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Glossary For Chapter 9

Accounts Payable (also known as Payables)
Money owed by your organization according to bills or invoices already received.

Accounts Receivable (also known as Receivables)
Money owed to your organization, corresponding to bills or invoices that have already been sent out.

Accrual Accounting/Budgeting
The accounting/budgeting system that records revenue when it is earned, expenses when they are incurred, and the cost of using fixed assets such as buildings or equipment, as opposed to Cash Accounting, defined below.

Allocation of Costs
In a cost or fund accounting system, the assignment of costs to different programs, operating centers, or types of services. For example, the accounting system may allocate 50 percent of the Training Coordinator's salary to "Overhead", and then allocate 10 percent to each of five different programs.

Asset
An asset is anything that has value that helps an organization provide its services to clients. Examples of assets include: cash, land, buildings, equipment, inventories (of supplies or goods for sale), furniture, and money owed to the organization ("receivables"). See "Fixed Assets" and "Current Assets."

Balance Sheet
The financial report that summarizes the value of the assets, liabilities, and equity (or reserves, in nonprofits) of an organization at a specific point in time.

Bank Reconciliation
Adjusting the balance of your bank account according to the bank statement to reflect deposits made and checks that have been drawn but not yet cleared by the bank.

Budget Performance Report
A report that compares actual revenues and expenses with those projected in the budget.

Capital Costs
Costs incurred when acquiring, constructing, or renovating long-lasting assets such as land, buildings, and large equipment.

Cash Accounting/Budgeting
The accounting/budgeting system that only records revenue when it is received and expenses when they are paid (as opposed to "Accrual Accounting/Budgeting").

Cash Flow Statement
The statement that forecasts and tracks the cash receipts and disbursements.

Chart of Accounts
The structure, within the accounting system that lists the programs, operating centers, and categories by which the revenues and expenses will be recorded and assigns a number to each line item.

Consolidated Budget
A budget that unifies information on the projected revenues and expenses from a variety of donors, programs, or facilities within the same institution.

Controls ("Financial" or "Internal")
All procedures and rules that guard against corruption, theft, misuse, and inappropriate utilization of funds or other resources.

Cost-Effectiveness (also known as Cost-Benefit)
A method of measuring the effectiveness of delivering services by comparing the cost with the impact using an indicator such as Total Fertility Rate. The purpose of a cost-effectiveness study is to identify program strategies that achieve the greatest impact for the least cost.

Current or Short-Term Assets
Assets that are typically used within the space of a year, such as cash and office and medical supplies.

Depreciation
The practice of charging as an annual expense the portion of a long-lasting asset's useful life that is used up each year. For example, a $20,000 truck with an estimated life of ten years will incur a yearly depreciation expense of $2,000.

Equity (also known as Reserves)
The "net worth" of the organization, calculated by subtracting the value of its liabilities subtracted from the value of its assets.

Expenditures
In cash accounting, actual disbursements of cash or checks.

Expenses
All the costs incurred in operating a program. In an accrual system, an expense is recorded in the accounting system when it is incurred, before you actually expend cash to pay the bill.

Financial Statement
The financial report covering a period of time (month or year) that summarizes the income and expenses ("Income and Expense Reports") and assets and liabilities ("Balance Sheet").

Fixed Costs or Expenses
Costs that do not vary with the quantity of people served or services delivered, such as main office expenses, insurance, rent, or interest on a mortgage.

Fixed or Long-Term Assets
Assets that have a useful life of longer than a year, such as land, buildings, furniture, and large pieces of equipment.

Fund Accounting
An accounting system that tracks expenses and revenues for different donor accounts.

Fund Balance (also known as Equity)
In a nonprofit organization, this represents the value of the revenues minus expenses.

Imprest Fund
A fixed cash flow set aside for small immediate cash outlays, which is replenished periodically in accordance with the amount expended.

Income and Expense Report (also known as Revenue and Expense Report, Income Statement and Profit and Loss Statement)
A periodic summary report of income and expenses, showing a surplus (profit) or deficit (loss) for the period covered by the report.

Liabilities
The obligations or debts owed to suppliers, employees, banks, or the government.

Line Item
The category in a Budget, Chart of Accounts, or Financial Statement which represents an account used to record transactions for a particular type of income, expense, asset, or liability.

Operating Center
Any logical division of the operations of a program, such as a department, a clinic, or one region's CBD program. Many organizations find it useful to produce financial information for each operating center.

Overhead Costs
The operating costs of an organization which are not already directly charged to a project (for example, building maintenance and utility expenses). A portion of these costs may sometimes be charged to a project.

Paper Trail
Records of the movement of resources (human, financial, and material), kept to enable such movement to be traced and resources to be accounted for.

Petty Cash
A form of imprest fund, whereby a fixed cash flow is set aside for small immediate cash outlays and is replenished periodically as it is used.

Receipts
In cash accounting, this term refers to cash received.

Recurrent Expenses (also known as Operating Expenses)
Those costs which are incurred regularly year after year.

Revenues
Monies or the equivalent received from sales, services, fees, donations, and grants. In the case of grants, only the portion that has been spent is actually revenue; the balance may have to be returned to the donor. In accrual systems, revenues are recorded when they are earned, not when the actual cash or goods are received.

Variable Costs or Expenses
Expenses that vary according to the level of service provided or number of people served. Contraceptive expenses, for example, vary depending on the number of users of each method.

Vehicle Usage Report
A log that records vehicular use. It includes the date, destination, purpose of the trip, beginning and ending odometer reading, petrol purchases, and repairs. It is used to calculate the cost per mile or kilometer and to control and monitor costs.


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