Accounting Glossary: R-Z

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Rate of interest

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Interest for one year expressed as a percentage of the principal

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Ratio analysis

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Expression of relationship between two relevant items in financial statements as a ratio or percentage and the interpretation of the result.

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Responsibility centre

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A collective name for cost centre, profit centre and investment centre.

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Retained earnings

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Profit belonging to ordinary shareholders of a company not distributed by way of dividends

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Return on capital

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After-tax profit expressed as a percentage of the capital invested in a business

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Return on investment

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A ratio of the income per period to the average investment for the period

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Revenue

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Increase in owners equity as a result of a variety of earnings by the business

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Revenue reserves

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A major owners equity classification that shows the portion of retained profit that is earmarked for a particular purpose

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Rolling budget

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A budget that is updated by deducting figures from the immediate past period and adding figures for the immediate new period.

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Sale and lease back

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A situation where the owner of an asset sells the asset and enters into an agreement with the buyer to lease it back

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Sales revenue

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An amount that a business earns by selling goods or services which increases the owners equity

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Sales variance

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The difference between the actual sales margin and the budgeted sales margin

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Secured loan

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A loan where the borrower pledges some asset as collateral to act as a guarantee that the loan will be repaid to the lender

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Semi-variable costs

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Costs that are a mixture of fixed and variable costs

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Simple interest

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Interest calculated on the original principal only

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Static budget

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A budget that is prepared at the beginning of the budget period and not modified for comparison with the actual result.

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Strategic objective

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The stated intentions of what an organisation wants to achieve in the long term

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Strategic plan

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A statement of long term goals along with a definition of the strategies and policies which will ensure achievement of these goals.

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Succession planning

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Planning the identification and development of potential successors of critical business positions

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Tactical plans

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Short term plans for achieving an entitys objectives

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Target costing

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A cost management method for reducing the overall cost of a product or service by employing better specification and design procedures

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Targets

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The goal aimed for - generally numerical values set by management

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Time value of money

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A dollar in hand today is worth more than a dollar receivable in the future because of the interest element

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Trade credit

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Delayed payment granted to a purchaser by a supplier

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Trend

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An overall tendency for a set of data to rise or fall

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Unsecured notes

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A form of borrowing by a company for which security is not given

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Variable cost

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A cost that changes in direct proportion to changes in volume of activity

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Variable overhead cost variance

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The difference between actual variable overhead and absorbed variable overhead

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Variable overhead efficiency variance

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The variance in variable overhead due to actual direct labour hours differing from the budgeted hours allowed for the output.

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Variable overhead expenditure variance

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The difference between the actual variable overhead and the budgeted variable overhead based on actual hours used.

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Variance

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The difference between a planned, budgeted or standard cost (or revenue) and the actual cost (or revenue).

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Variance analysis

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Comparison of actual output and input with the budgeted output and input to isolate differences

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Vertical analysis

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The expression of items in financial statements as a percentage of base amount (e.g. sales) in the same statement

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Weighted average

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An average calculated by assigning different weights to the items averaged to give effect to their relative importance

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Work groups

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Subsections of an organisation with several workers who perform a common task

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Working capital

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A measure of a business's ability to meet its short term obligations using its current assets, obtained by deducting current liabilities from current assets.

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Zero-based budgeting

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A method of budgeting which requires each cost element to be specifically justified, as though the activities to which the budget relates were being undertaken for the first time.