining to be paid under the mortgage as of
a given point in time.

Statement of Financial Accounting Standards No. 8

This is a currency translation standard previously in
use by U.S. accounting firms. See: Statement of accounting Standards No. 52.

Statement of Financial Accounting Standards No. 52

This is the currency translation standard currently
used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial accounting
Standards No. 8.

Sweep account

account in which the bank takes all of the excess available funds at the close of each business
day and invests them for the firm.

Target cash balance

Optimal amount of cash for a firm to hold, considering the trade-off between the
opportunity costs of holding too much cash and the trading costs of holding too little cash.

TT&L account

Treasury tax and loan account at a bank.

Zero coupon bond

Such a debt security pays an investor no interest. It is sold at a discount to its face price
and matures in one year or longer.

Zero prepayment

assumption The assumption of payment of scheduled principal and interest with no payments.

Zero uptick

Related: tick-test rules.

Zero-beta portfolio

A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.

Zero-coupon bond

A bond in which no periodic coupon is paid over the life of the contract. Instead, both the
principal and the interest are paid at the maturity date.

Zero-investment portfolio

A portfolio of zero net value established by buying and shorting component
securities, usually in the context of an arbitrage strategy.

Zero-one integer programming

An analytical method that can be used to determine the solution to a capital
rationing problem.

Zero-sum game

A type of game wherein one player can gain only at the expense of another player.

ACCOUNTS PAYABLE

Amounts a company owes to creditors.

ACCOUNTS RECEIVABLE

Amounts owed to a company by customers that it sold to on credit. Total accounts receivable are usually reduced by an allowance for doubtful accounts.

BALANCE SHEET

A “snapshot” statement that freezes a company on a particular day, like the last day of the year, and shows the balances in its asset, liability, and stockholders’ equity accounts. It’s governed by the formula:
Assets = Liabilities + Stockholders’ Equity.

Declining balance

An accelerated depreciation method that calculates depreciation each year by applying a fixed rate to the asset’s book (cost–accumulated depreciation) value. Depreciation stops when the asset’s book value reaches its salvage value.

Account

An explanation or report in financial terms about the transactions of an organization.

Accountability

The process of satisfying stakeholders in the organization that managers have acted in the best interests of the stakeholders, a result of the stewardship function of managers, which takes place through accounting.

Accounting

A collection of systems and processes used to record, report and interpret business transactions.

Accounting equation

The representation of the double-entry system of accounting such that assets are equal to liabilities plus capital.

Accounting period

The period of time for which financial statements are produced – see also financial year.

Accounting rate of return (ARR)

A method of investment appraisal that measures
the profit generated as a percentage of the
investment – see return on investment.

Accounting system

A set of accounts that summarize the transactions of a business that have been recorded on source documents.

Accounts

‘Buckets’ within the ledger, part of the accounting system. Each account contains similar transactions (line items) that are used for the production of financial statements. Or commonly used as an abbreviation for financial statements.

Accruals accounting

A method of accounting in which profit is calculated as the difference between income when it is earned and expenses when they are incurred.

Balanced Scorecard

A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.

Balance Sheet

A financial statement showing the financial position of a business – its assets, liabilities and
capital – at the end of an accounting period.

Cash accounting

A method of accounting in which profit is calculated as the difference between income
when it is received and expenses when they are paid.

Financial accounting

The production of financial statements, primarily for those interested parties who are external to the business.

Management accounting

The production of financial and non-financial information used in planning for the future; making decisions about products, services, prices and what costs to incur; and ensuring that plans are implemented and achieved.

Profit and Loss account

A financial statement measuring the profit or loss of a business – income less expenses – for an accounting period.

Strategic management accounting

The provision and analysis of management accounting data about a business and its competitors, which is of use in the development and monitoring of strategy (Simmonds).

Zero-based budgeting

A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.

Accounting equation

The formula Assets = Liabilities + Equity.

Accounts payable

Amounts owed by the company for goods and services that have been received, but have not yet been paid for. Usually accounts payable involves the receipt of an invoice from the company providing the services or goods.

Accounts receivable

Amounts owed to the company, generally for sales that it has made.

Allowance for doubtful accounts

A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.

Balance Sheet

One of the basic financial statements; it lists the assets, liabilities, and equity accounts of the company. The balance Sheet is prepared using the balances at the end of a specific day.

Contra-asset account

An offset to an asset account that reduces the balance of the asset account.

Contra-equity account

An account that reduces an equity account. An example is Treasury stock.

Control account

An account maintained in the general ledger that holds the balance without the detail. The detail is maintained in a subsidiary ledger.

Declining-balance

A method of depreciation.

Permanent accounts

The accounts found on the balance Sheet; these account balances are carried forward for the lifetime of the company.

T account

The format used for a general ledger page. The name of the account is put on the top line, and a vertical line is dropped from the top line (hence the "T"). Debits are recorded on the left side, and credits are recorded on the right.

Temporary accounts

The accounts found on the Income Statement and the Statement of Retained Earnings; these accounts are reduced to zero at the end of every accounting period.

Trial balance

A listing of all the accounts and their balances on a specified day.

accounting

A broad, all-inclusive term that refers to the methods and procedures
of financial record keeping by a business (or any entity); it also
refers to the main functions and purposes of record keeping, which are
to assist in the operations of the entity, to provide necessary information
to managers for making decisions and exercising control, to measure
profit, to comply with income and other tax laws, and to prepare financial
reports.

accounting equation

An equation that reflects the two-sided nature of a
business entity, assets on the one side and the sources of assets on the
other side (assets = liabilities + owners’ equity). The assets of a business
entity are subject to two types of claims that arise from its two basic
sources of capital—liabilities and owners’ equity. The accounting equation
is the foundation for double-entry bookkeeping, which uses a
scheme for recording changes in these basic types of accounts as either
debits or credits such that the total of accounts with debit balances
equals the total of accounts with credit balances. The accounting equation
also serves as the framework for the statement of financial condition,
or balance sheet, which is one of the three fundamental financial
statements reported by a business.

accounts payable

Short-term, non-interest-bearing liabilities of a business
that arise in the course of its activities and operations from purchases on
credit. A business buys many things on credit, whereby the purchase
cost of goods and services are not paid for immediately. This liability
account records the amounts owed for credit purchases that will be paid
in the short run, which generally means about one month.

accounts receivable

Short-term, non-interest-bearing debts owed to a
business by its customers who bought goods and services from the business
on credit. Generally, these debts should be collected within a month
or so. In a balance sheet, this asset is listed immediately after cash.
(Actually the amount of short-term marketable investments, if the business
has any, is listed after cash and before accounts receivable.)
accounts receivable are viewed as a near-cash type of asset that will be
turned into cash in the short run. A business may not collect all of its
accounts receivable. See also bad debts.

accounts receivable turnover ratio

A ratio computed by dividing annual
sales revenue by the year-end balance of accounts receivable. Technically
speaking, to calculate this ratio the amount of annual credit sales should
be divided by the average accounts receivable balance, but this information
is not readily available from external financial statements. For
reporting internally to managers, this ratio should be refined and finetuned
to be as accurate as possible.

accrual-basis accounting

Well, frankly, accrual is not a good descriptive
term. Perhaps the best way to begin is to mention that accrual-basis
accounting is much more than cash-basis accounting. Recording only the
cash receipts and cash disbursement of a business would be grossly
inadequate. A business has many assets other than cash, as well as
many liabilities, that must be recorded. Measuring profit for a period as
the difference between cash inflows from sales and cash outflows for
expenses would be wrong, and in fact is not allowed for most businesses
by the income tax law. For management, income tax, and financial
reporting purposes, a business needs a comprehensive record-keeping
system—one that recognizes, records, and reports all the assets and liabilities
of a business. This all-inclusive scope of financial record keeping
is referred to as accrual-basis accounting. Accrual-basis accounting
records sales revenue when sales are made (though cash is received
before or after the sales) and records expenses when costs are incurred
(though cash is paid before or after expenses are recorded). Established
financial reporting standards require that profit for a period
must be recorded using accrual-basis accounting methods. Also, these
authoritative standards require that in reporting its financial condition a
business must use accrual-basis accounting.

balance sheet

A term often used instead of the more formal and correct
term—statement of financial condition. This financial statement summarizes
the assets, liabilities, and owners’ equity sources of a business at a
given moment in time. It is prepared at the end of each profit period and
whenever else it is needed. It is one of the three primary financial statements
of a business, the other two being the income statement and the
statement of cash flows. The values reported in the balance sheet are the
amounts used to determine book value per share of capital stock. Also,
the book value of an asset is the amount reported in a business’s most
recent balance sheet.

double-entry accounting

See accrual-basis accounting.

generally accepted accounting principles (GAAP)

This important term
refers to the body of authoritative rules for measuring profit and preparing
financial statements that are included in financial reports by a business
to its outside shareowners and lenders. The development of these
guidelines has been evolving for more than 70 years. Congress passed a
law in 1934 that bestowed primary jurisdiction over financial reporting
by publicly owned businesses to the Securities and Exchange Commission
(SEC). But the SEC has largely left the development of GAAP to the
private sector. Presently, the Financial accounting Standards Board is
the primary (but not the only) authoritative body that makes pronouncements
on GAAP. One caution: GAAP are like a movable feast. New rules
are issued fairly frequently, old rules are amended from time to time,
and some rules established years ago are discarded on occasion. Professional
accountants have a heck of time keeping up with GAAP, that’s for
sure. Also, new GAAP rules sometimes have the effect of closing the barn
door after the horse has left. accounting abuses occur, and only then,
after the damage has been done, are new rules issued to prevent such
abuses in the future.

internal accounting controls

Refers to forms used and procedures
established by a business—beyond what would be required for the
record-keeping function of accounting—that are designed to prevent
errors and fraud. Two examples of internal controls are (1) requiring a
second signature by someone higher in the organization to approve a
transaction in excess of a certain dollar amount and (2) giving customers
printed receipts as proof of sale. Other examples of internal
control procedures are restricting entry and exit routes of employees,
requiring all employees to take their vacations and assigning another
person to do their jobs while they are away, surveillance cameras, surprise
counts of cash and inventory, and rotation of duties. Internal controls
should be cost-effective; the cost of a control should be less than
the potential loss that is prevented. The guiding principle for designing
internal accounting controls is to deter and detect errors and dishonesty.
The best internal controls in the world cannot prevent most fraud
by high-level managers who take advantage of their positions of trust
and authority.

Zero-coupon Bond

A security that makes no interest payments; it is sold at a discount
at issue and then repaid at face value at maturity

accounting rate of return (ARR)

the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow

balanced scorecard (BSC)

an approach to performance
measurement that weighs performance measures from four
perspectives: financial performance, an internal business
perspective, a customer perspective, and an innovation and
learning perspective

Certified Management Accountant (CMA)

a professional designation in the area of management accounting that
recognizes the successful completion of an examination,
acceptable work experience, and continuing education requirements

Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.