Accounting, Business Studies and Economics Dictionary

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DAC - Development Assistance Committee of the OECD.

Data – A collection of information.

Database - An organised collection of data stored electronically with instant access, searching and sorting facilities.

Date of record - The date at which those who owned/own shares will receive the dividends.

Days’ inventory (inventory turnover) - The average time period goods are in inventory, i.e., the length of time a firm could continue to trade without receiving a new inventory shipment . The firm will try to calculate the economic order quantity (EOQ) by balancing the cost of holding inventory with its ordering costs.

Days payable outstanding (DPO) (creditors turnover) - An estimate of the amount of days the firm takes to pay suppliers after getting the Inventory.  It is normally calculated with the following equation: creditors days (creditors turnover)  = (creditors x 365) / sales

Deadweight loss of an indirect tax - The loss of consumer surplus plus producer surplus from the imposition of an indirect tax.

Deadweight welfare loss -The loss of consumer plus producer surplus in imperfect markets (when compared with perfect competition).

Death-rate - The number of deaths per 1000 people in the population per year.

Death tax - Tax imposed on property upon the death of the owner, such as an inheritance or estate tax.

Debenture - Is used when a limited company receives money on loan, and certificates called debenture certificates are issued to the lender.  This loan is secured against the assets of the company

Debit - When an entry is made on the left hand side of a journal or ledger account.

Debit card - A card that has the same use as a cheque. Its use directly debits the person's current account.

Debit and credit conventions - The rules for debit and credit to be followed under double entry bookkeeping.

Debit notes - May be issued to when there is a payment which is short.

Debt - Money or services owed to an outside party. It is a legal obligation of the business arising either from written or oral agreement. Debt may either be short-term or long-term.

Debt collection period - The number of days it takes to collect the average debt.

Debt / equity ratio - Measure used in the analysis of financial statements to show the amount of protection available to creditors. The ratio equals total liabilities divided by total stockholders' equity; also called debt to net worth ratio. A high ratio usually indicates that the business has a lot of risk because it must meet principal and interest on its obligations.

Debt financing - Raising money through selling bonds, notes, or mortgages or borrowing directly from financial institutions.

Debt-servicing  - The sum of interest and principal repayments on publicly held or publicly guaranteed external debt.

Debtors- Customers who owe money to the business.

Debtors days -  How long on average it takes a company to collect the money owed to it. (debtors x 365) / sales.

Debtors control account - The account in the general ledger which has the balance from the outstanding amounts owed from the sales ledger.

Debt service ratio - The measurement of debt payments to gross income.

Debt to equity (gearing) - Is a measure of the the risk of the  capital structure of the firm. It shows amounts of capital contributed by creditors as compared to the amount contributed by owners. A low Debt/equity ratio may make it easier for a firm to borrow.

Decentralised - A management structure in which many decisions are not taken at the centre of the business but are delegated to lower levels of management.

Decision lag - The period of time between perceiving problem and reaching a decision on what to do about it.

Decision making - Purposeful selection from among a set of alterna­\tives in light of a given objective. Decision making is not a separate function of management. In fact, decision making is intertwined with the other functions, such as planning, coordinating, and controlling.

Decision theory - Systematic approach to making decisions especially under uncertainty by using analytical techniques of different degrees of formality designed to help a decision maker choose among a set of alternatives in light of their possible consequences.

Decision tree (or game tree) – A technique which shows all possible outcomes of a decision.  The name comes from the similarity of the diagram to branches on a tree.

Declining (reducing) balance depreciation method - A method of accelerated depreciation by which the asset's book value is multiplied by a fixed depreciation rate. This method of depreciation gives larger  levels of depreciation in beginning years of the asset.

Decreasing returns - A situation in which output is less than in proportion to inputs as the scale of firm's production increases. A firm in this situation with fixed factor prices, is an increasing cost firm.

Deed of Partnership - A binding legal document which states the formal rights of partners.

Deductions - 1. The itemised deductions, which are deductions from adjusted gross income (AGI). Or 2. the deductions for adjusted gross income, such as employee business expenses and contributions to an IRA pension plan. Or 3. an adjustment to an invoice.

Default1. Accounting - The failure of a debtor to meet principal or interest payment on a debt at the due date. In the event of default, creditors may make claims against the assets of the issuer in order to recover their principal. In the area of corporate finance the term default is typically a indication that a bankruptcy may soon follow. 2. Economics - Default can mean a sovereign state fails or refuses to meet it international debt obligations.

Deferred expenditure - The are expenses that have been  incurred but do not apply to the current accounting period. They are recorded as a non until they become current where they are transferred to the profit and loss account.

Deferred income - This refers to the income that the company has received cash for but has yet to be "earned". For example, 12 months gym membership being paid in the middle of the fiscal year.  At the end of the year only six months of that income should be recorded in the profit and loss account. The rest would be recorded in the balance sheet as a current liability.

Deficit (accounting) - In accounting this means a debit balance (negative) in the retained earnings account which is a direct result of operating losses.

Deficit (economics)- When the government spending is greater than revenue.  This is an example of expansionary demand side policy.

Deficit budget - Where the estimated outflows or expenses are greater than estimated inflows or revenue.

Deficit spending - Government spending that is in excess of tax revenues.

Deflate - A government action to lower aggregate demand through fiscal policy or monetary policy.

Deflation – A situation where prices are falling in the economy.

Deflationary gap -The shortfall of national expenditure below national income (and injections below withdrawals) at the full-employment level of national income.

Deflationary policy -Fiscal policy or monetary policy designed to reduce the rate of growth of aggregate demand.

De-industrialisation - Occurs when their is a decline in the importance of the secondary sector ( or manufacturing) of an industry in an economy.

Delayering - The removal of managerial layers in the hierarchical structure.

Delegation - Authority (and sometimes responsibility) passed down from superior to subordinate.

Delinquency ratio - Is a ratio of the overdue debts/loans to total number of loans being repayed.

Delivery note - This is a source document given by a supplier when goods are delivered stating the type and amount of goods.

Demand  - The entire relationship between the quantity of product that buyers wish to purchase per period time and the price of that product..

Demand curve - A graph showing the relationship between the quantity demanded of a good or service and its price, holding everything else constant.

Demand deposit - Bank deposit from which withdrawals can be carried out without advance notice.

Demand for money - The total amount of money balances that the public wishes to hold for all purposes.

Demand inflation - Inflation arising from excess aggregate demand, that is, when national income exceeds potential income.

Demand management policies - Demand-side policies (fiscal policy and/or monetary policy) designed to smooth out the fluctuations in the business cycle.

Demand note - A note which is considered to be payable on demand from the individual to whom the money is owed.

Demand schedule -  A table showing for selected values relationship between the quantity of a product, buyers wish to purchase per period of time and the price of that product, other things being equal.

Demand schedule for an individual - A table showing the different quantities of a good that a person is willing and able to buy at various prices over a given period of time.

Demand schedule (market) - A table showing the different total quantities of a good that consumers are willing and able to buy at various prices over a given period of time.

Demand-deficient or cyclical unemployment - Disequilibrium unemployment caused by a fall in aggregate demand with no corresponding fall in the real wage rate.

Demand-pull inflation - Inflation that results from an increase in aggregate demand.

Demand-side policies - Policies designed to affect aggregate demand: fiscal policy and monetary policy.

Demerger - Where a business splits into two separate organizations.

Demerit good - Goods that are considered to be undesirable for consumers and overprovided by the market..

Democratic leadership - A leadership style where the leader encourages others to participate in decision making.

Demographic factors - Features of the size, location and distribution of the population.

Demographics - Are the attributes such as income, age, and occupation that best describe your target market.

Denomination - Refers to the series of currency notes or weights i.e. is denominated is US $ or in Kilograms etc.

Departmental accounting (cost and profit centres) - Where the different departments in a firm  have a variety of different degrees of autonomy, these departments are still probably in the same business location. For example a department store. Departmental accounts will  usually include at least a trading account and possibly also a profit and loss (income) account.

Dependent - Person who derives primary support from another party. In order for a person to qualify as a dependent for federal income tax exemption purposes, five tests must be met: support test, gross income test, joint return test, citizenship or residency test, and relationship or member of household test.

Dependency - Where the development of a developing country is hampered by its relationships with the industrialised world.

Dependency ratio - The percentage of the population in the combined age groups aged under 15 and 65 plus.

Depletion - Physical exhaustion of a natural resource (e.g., oil, coal). The entry for recording annual depletion is to debit depletion expense and credit accumulated depletion. Accumulated depletion is a contra account to the natural resource.

Deposit - 1. May refer to when a payment is given in a commitment or guarantee that a future obligation will be completed. Or 2. the act of putting money into a bank account. Or 3. a partial or percentage of the total payment made with or at the same time as the original purchase with the promise or commitment to pay the balance later. Or 4. may also refer to when money is given or offered as a form of security for an item gained to be used only on a temporary basis.

Deposit money - Money held by the public in the form demand deposits with commercial banks.

Depreciation (Accounting) - Reduction in the value of capital goods over a one-year period due to physical wear and tear and also to obsolescence. Depreciation is when the value of assets usually decreases as time goes by. The amount or percentage it decreases by is called depreciation. This is normally calculated at the end of every accounting period (usually a year) at a typical rate of 25% of its last value. It is shown in both the profit & loss account and balance sheet of a business. See straight-line depreciation.

Depreciation (currency) - A lessening of the value of a domestic currency in terms of foreign currencies.

Depression - A persistent period of very low economic with very high unemployment and high excess capacity.

Deregulation - Where the government removes official barriers to competition (e.g. licences and minimum quality standards).

Derivative - Is when the transaction or in some cases the contract's value is dependent on or, derives its worth from the value of  assets which ore behind or underlying it.  Examples include such as  mortgages, stock, bonds, foreign currencies or market indices.

Derived demand - The demand for a factor of product that results from the demand for the products that it used to make.

Derived demand for labour - When the demand for workers by businesses is the result of demand for the product or service produced by businesses.

Designated - Something or someone who has/is selected for a job, e.g., designated payments.

Desk research - Secondary data.

Destabilising speculation - Where the actions of speculators tend to make price movements larger.

Devaluation - Depreciation under a regime of fixed exchange rates.

Devalue - To lower the par or fixed value of a managed exchange rate. The action makes exports cheaper and imports dearer.

Developed countries - The higher-income countries of the world, including the United States, Canada, most of Western Europe, Japan, Australia, and South Africa.

Developing countries - The lower-income countries of the world, most of which are in Africa, Asia, and Latin America. Also called underdeveloped countries, less developed countries (LDC).

Development (accounting) - The changing of new ideas into commercial  propositions.

Development (economics) - A process to improve the lives of all people in a country. This involves not only raising living standards i.e. goods and services but the promotion of self esteem, dignity and respect, and the enlarging of peoples freedom to choose and to take control of their own lives.

Development areas - Regions with high unemployment which qualify for government help aimed at attracting business. .

Devolution -  This is used to refer to when authority is delegated from a higher to a lower level.

Devolve - This is the act of passing on or delegating to another person or entity, e.g. a more junior level of management.

Differentiated product - A group of products that are simlar enough to be called the same product but dissimilar enough so that all of them do not have to be sold at the same price.

Dilution - The reduction, weakening, or decrease in a item. For example, share values are diluted with the issue of more common shares.

Diminishing marginal product- The property whereby the marginal product of an input declines as the quantity of the input increases.

Diminishing marginal rate of substitution - The hypothesis that the marginal rate of substitution changes systematically as the amounts of two products being consumed vary.

Diminishing marginal utility – 1. as more units of a good are consumed, additional units will provide less additional satisfaction than previous units. Or 2. where each additional dollar of income  earned yield s less additional utility. -  The principle of diminishing marginal utility. The more of a product a person consumes over a given period of time, the less will be the additional utility gained from one more unit.

Diminishing returns - The eventual decline in output each extra worker adds to total output when the opportunity to specialise is used up.

Direct allocation method - Method allocating costs of each service department directly to production departments; also called direct method. Under this method, no consideration is given to services performed by one service department for another.

Direct burden - Amount of money for a tax that is collected from taxpayers.

Direct  cost or prime cost - A cost which can be clearly identified with a particular unit of output.

Direct expense - That part or percentage of  an expense that was directly spent in the provision of a product/service for its sale. It is part of cost of goods sold, e.g.  direct labour or direct materials.

Direct investment -  In balance of payments accounting, nonresident investment in the form of a takeover or capital investment in a domestic branch plant or subsidiary company in which the investor has voting control.

Direct labour -  Work directly involved in making the product. Examples of direct labour costs are the wages of assembly workers on an assembly line and the wages of a machine tool operator in a machine shop. Direct labour is an inventoriable cost.

Direct labour variance - Refers to the difference between the 'standard rate' and 'actual rate' for the actual labour hours worked.  It is given by the following equation [(standard rate - actual rate) X actual hours].

Direct marketing - A method of distributing products directly to consumers, without the use of intermediaries such as wholesalers and retailers.

Direct material - The cost of raw materials and other components that can be identified with individual units of production or a responsibility centre.

Direct materials variances - Refers to the difference between the actual costs of materials and the standard costs of materials.

Directors - People elected by shareholders to run companies.

Director’s report - Financial report prepared for company directors. The report is typically prepared on a quarterly and annual basis. It includes detailed items such as the accountant's financial analyses and management recommendations.

Direct tax - Tax liability targeted at one person on the basis of income.

Direct write-off method – A method of recognition of uncollectible accounts only when known to be such.

Dirty or managed float - A freely floating (or flexible) exchange rates that involves governments intervening to stabilize the value of their currencies. To be compared with a 'clean' float, where there is no government intervention in the foreign exchange market.

Disbursement - Is used to mean the paying  of money in order satisfy an expense or debt.

Disclosure principle - This principle says that all relevant information that may or does affects the full understanding and ability to interpret a firm's financial statements must be included with final statements. This means some information should be given as accompanying notes. Examples of such items are outstanding lawsuits or other known factors that could affect the business.

Discount - 1. difference between the face value (i.e., future value) and the present value of a payment. Or 2. reduction in price given for prompt payment.Or 3. excess of the par value (face value) of a financial instrument over the price paid for it.

Discount allowed - A reduction of the invoice amount for early payment of the invoice value.

Discounted cash flow (DCF) - A method of investment appraisal which takes interest rates into account by calculating the present value of future income.  

Discounting - The process of reducing future flows to give them a present valuation.

Discount rate - 1. the interest rate the (Fed) Federal Reserve of the United States charges a bank to borrow money from when the bank is temporarily unable to meet its current liquidity requirements. Or 2. in banking, the rate at which the central bank is prepared to lend reserves to commercial banks. Or 3 3. more generally, the rate of interest used to discount a stream of future payments to arrive at their present value

Discouraged workers - People who would like to work but have ceased looking for a job and hence have withdrawn from the labour force because they believe that no jobs are available for them.

Discrepancy - Refers to when there is a difference between two sources of data.

Discretionary - Refers to when something is not mandatory or compulsory, it is up to the firm or individual to decide.

Discretionary cost - Can be changed at the discretion of the individual decision maker.

Discretionary fiscal policy – Deliberate changes in tax rates or the level of government expenditure in order to influence the level of aggregate demand.

Discrimination - To make a. selection or choice from alternatives, such as an applicant for a job. The term is often used to mean  an illegal or unreasonable selection in the context of equal opportunities.

Diseconomies of scale - 1. when increases in output lead to increases in long run average costs. Or 2.  rising long run average costs as a industry expands beyond its minimum efficient scale.

Disembodied technical change - Technical change that raises output without the necessity of building new capital to embody the new knowledge.

Disequilibrium - The situation of a market in which there is excess demand or excess supply.

Disequilibrium price - A price at which quantity demanded does not equal quantity supplied.

Disequilibrium unemployment - Unemployment resulting from real wage rates in the economy being above the equilibrium level.

Disguised unemployment - Where the same work could be done by fewer people.

Disinvestment - Opposite of capital budgeting decisions, because they concern whether to terminate rather than start an operation. In general, if the marginal cost of a project is greater than the marginal revenue, the firm should disinvest.

Dispersion - A measure of the spread of data.

Disposable income - Household income after the deduction of taxes and the addition of benefits.

Dissolution - The act or process of terminating, ending,  or in other ways winding-up a business and closing of its affairs.

Distributed profits - Profits paid out to owners of a firm. For incorporated firms, the distributed profits are called dividends.

Distribution cost - Is the costs that are incurred to fill an order or sale for an item.

Distribution of income - The amount of income and wealth different groups have in a particular country.  Inequality of income can be illustrated with the Lorenz curve.

Diversification - Where a firm expands into new types of business.

Divesture - Is often used to refer to the process of selling by a firm of a a subsidiary, division or product line.

Dividend - A proportion of a company's profits paid to owners of shares in that company.

Dividend cover - How many times the dividend could have been paid from the year's earnings.

Dividend payout ratio - Simply measure of the percentage or proportion of a company's earnings paid out in dividends.

Dividends- These are payments to the shareholders of a limited company. It is the shareholders portion of distributable profits.

Dividends per share - The amount of money a shareholder will actually receive for each share owned.

Dividend yield - The amount received by the shareholder as a percentage of the share price.

Division - A unit which may to some degree be self sufficient within a company. A division usually is considered to contains all the  necessary resources to function in an independent way from the parent company.

Division of labour - When the production process is split up into different tasks and each worker performs one of these tasks. Also known as specialisation.

Dollar standard - A system under which countries hold reserves in, and settle debts with, U.S. dollars, but the dollar is not backed by gold or any other physical source of monetary value.

Dominant firm price leadership - When firms (the followers) choose the same price as that set by the dominant firm in the industry (the leader).

Dominant price leader - The leading firm in an industry which is the first to change prices.

Dominant strategy - A strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Dominant strategy game - Where the same policy is suggested by different strategies.

Double counting - Counting the expenditure on both the final good or service and the intermediate goods and services used in its production.

Double declining balance methodAccelerated depreciation method in which a constant percentage factor of twice the straight-line rate is multiplied each year by the declining balance of the asset's book value.

Double-entry book-keeping- A system which accounts for every aspect of a transaction - where it came from and where it went to. This from and to aspect of a transaction (called crediting and debiting) is what the term double-entry means. Modern double-entry was first mentioned by G Cotrugli, then expanded upon by L Paccioli in the 15th century.

Doubtful debt - This is used to refer to a debt that is now considered to have uncertain collectability.  It is often given as a percentage of the total e.g. on average 5% of debts are doubtful.  This may be based on past experience. These doubtful debts are recorded as an expense in the profit and loss account  credited to a provision for doubtful debts account.

Dow Jones industrial average - The index which tracks the daily value of shares in 30 large US companies listed on the New York stock exchange.

Down payment - A Part payment made at the time of the purchase of the item with a promise to pay the balance at a later date.

Downsizing - The process of reducing capacity. Usually by laying off staff.

Dr - The ancient Italian word ‘debare’; meaning ‘debit’ this is different from DR. DR - debit record.

Drawdown - The size of the decline in the value of the account.

Drawee - The person or entity that buys a draft instrument.

Drawings- The money taken out of a business by its owner(s) for personal use. This is entirely different to wages paid to a business's employees or the wages or remuneration of a limited liability company's directors (see 'wages').

Duality concept - This is the fundamental concept underlying double entry accounting.  This means that any transaction will allows affect at least two accounts.  For example paying wages with cash affects both the cash account and the wages account.  In double entry accounting the two accounts affected will be either debited or credited.  The total amount of debits must always be equal to the total amount of credits.

Dual economy - The existence of two distinct types of economy in one country, modern and traditional, side by side.

Due diligence – A qualitative assessment of management’s character and capability. Comprehensive due diligence may also include an examination of the books and records, asset appraisals, reviews of the company's other debt obligations, legal and accounting affairs, internal controls, planned capital expenditures, and other matters that bear on the company's future success and prof­itability. Due diligence is a legal requirement before public offerings.

Dumping - In international trade, the practice of selling a commodity at a lower price in the export market than in the domestic market for reasons unrelated to differences in costs of servicing the two markets. Also referes to selling a good at below average cost or unit cost of production.

Duopoly - A market structure in which there are only two sellers of a commodity and thus the matter of interdependence is critical for price determination.

Durable consumer goods - Goods used by consumers that have a life-span of more than one year.

Duty - Is when a tax is imposed by a customs authority on goods which are imported. Also it is often referred to as a "tariff."

Dynamic efficiency - Achieving an efficient allocation of resources over time, particularly through innovation and the exploiting new opportunities as they arise. Monopolistic competition is often referred to as achiving dynamic efficency.

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The first step toward success is taken when you refuse to be a captive of the environment in which you first find yourself.
Mark Caine