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Accountability

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Definition of Accountability

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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.



Related Terms:

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

A federal Act expanding upon many of the insurance reforms created by
COBRA. In particular, it ensures that small businesses will have access to
health insurance, despite the special health status of any employees.


Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.


Act of state doctrine

This doctrine says that a nation is sovereign within its own borders and its domestic
actions may not be questioned in the courts of another nation.


Active

A market in which there is much trading.


Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a
better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy



activity

a repetitive action performed in fulfillment of business functions


activity analysis

the process of detailing the various repetitive actions that are performed in making a product or
providing a service, classifying them as value-added and
non-value-added, and devising ways of minimizing or eliminating
non-value-added activities


Accountability Image 1

Activity-based budgeting

A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.


activity-based budgeting (ABB)

planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
quality of production


Activity-based costing

A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.


activity based costing (ABC)

A relatively new method advocated for the
allocation of indirect costs. The key idea is to classify indirect costs,
many of which are fixed in amount for a period of time, into separate
activities and to develop a measure for each activity called a cost driver.
The products or other functions in the business that benefit from the
activity are allocated shares of the total indirect cost for the period based
on their usage as measured by the cost driver.


activity-based costing (ABC)

a process using multiple cost drivers to predict and allocate costs to products and services;
an accounting system collecting financial and operational
data on the basis of the underlying nature and extent
of business activities; an accounting information and
costing system that identifies the various activities performed
in an organization, collects costs on the basis of
the underlying nature and extent of those activities, and
assigns costs to products and services based on consumption
of those activities by the products and services


Activity-based costing (ABC)

A cost allocation system that compiles costs and assigns
them to activities based on relevant activity drivers. The cost of these activities can
then be charged to products or customers to arrive at a much more relevant allocation
of costs than was previously the case.


activity-based management (ABM)

a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
by a customer and the resulting profit achieved by providing
this value


activity center

a segment of the production or service
process for which management wants to separately report
the costs of the activities performed


activity driver

a measure of the demands on activities and,
thus, the resources consumed by products and services;
often indicates an activity’s output


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Actual cost

The actual expenditure made to acquire an asset, which includes the supplierinvoiced
expense, plus the costs to deliver and set up the asset.


actual cost system

a valuation method that uses actual direct
material, direct labor, and overhead charges in determining
the cost of Work in Process Inventory



Actuals

The physical commodity underlying a futures contract. Cash commodity, physical.


Actuary

One who uses statistical information to evaluate the probability of future events and prices insurance products.


ADF (annuity discount factor)

the present value of a finite stream of cash flows for every beginning $1 of cash flow.


Allocation base A measure of activity or volume such as labour

hours, machine hours or volume of production
used to apportion overheads to products and
services.


Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.


Amortization factor

The pool factor implied by the scheduled amortization assuming no prepayemts.


Annuity factor

Present value of $1 paid for each of t periods.


annuity factor

Present value of an annuity of $1 per period.


Asset activity ratios

Ratios that measure how effectively the firm is managing its assets.


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Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.



Bill and Hold Practices

Products that have been sold with an explicit agreement that delivery
will occur at a later, often yet-to-be-determined, date.
Capitalize To report an expenditure or accrual as an asset as opposed to expensing it and charging it against earnings currently.


Borrower (Credit Insurance)

A consumer who borrows money from a lender.


Bullet contract

A guaranteed investment contract purchased with a single (one-shot) premium. Related:
Window contract.


business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay


Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.


Canadian Life and Health Insurance Association (CLHIA)

An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.


cash flow from operating activities, or cash flow from profit

This equals the cash inflow from sales during the period minus the cash
outflow for expenses during the period. Keep in mind that to measure
net income, generally accepted accounting principles require the use of
accrual-basis accounting. Starting with the amount of accrual-basis net
income, adjustments are made for changes in accounts receivable,
inventories, prepaid expenses, and operating liabilities—and depreciation
expense is added back (as well as any other noncash outlay
expense)—to arrive at cash flow from profit, which is formally labeled
cash flow from operating activities in the externally reported statement
of cash flows.


Cash Flow Provided by Operating Activities

With some exceptions, the cash effects of transactions
that enter into the determination of net income, such as cash receipts from sales of goods
and services and cash payments to suppliers and employees for acquisitions of inventory and
expenses.


Cash Flow Provided or Used from Financing Activities

Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.


Cash Flow Provided or Used from Investing Activities

Cash receipts and payments involving
long-term assets, including making and collecting loans and acquiring and disposing of
investments and productive long-lived assets.


CASH FLOWS FROM FINANCING ACTIVITIES

A section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations.


CASH FLOWS FROM INVESTING ACTIVITIES

A section on the cashflow statement that shows how much cash came in and went out because of various investing activities like purchasing machinery.


Cash settlement contracts

Futures contracts, such as stock index futures, that settle for cash, not involving
the delivery of the underlying.


Cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which
calls for future delivery of an asset at an agreed-upon price.


Characteristic line

The market model applied to a single security. The slope of the line is a security's beta.


Child Insurance Rider (CIR)

insurance or insurability provided on current or future children of insured.


Co-insurance

In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.


Coinsurance effect

Refers to the fact that the merger of two firms decreases the probability of default on
either firm's debt.


Collection fractions

The percentage of a given month's sales collected during the month of sale and each
month following the month of sale.


Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.


Completed-Contract Method

A contract accounting method that recognizes contract revenue
only when the contract is completed. All contract costs are accumulated and reported as expense
when the contract revenue is recognized.


computer-aided manufacturing (CAM)

the use of computers to control production processes through numerically
controlled (NC) machines, robots, and automated assembly systems


computer integrated manufacturing (CIM)

the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system


Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional
sales contract.


Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal act
containing the requirements for offering insurance to departed employees.


Consumer Credit Protection Act

A federal act specifying the proportion of
total pay that may be garnished.


Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
bilateral agreement between the buyer and seller of a transaction as defined by an exchange.


Contract

A formal written statement of the rights and obligations of each party to a transaction.


Contract Accounting

Method of accounting for sales or service agreements where completion
requires an extended period.


contract manufacturer

an external party that has been granted an outsourcing contract to produce a part or component for an entity


Contract month

The month in which futures contracts may be satisfied by making or accepting a delivery.
Also called value managers, those who assemble portfolios with relatively lower betas, lower price-book and
P/E ratios and higher dividend yields, seeing value where others do not.


contract vendor

an external party that has been granted an
outsourcing contract to provide a service activity for an entity


Contract Work Hours and Safety Standards Act

A federal act requiring federal contractors to pay overtime for hours worked exceeding 40 per week.


Conversion factors

Rules set by the Chicago Board of Trade for determining the invoice price of each
acceptable deliverable Treasury issue against the Treasury Bond futures contract.


cost of goods manufactured (CGM)

the total cost of the
goods completed and transferred to Finished Goods Inventory
during the period


Cost of Insurance

The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.


Cost of manufacture

The cost of goods manufactured for subsequent sale.


cost-plus contract

a contract in which the customer agrees
to reimburse the producer for the cost of the job plus a
specified profit margin over cost


Creative Accounting Practices

Any and all steps used to play the financial numbers game, including
the aggressive choice and application of accounting principles, both within and beyond
the boundaries of generally accepted accounting principles, and fraudulent financial reporting.
Also included are steps taken toward earnings management and income smoothing. See Financial
Numbers Game.


Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.


Critical Illness Insurance

Coverage that provides a lump-sum payment should you be diagnosed with a critical illness and survive a pre-determined period of time. There are no restrictions on how you use your benefit.


Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.


critical success factors (CSF)

any item (such as quality, customer
service, efficiency, cost control, or responsiveness
to change) so important that, without it, the organization
would cease to exist


Current Tax Payment Act of 1943

A federal act requiring employers to withhold income taxes from employee pay.


Davis-Bacon Act of 1931

A federal act providing wage protection to nongovernment
workers by requiring businesses engaged in federal construction
projects to pay their employees prevailing wages and fringe benefits.


De facto

Existing in actual fact although not by official recognition.


Dead Peasants Insurance

Also known as "Dead Janitors insurance", this is the practice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned life insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the deaths of their employees [and sometimes ex-employees] have attracted adverse publicity because ultimate death benefits are seldom, even partially passed down to surviving families.


Debt (Credit Insurance)

Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be secured.


design for manufacturability (DFM)

a process that is part of the project management of a new product; concerned with finding optimal solutions to minimizing product failures
and other adversities in the delivery of a new product
to customers


Disability Insurance

insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.


Disability Insurance (Credit Insurance)

Group insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.


Discount factor

Present value of $1 received at a stated future date.


discount factor

Present value of a $1 future payment.


Employee Retirement Income Security Act of 1974 (ERISA)

A federal act that sets minimum operational and funding standards for employee benefit
plans.


Equal Pay Act of 1963

A federal act requiring that both sexes receive equal pay
in situations where work requires equivalent effort, responsibility, and skills,
performed under similar working conditions.


Equity-based insurance

Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.


Errors and Omissions Insurance

insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.


Exact matching

A bond portfolio management strategy that involves finding the lowest cost portfolio
generating cash inflows exactly equal to cash outflows that are being financed by investment.


Export Credit Insurance

The granting of insurance to cover the commercial and political risks of selling in foreign markets.


Factor

A financial institution that buys a firm's accounts receivables and collects the debt.


Factor

An agent who buys and sells goods on behalf of others for a commission.


Factor analysis

A statistical procedure that seeks to explain a certain phenomenon, such as the return on a
common stock, in terms of the behavior of a set of predictive factors.


Factor model

A way of decomposing the factors that influence a security's rate of return into common and
firm-specific influences.


Factor of Production

A resource used to produce a good or service. The main macroeconomic factors of production are capital and labor.


Factor portfolio

A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of
zero on any other factors.


Factoring

Sale of a firm's accounts receivable to a financial institution known as a factor.


Factoring

The sale of accounts receivable to a third party, with the third party bearing
the risk of loss if the accounts receivable cannot be collected.


Factoring

The discounting, or sale at a discount, of receivables on a nonrecourse, notification
basis. The purchaser of the accounts receivable, the factor, assumes full risk of collection and
credit losses, without recourse to the firms discounting the receivables. Customers are notified to
remit directly to the factor.


Factoring

Type of financial service whereby a firm sells or transfers title to its accounts receivable to a factoring company, which then acts as principal, not as agent.


Factory overhead

All the costs incurred during the manufacturing process, minus the
costs of direct labor and materials.


Fair Labor Standards Act of 1938

A federal act creating standards of overtime
pay, minimum wages, and payroll recordkeeping.


Family and Medical Leave Act

A federal act containing the rules for offering
health insurance to employees who are on leave.



 

 

 

 

 

 

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