Accounting, Business Studies and Economics Dictionary

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Pac Ioli, Luca  – The author of the first statement and commentary on double-entry book-keeping. This treatise, published in Venice in 1494, was part of a work Summa de Arithmetica, Geometria Proportioni et Proportionalita.

Packaging - The physical container or wrapping for a product, also used for promotional purposes.

Packing list (slip) - The statement of what is included in the contents of a specific container, usually the packing slip is put into the container so that it is possible that the quantity and specifications of actual merchandise may then be counted by the individual who opens the specific container concerned.

Is that section of stockholders' equity that shows: (1) amount of stock a corporation has issued; (2) the premiums or discounts that have resulted from selling stock (paid-in capital in excess of par or stated value); (3) stock received from donations; and (4) the resale of Treasury stock. Stockholders' equity consists of paid-in or contributed capital and retained earnings/profit.

That part of paid in capital in excess of par or stated value.

- The value of issued shares which have been paid for. See Called-up Share capital.

Paper profit – Is the unrealised gainfrom holding an item while its market value has increased.

Paradox of thrift - An increased desire to save (an increase in the Marginal Propensity to Save) will lead to 'a reduction in the equilibrium level of saving.

P&L - Profit and loss statement.

Parent company - 1. owner of a subsidiary company. Or  2. a holding company that is not engaged in a trade or business.

Pareto principle/law – An analysis used to differentiate between the vital few and the trial many. It is based on the concept that about 80 percent of the problems come from 20 percent of the items. Pareto analysis can be used to identify cost drivers or activity drivers that are responsible for the majority of cost incurred by ranking the cost drivers in order of value.

Parity - 1. economics, term designating a constant spread between prices; for example, having a constant relationship between domestic and world sugar prices. Or 2. labour law, salary equality among workers such as policemen and firemen.

Parity price - The measuring device for price levels in terms of an index number of 100. 

Participation rate - The percentage of the working­ age population that is part of the workforce.

Participative budgeting – A budgeting system enabling key employees in a department to provide input into the budgetary process.

Partnership - Refers to an unincorporated form of business ownership  (unlimited liability)  that has between two to twenty owners. Each of whom takes part in the management of the firm and is personally responsible for all of the firm's actions and debts. It is different from a sole trader in that a sole trader has only one single owner.

Partnership agreement - The written and legal agreement between business partners.

Par value - 1. is the maturity value or in other words the face value, i.e., the amount that the issuer has agreed to pay on maturity. Or  2. the official rate of exchange between two different countries' currencies. Or  3. the value of an individual security that has been set by the firm issuing it and is not related to current market value.

Patent - Is a legal form of intellectual property protection (or licence) that provides an entity or individual with the exclusive rights to stop other firms from using, making, or selling a the concept or specific invention for the length of time of the patent. In accounting it is calssified as an intangible asset.

Paternalism - Intervention in the free choices of individuals by others (including governments) to protect them against their own ignorance or folly.

PayableRefers to the amount of monies waiting a payment to be completed, e.g.  taxes payable or accounts payable.

Payables turnover  - Purchases / Average Payables.

Payback period – The amount of time it takes to recover the cost of an investment. In capital budgeting the payback period refers to the specific time period needed by the firm in order to recoup the initial plus and subsequent costs of the capital investment. The payback period includes all initial investment to the annual predicted cash inflows for the recovery time period. The major problem of this ratio is that it does not take into account cash flows which the firm receives after the payback period has been met and thus can not be considered a measure of the profitability of any particular  investment undertaking.

Pay cycle - The criteria by which scheduled payments are selected for payment creation, e.g., payroll may be on a weekly, bi-weekly, or monthly pay cycle.

Payment - The satisfaction of a debt or claim; primarily money paid to fulfil an obligation.

Payment by results – Payment methods that reward workers for the quantity and quality of work they produce.

Payment due date - The date on which a payment is due and payable.

Payment in kind - The settlement of a charge for goods or services or satisfaction of liabilities with similar or identical mediums of exchange and value (e.g., money for money, goods for goods, and services for services). It also connotes a transaction where one medium of exchange is satisfied with another.

Payout ratio - The ratio of cash dividends declared to earnings for the period. It equals dividends per share divided by earnings per share.

Payroll costs – Refers to employer costs incurred for employees' services. Payroll costs consist of the actual cash paid to the employees and the withheld amounts.

Payroll tax Are taxes levied on employee's salaries or net income of self-employed individuals.

P.A.Y.E (Pay as you earn) - This is an income tax system where the tax of an employee is deducted before their wages are paid.

Pareto optimum - The situation (economic theory) where it is not possible to change the combination of output of goods and services produced by a society without making the net happiness of society fall.

Pay on delivery (COD) - The purchaser must pay for the goods (to the carrier) when they receive them.

Peak The time period where the maximum use/demand occurs. For example, at peak traffic hours congestion can be severe.

Pending -  1. Not as yet decided. or 2. Being in the state of continuance.

Penetration pricing – A method of pricing a standard product. It sets a low initial price for a product in order to gain quick acceptance in a broad portion of the market. It calls for a sacrifice of short-term profits in order to establish a certain amount of market share.

Penny stock - A low priced, highly speculative stock.

Pension fund (MPF) - A fund reserved to pay workers' pensions when they retire from service. Also known as superannuation fund.

PE ratio - The quoted price of an ordinary share divided by the most recent years earnings.

Per capita Income A measure of the mean income averaged for the entire population of a particular group. It is arrived at dividing the total income by the total population of the group.

Per capita output - GDP divided by total population.

Perceived demand - The demand which the managers owners of a business believe exists for their products in a particular market

Perfect competition  - A market structure in which all firms in an industry are price takers and in which there is freedom of entry into and exit from the industry.

Perfect complements - Two goods with right-angle indifference curves.

Perfect market - A market structure characterised by a very large number of buyers and sellers of a homogeneous (non-differentiated) product. Entry and exit from the industry is costless, or nearly so. Information is freely available to all market participants, and there is no collusion among firms in the industry.

Perfect substitutes - Two goods with straight-line indifference curves.

Perfectly contestable market - A market where there is free and costless entry and exit.

Perfectly elastic demand - Demand with an elasticity of infinity; the quantity demanded becomes zero if the price rises by the smallest amount and the quantity demanded becomes infinite if the price falls by the smallest amount.

Perfectly elastic supply - Elasticity of supply is infinite; the quantity supplied becomes zero if the price falls by the slightest amount, and the quantity supplied becomes infinite if the price rises by the slightest amount.

Perfectly inelastic demand - Demand with an elasticity of zero; the quantity demanded does not change as the price rises.

Perfectly inelastic supply - Elasticity of supply is zero; the quantity supplied does not change as the price changes.

Performance audit Is an appraisal of how a particular activity is carrying out the company's policies and procedures. Such review may cover any activity within a department, division, or local area.

Performance budget - 1. a budget format that relates to both the input of resources into something and the output of services of that thing for each unit within an organisation. Sometimes this may be called a program budget. Or 2. a medium- to short-range budget used in governmental accounting.

Performance indicators Refer to those pieces of empirical data that are indicative of how well, or maybe poorly, an firm is performing against its preset objectives and goals. Normally, a firm will set specific targets over a specific period of time, that the firm does believe are both attainable and realistic and then track its performance over the time period to see if  those targets and/or objectives are being met.

Performance related pay – Management’s attempts to increase worker productivity by linking pay with performance.

Performance report - A statement that displays measurements of actual results of some person or entity's activity over some time period.

Performing asset - An asset that generates an annual financial positive return.  Examples could include a piece of production machinery or, in transportation, an truck.

Period costRefers to an expense that can not be directly attributed to a item that has been produced e.g. rent.  Period costs are charged against sales revenues for period from which the revenue was  earned. Period costs may also be called period expense.

Periodicity Concept - The concept that each individual accounting period has some level of economic activity that is directly associated with that period, and further to this that the specified activities can be measured, recorded, and then reported upon.

Periodic audit - 1. audit for an intermediate period (e.g., one month, three months). Or 2. audit carried out at specified intervals within the year.

Periodic inventory - A inventory systemis one whose balance is updated on a periodic basis, ie. every week/month/year. See inventory.

Peripherals – Refers to the auxiliary equipment used in computer systems.

Permanent account - An account that is included on the balance sheet, e.g. accounts receivable and accounts payable.

Permanent capital – Share capital which is never repaid by the company.

Permanent employment - Employment for an indefinite period of time.

Permanent income - The maximum amount that a household can consume per year into the indefinite future without reducing its wealth. Also called lifetime income.

Permanent-income theory - A hypothesis that relates actual consumption to permanent income rather than (as in the original keynesian theory) to current income.

Perpetual inventory- An inventory system where the balance is updated after each and every transaction. See Inventory .

Perpetual succession - A legal distinctions between what constitutes a business and what constitutes a company. A company has perpetual succession which means that any change in the company's membership does not have any affect the legal existence of that company whereas a business which is not a company does not enjoy this perpetual succession relationship. For example, in a partnership, a change in the membership (one of the partners dies etc) affects the legal stance of the partnership.

Perpetuity – An annuity that goes on indefinitely.

Persistent earningsRefers to the level of earnings, from one accounting period to the next accounting period, that continually recure.

Personal accounts - These are the accounts of a business's customers and suppliers. They are usually held in the sales ledger and purchase ledger.

Personal equityRefers to that percentage of equity that is held to an individuals own benefit or invested as a part of the range of assets of the legal entity.

Personal financial planning The field of financial planning for individuals.  It involves (I) analysing a client's personal finances; and (2) recommending how to improve the client's financial condition.

Personal income - Income earned by, or paid to, individuals before allowance for personal income taxes on that income.

Personal loan - A loan for a short term period of time that is given based on the personal credit worthiness of the individual borrower.

Person specification - A profile of the type of person needed to do a job.

Persuasive advertising - Advertising which seeks to  influence and persuade consumers to buy a product

PERT - Program (or Project) Evaluation and Review Technique, is a model for project management designed to analyse and represent the tasks involved in completing a given project.

PEST analysis - An analysis of the political, economic, social and technological factors affecting a business.

Petty cash- A small amount of money held in reserve (normally used to purchase items of small value where a cheque or other form of payment is not suitable).

Petty cash slip - A document used to record petty cash payments where an original receipt was not obtained (sometimes called a petty cash voucher).

Phantom profit Is used to refer to a hypothetical or non existent profit, i.e., no actual cash flow has been generated. Appreciation on any given asset, e.g. stock, may be called a phantom profit.  This is the situation until the asset is then sold, at which time it generates a cash flow.

Phillips curve - Originally, a relationship between the percentage of the labour force unemployed and the rate of change of money wages. Now often drawn as a relationship between the percentage of the labour force employed and the rate of price inflation or between actual national income and the rate of price inflation.

Physical capital - The stock of equipment and structures that are used to produce goods and services.

Physical inventory (stock-take) - Is determining the quantity of inventory on hand through an inventory count (i.e., quantity, weight).

Picketing - When people on strike gather at the entrance to the, firm and attempt to persuade workers or delivery vehicles from entering.

Pictograph or pictogram - A chart where numerical data is represented by pictorial symbols.

Piece rates - A payment system where employees are paid an agreed rate for every item produced.

Pie chart - A chart which consists of a circle where the data components are represented by the segments.

Pigovian tax - A tax enacted to correct the effects of a negative externality.

Placement  When one bank depositing (sells) Eurodollars with/to another different bank.  This is said to be the bank making a placement.

Planned economy or command economy – An economics system in which the state is responsible for resource allocation.

Planning - Planning is the process of deciding, in advance, what is to be done and how it is to be done.

Planning permission - When a government body allows a business to build a factory or office in a particular location.

Plant asset - A non-current physical (real) asset that is used by the firm in its manufacturing activities.

Plant economies of scale - Economies of scale that arise because of the large size of the factory.

Pledge 1. the transfer or commitment of a specific asset or set of assets being used as collateral to secure payment relating to a debt obligation.  For example, when a firm/individual pledges securities to a lender for a loan that is then secured by the owner of those pledged securities.  Or 2. the deposit and/or the placing of some personal property/assets as security for a specific debt or other specific obligation with another person is called a pledgee. The pledgee then has the power to sell the specific property or asset if the debt is subsequently not paid in full. When the debt is paid in full, the right to the possession of the property or asset return to the original pledgor. Or, 3. a pledge may be a oral or written agreement to contribute cash or assets to some activity.

Pledged assetIs when the asset has been used as a form of collateral in order to secure a debt or other contract. The lender takes possession of the pledged asset, but ownership does not change hands unless a default on the loan occurs e.g. a pawn shop.

Point elasticity - A measure of the responsiveness of quantity to price at a particular point on the demand curve.

Point of diminishing average productivity - The level of output at which average product reaches a maximum.

Point of diminishing marginal productivity - The level of output at which marginal product reaches a maximum.

Point of sale (POS) - The place where the product is being sold, e.g.. a shop.

Point of sale promotion- A promotion at any point where a consumer buys a product.

Policy instruments - The variables that the government can control directly to achieve its policy objectives.

Policy variables - The variables that the government seeks to control, such as real national income and the price level.

Poll tax - A lump sum tax per head of the population. Since it is a fixed amount, it has a marginal rate of zero with respect to both income and wealth.

Pool - 1. a group of different individuals/entities that have organised for a common and purpose or any other communal grouping of funds. Or 2. in capital budgeting, when investment projects are to be out of a pool of bonds, common stock, and preferred stock at a weighted average cost. or 3. in insurance, it refers to when a group of different insurers share the risk premium. Or 4. in investments, a pool may mean a combination of funds which is for the benefit or support of some common project. Or 5. when a group of investors use their combined level of influence in order to manipulate the price of something.

Population - Rate of Natural Increase - Birth rate minus death rate expressed as a percentage, ignoring any migration.

Population doubling time - The number of years it will take for a population to double assuming a constant rate of increase.

Population growth rate -The increase in a country's population in a year expressed as percentage of the population at the beginning of the year. It reflects the difference between birth rate and death rate plus net migration. The average of several years is more representative than any single year.

Population per physician - The population of a country divided by the number of doctors. It takes no account of numbers of nurses or medical technicians.

Population structure - The breakdown of the people in a country into groups based on differences in age, gender. geographical location etc.

Portfolio - 1. the act of combining securities to reduce risk by diversification. Or 2. is a term used to describe all the different investments that an individual or entity does own. A diversified portfolio is one that contains a range of different investments.

Portfolio balance - The balance of assets, according to their liquidity, that people choose to hold in their portfolios.

Portfolio investment - In balance of payments accounting, foreign investment in bonds or a minority holding of shares that does not involve legal control. Also referred to as Hot Money. See also direct investment.

Position - The financial condition of an entity.

Positive action – Measures geared towards improving employment opportunities and training of groups that are under-represented at work.

Positive externality - A benefit to a third party who is not part of the transaction.

Positive statement - A statement about what actually is (was or will be), as opposed to what ought to be. An expression that can be verified by observation.

Post - Is the transfer of the accounting entries from a specific journal (book of first entry) into the correct ledger book.  This is done in a chronological order in accordance to when the entry was generated.

Post closing trial balance - This is a trial balance prepared after the balance sheet has been drawn up, and only includes balance sheet accounts.

Post date - Is when a date from the future is paced on a cheque or other document.  This means the document does not become valid until that date e.g. a post dated cheque can not be cashed until on or after the date on the cheque.

Posting- The copying of entries from the journals to the ledgers.

Postulate - A proposition which is considered as true in order to give a basis for further logical reasoning.

Potential growth - The percentage annual increase in the capacity of the economy to produce.

Potential income (Y) - The real gross domestic product that the economy could produce if its productive resources were fully employed at their normal levels of utilisation. Also called potential GDP or high employment income.

Potential output - The output that could be produced in the economy if there were a full employment of resources (including labour).

Poverty (absolute) - A level of income below what is required to have a decent standard of living, sometimes measured at less than US$1 per day.

Poverty (relative) - The minimum level of income needed to achieve an adequate standard of living. The level of poverty in a country expressed in term of certain level of income such as half of the average wage.

Poverty gap - The number of dollars per year required to raise the income of everyone below the poverty level to that level.

Poverty level - The official government estimate of the annual family income that is required to maintain a minimum adequate standard of living.

Poverty line - An absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty.

Poverty rate - The percentage of the population whose family income falls below an absolute level called the poverty line

Poverty trap - Where poor people are discouraged from working or getting a better job because any extra income they earn will be largely taken away in taxes and lost benefits.

PPI - Producer price index.

PR – Public relations

Practical capacity - Is the highest activity level at which the factory can operate with an acceptable degree of efficiency, taking into consideration unavoidable losses of productive time (i.e., vacations, holidays, repairs to equipment); also called maximum practical capacity.

Predatory pricing - Where a firm sets its prices below average cost or unit cost in order to drive competitors out of business.

Precautionary balances - Money balances held for protection against the uncertainty of the timing of cash flows.

Precious metals - Are valuable commodities (e.g., gold and silver) representing a private store of value. Precious metals are liquid, have international markets, and provide a hedge against inflation, currency risk, and unfavourable political and economic developments.

Pre-emptive rightRefers to the right of a current share holder to maintain the proportional ownership they have in the company by buying any new share issue on a pro rata basis prior to the shares being released to the public.

Preference shares - This is a type of share issued by a limited company. It carries a medium risk but has the advantage over ordinary shares in that preference shareholders get the first slice of the dividend 'pie' (but usually at a fixed rate).

Preferential trading arrangements - A trade agreement whereby trade between the signatories is freer than trade with the rest of the world.

Preferred creditor – Is  a creditor that has priority over another creditor when the company becomes bankrupt.

Preferred stock -  Is non-voting capital stock which normally pays a dividend at a specific stated rate and also has a preferential position over common stock with regard to the payment of dividends and/or any liquidation of the firms assets.

Premium on capital stock Refers to the excess monies that are received higher then the par value of the stock issued.

Premium price - A price above the average charged by businesses in the market.

Prepaid expenses Refers to amounts that are paid in prior to the good or service being received to a supplier or creditor for goods & services. Prepaid Expenses is classified as a current assets on the balance sheet of the firm. This is because the item has already been paid for and someone owes a good or service for which has already prepaid.

Pre-payments - One or more accounts set up to account for money paid in advance (eg. insurance, where part of the premium applies to the current fiscal year, and the remainder to the following year).

Prerequisite - An event or action that has to be satisfied before the next event or action can occur.

Present value (PV) – The value today of a sum of money in the future. It is the discounted value of an individual payment or possibly a stream or flow of payments to be received at sometime in the future, applying a specific interest or specific discount rate e.g. inflation rate. Present value is the representation of future cash flows expressed in the value of today's dollar amount.

Pressure groups - Groups of people without direct political power who seek to influence decision makers in politics. business and society.

Price - Price is most often given by the amount of money an item or service would bring if or when it is sold.

Price benchmark - A price that is typically used. Firms, when raising prices, will usually raise them from one benchmark to another.

Price consumption line - A line connecting the points of tangency between a set of indifference curves and a set of budget lines where one absolute price is fixed and the other varies, money income being held constant.

Price controls - Government policies that attempt to hold the price in a particular market at a disequilibrium value.

Price ceiling Usually refers to a government imposed limit on how high a price can be charged on a product.

Price change accounting - Accounting for the value of assets, stock, raw materials etc. by their current market value instead of the more traditional historic cost .

Price control - Government regulation of the market prices such that a legal maximum price is specified.

Price discrimination - The practice of charging a higher price to some customers than to others for an identical good or service i.e. there are no differences in cost as in price differentiation.

Price earning multiple - The price-earnings ratio (P/E) : the price of a company's share of common stock at the current market price divided by the company's earnings per share. If this is multiplied by the company's net income is one way to value a business.

Price earnings ratio (PER) – Relates the earnings per share to its market price and reflects the return for buying shares.

Price elasticity of demand - The percentage (or proportionate) change in quantity demanded divided by the percentage (or proportionate) change in price.

Price elasticity of supply - The percentage (or proportionate) change in quantity supplied divided by the percentage (or proportionate) change in price

Price fixing - A practice which is often illegal, where companies that should be competing agree, formally or informally, to restrict and/or control the price often within a specified price range.

Price floor - A government imposed minimum permissible price at which a product may be sold.

Price index - A measure of the average level of prices in one period as a percentage of their level in an earlier period.

Price level - The average level of prices as measured by a price index.

Price maker - A firm that administers its prices.

Price mechanism - The system in a market economy whereby changes in price in response to changes in demand and supply have the effect of making demand equal to supply.

Price mix - The value of an item that is determined by the individual producer. The price mix can include decisions relating to, the price level, any discounts and,  any credit terms to be allowed to customers.

Price skimming - A pricing strategy where a high price is set for a new product on the market.

Price stability - A situation in which the average level of prices is moving neither up nor down.

Prices and incomes policies - Government policies which restrict the increase of prices and incomes in order to attain price stability.

Price taker - A firm that cannot influence the price of its output.

Price theory - The theory of how prices are determined; competitive price theory concerns the determination of prices in competitive markets by the interaction of demand and supply.

Price to earnings ratio (P/E) – This ratio is used as a performance benchmark to compare one company against other companies or may also be used to compare  the company's  own historical stock performance.

Price variance (PV) Is the difference between actual unit price and standard unit price, multiplied by actual quantity of input used. It reflects a change between the expected price and actual price of input.

Pricing strategy - The pricing policy or method of pricing adopted by a business.

Primary data - Information which does not already exist and is collected through the use of field research.

Primary health care - Health service provision based upon preventing rather than curing diseases. It includes clean water supply, sanitation, immunization and nutritional and family planning services.

Primary labour market - The market for permanent full-time core workers.

Primary market 1. (Accounting}, The first sale of a newly issued security to the market. Those new securities are purchased within the primary market. All trading of those securities subsequently is done via secondary market. Or 2. (Economics) - The market for primary products.

Primary production - The production of goods that are sold or used as they are they are found in nature e.g. fish, trees, diamonds, oil.

Primary research - The collection and collation of original data via direct contact with potential or existing customers. Also called field research.

Primary sector - Industry which extracts the natural resources of the earth.

Primary school enrolment rate - The number of children of primary school age, usually 6 to 11 years, who are enrolled at school as a percentage of the age group. Sometimes this is greater than 100% due to younger and older pupils enrolling.

Prime book of entry - See original book of entry .

Prime cost - Refers to the sum of direct material plus direct labour. It excludes overheads.

Prime rate - The interest rate that is charged by the bank to its preferred customers. If the prime rate changes other rates will then change e.g. mortgage interest rates.

Principal - 1. face amount of a financial instrument on which interest accrues.  Or 2. carrying value of an obligation (i.e., bonds payable). Or 3. amount invested, excluding return on investment. Or 4. high-level individual (i.e., partner) in a CPA firm having major authority and responsibilities. Or 5. owner, especially one with executive authority, of a business firm.

Principal-agent problem - The problem of resource allocation that arises because contracts that will induce agents to act in their principals' best interests are generally impossible to write or too costly to monitor.

Principle of substitution - The principle that methods of production will change if relative prices of inputs change, with relatively more of the cheaper input and relatively less of the more expensive input being used.

Prior period - Refers to the accounting periods that have occurred before the current one.

Prisoners' dilemma - Where two or more firms (people), by attempting independently to choose the best strategy for whatever the other(s) a likely to do, end up in a worse position than they had co-operated in the first place.

Private benefits – The benefit of an activity to an individual or a business.

Private corporation (company) - A corporation whose ownership is held with the private sector i.e. either LTD or PLC.

Private costs – The cost of an activity to an individual or business.

Private efficiency - Where a person's marginal benefit from a given activity equals the marginal cost.

Private equityRefers to the equity securities of companies which are unlisted i.e. non-publicly traded.

Private good  - A good (or service), each unit of which is consumed by only one individual.

Private limited company (Ltd) - A company owned by its shareholders. Shareholders' liability is limited to the value of their shares. Shares can only be bought and sold privately.

Private saving - Saving on the part of individuals, the part of disposable income that is not spent on consumption.

Private sector - The portion of an economy in which goods and services are produced by non governmental units, such as firms and households.

Privatisation - The process of selling a public corporation to private shareholders.

Probability - The degree of likelihood that something will happen.

Proceeds -  The total amount received from an activity, e.g. the proceeds of a specific sale. In insurance, it refers to the net amount which is received after any deductions for discount or other charges.

Process - The method used to convert inputs to final goods or services.

Process costing - A method used in cost accounting that is applied to a production process where the product is created by a series of different operational or chemical stages in the production processes. Costs are normally accumulated for the whole production process and the the average unit cost is calculated for each stage of the process to get the total unit costs.

Procurement - The purchasing of specific materials or services.

Pro cyclical - Moving in the same direction as the business cycle up in booms and down in slumps.

Producer price index (PPI) -  A measure of the average price change over time in the selling price received by the domestic producers within a country for their production.

Producer surplus - The difference between the total amount that producers receive for all units sold of a product and the total variable cost of producing the product.

Product - 1. the end result of a specific manufacturing or other production process. Or 2. commodities which are offered for sale. Or 3. an artefact or item that has been made by individual or a process.

Product cost – The cost of any  Inventory which is currently on hand.  It is also referred to as inventoriable cost. They are considered assets of the firm until the products/items are sold. Once the product/item is sold, it is treated as a  expense, i.e. cost of goods sold (COGS). All manufacturing costs are considered to be product costs, e.g., direct labour, direct material and factory overhead.

Product differentiation - Slight differences in products which may be real or perceived.

Product family - A group of products or services that have a defined relationship because of physical and production similarities.

Product life cycle - The period that starts with the initial product specification and ends with the withdrawal of the product from the marketplace. A product life cycle is characterised by certain defined stages, including research, development, introduction, maturity, decline, and abandonment.

Product mix (product portfolio) The particular mix of products that the firm is marketing. Or 2) involves planning and developing the right type of product that will satisfy fully the needs of customers. A product has several dimensions. These dimensions are collectively called 'product mix'. Product mix for example may consist of size and weight of the product, volume of output, product quality, product design, product range, brand name, package, product testing, warranties and after sales services and the like.

Product orientation - An approach to business which places the main focus of attention upon the production process and the product itself.

Production - The conversion of natural, human and capital resources into goods and services.

Production budget - The schedule for expected units to be produced. It sets forth the units expected to be manufactured to satisfy budgeted sales and inventory requirements.

Production function - A functional relation showing the maximum output that can be produced by each and every combination of inputs.

Production possibility frontier (curve) - A curve that shows which alternative combinations of commodities can just be attained if all available resources are used; it is thus the boundary between attainable and unattainable output combinations. Also called the production possibility boundary.

Productive activity - Is defined as including any activities that generate economic value for the firm in the marketplace. May also be defined as a any activity that produces or creates a good or service that has value even if the good or service has not been actually paid for.

Productive efficiency - A situation where firms producing the maximum output for a given amount of inputs, or producing a given output at the least cost.

Productivity - Output produced per unit of some input; frequently used to refer to labour productivity, measured by  total output divided by the amount of labour used.

Productivity agreement - Workers and management agree an increase in benefits, in return for an increase in productivity.

Productivity deal - When, in return for a wage increase, a union agrees to changes in working practices that will increase output per worker.

Productivity ratio Shows the ratio of outputs as compared to inputs. The closer  to 1:0, the higher the productivity, the closer to 0:0, the lower the productivity. Productivity can be affected by different work methods, quality, technology, management practices etc.

Product markets - Markets in which outputs of goods services are sold. Also called goods markets.

Product-orientated - A description applied to a business whose main focus of activity is on the product itself. See also market-orientated.

Professional ethics - The moral principles and standards of conduct guiding professionals such as CPAs in performing their functions.

Profit - 1. in ordinary usage, the difference between value of outputs and the value of inputs. Or 2. in economics, the difference between revenues received from the sale of goods and the value of inputs, includes the opportunity cost of capital, so that profits are economic profits.(3) In macroeconomics, profits exclude interest on borrowed capital but do not exclude the return on owner's capital. Or 4.  Profit (π) = total revenue (TR) – total cost (TC). (See gross profit , net profit , and profit and loss account .

Profitability - The ability of a business entity to generate net income i.e. revenues in excess of the costs incurred in producing those revenues.

Profitability index - The ratio of the total present value (PV) of future cash inflows to the initial investment (I).

Profitability ratiosRatios that measure the performance of a firm, where earnings compared to its sales, assets or equity.

Profit after tax (PAT) - The net profit earned by the company after deducting all expenses like interest, depreciation and tax. PAT can be fully retained by a company to be used in the business. Dividends, if declared, are paid to the share holders from this residue.

Profit and loss account- An account made up of revenue and expense accounts which shows the current profit or loss of a business (i.e.. whether a business has earned more than it has spent in the current year).

Profit and loss appropriation account -  Shows how the profit after tax is distributed between shareholders and the business.

Profit and loss sharing (PLS) - This is a method used in Islamic banking to comply with the Islamic prohibition of interest. The Islamic solution, commonly referred to as Profit & Loss Sharing (PLS), implements the idea of an equitable sharing of risks and profits between the different parties involved in the financial transaction. In banking, there are three parties - the entrepreneur or the individual or firm that actually uses the capital, the bank which serves the roles of a partial user of capital funds and as the financial intermediary, and thirdly the depositors in the bank who supplied the savings used as the capital funds. There two different partnership that are created  in this Islamic banking method are: the partnership between the individual depositors and their bank, and the partnership between the the borrower (entrepreneur) and the bank. Under this method of banking, the bank or other financial institution will not receive a fixed rate on the outstanding loans, rather, they will get to share the profits or  losses of the business owner to whom they have provided the funds. Similarly, those people who deposit their funds in the bank will get to share in the profit or losses of the bank.

Profit and loss statement (P&L) or (income statement) - This statement shows a firms revenues and expenses for a specific time period. The total revenues less total expense is the firms net income or net profit.

Profit before taxes (PBT) - A profitability measure that looks the firm's profits before it pays its company/corporation/profit tax.

Profit centre - Part of a business where revenues and costs can be clearly defined.

Profit margin - The percentage difference between the costs of a product and the price you sell it for. Eg. if a product costs you $10 to buy and you sell it for $25, then you have a 150% profit margin. This is also known as your 'mark-up'.

Profit maximisation - Producing a level of output which generates the most profit for a business.  Where marginal cost is equal to marginal revenue.

Profit maximising rule - Profit is maximised where marginal revenue equals marginal cost.

Profit sharing plan - A plan by which corporate executives and employees receive a share of the company's net income on some equitable basis. Such basis may relate to salary level and service years.

Profit variance – Is the difference between actual profit and budgeted profit.

Profit volume (PV) chart (Break even chart) A chart or graph that determines how profits vary with changes in volume. Profits are plotted on the vertical axis while units of output are shown on the horizontal axis.

Pro-forma - To provide a prescribed form for completing a specified task.

Pro-forma accounts (pro-forma financial statements)- A set of accounts prepared before the accounts have been officially audited . Often done for internal purposes or to brief shareholders or the press.

Pro-forma invoice - An invoice sent that requires payment before any goods or services have been dispatched.

Program budget - A budget where the inputs of any resources and outputs of the final services are identified by different specific programs without any regard to the number of different organisational units involved in the performing and completing of various different aspects of the specific program.

Progressive income tax - An income tax where the portion of income paid in tax is higher for people on high incomes than for people on low incomes. The marginal rate of tax is greater than the average rate of tax.

Progressive tax - A tax that takes a larger percentage of come the higher the level of income.

Proportional income tax - An income tax where the portion of income paid in tax is the same for people on high incomes as it is for people on low incomes.

Project - A broad, complex, multidisciplinary approach to the production of a good or service.

Project costing - A cost system that collects information on activities and costs associated with a specific activity, project, or program.

Projection - An approximation or prediction of future events. Usually a projection is based on the known information and then used to estimate a future period but also taking into consideration events that could affect or influence the possible outcomes.

Promissory note - A formal unconditional promise in writing to pay on demand or at a future date a definite sum of money.

Promotion - An attempt to retain and obtain customer by drawing attention to a firm or its products.

Promotional pricing - A pricing strategy where the product is sold at a very low price for a short period of time.

Proportional tax - A tax that takes a constant percentage of income at all levels of income and is thus progressive nor regressive. In many country’s company tax or profits tax is proportional.

Proprietary asset - An asset that falls under the category of intellectual property and therefore should not be disclosed by an employee e.g., all information to do with customers or clients including names, addresses, telephone numbers and other contact information, as well as any business related or personal information and unique proprietary asset to a company. Proprietary assets could also include things like trade secrets and new inventions.

Proprietary theory– Is the theory that assets are owned by the proprietor and liabilities are owed by him. The accounting equation is: Assets - Liabilities = capital.  Capital is the net value of the business to the owner.

Proprietors funds -  Owner's capital + net profit - owners drawings.

Proprietorship – 1. assetsliabilities = contributed capital + earnings. Or 2. form of business organisation.

Pro rata Refers to the basis for allocating an amount proportionally to the items involved. An amount may be proportionally distributed to assets, expenses, funds, etc.

Prospectus - The document that must accompany a new issue of securities. It contains the same information appearing in the registration statement, such as a list of directors and officers, financial reports certified by a CPA, underwriters, the purpose and use for the funds, and other reasonable information that prospective buyers of a security need to know.

Protectionism - Any government policy that interferes with free trade in order to give some protection to domestic industries against foreign competition.

Provision – The allowance made in accounts for depreciation. Or 2) Is to prepare in advance for an event that is projected to place in the future. In accounting, it is an amount charged against profits for a specific liability (for example: bad debts, depreciation or taxes). A liability may be known, but the amount is often uncertain. This uncertainty may lead to an adjustment in a later income statement once the final amount of the liability is ascertained.

Provisions - One or more accounts set up to account for expected future payments (e.g.. where a business is expecting a bill, but hasn't yet received it).

Proxy - A person authorised to act on behalf of another. An example would be the power of attorney document being given by the shareholder of a company  the authorisation for a specific vote to be taken on their behalf at a company meeting.

Prudence This term is used to mean the having fo foresight and exercising caution along with discretion or to not act recklessly.

Prudence concept (conservatism) – This concept requires that whenever there are alternative procedures or set of  values, the accountant should always choose the values that give the lower profit, lower asset value and the higher liability value.

Psychological pricing - A pricing strategy where particular attention is paid to the effect that the  price of a product will have upon consumers'.

Public accounting - The profession that public accountants are engaged in. Independent public accountants perform many functions, including auditing financial statements, designing financial accounting systems, assisting in the managerial accounting function, providing managerial advisory services, and tax preparation.

Public corporation - A corporation owned by the government.

Public good - A good which is non excludable, non rivalry. A good which can be jointly consumed by many individuals simultaneously at no additional cost, and with no reduction in the q or quantity of the provision concerned. 

Public interest- Refers to theory of "general welfare" the "common well-being" of a society. It is a broad concept used in policy debate but there is little, if any, consensus on what exactly constitutes the public interest.

Public limited company (PLC) - A company owned by its shareholders. Shareholders' liability is limited to the value of their shares. Shares may be bought and sold publicly - on the stock exchange.

Public offering - The presenting new securities to the investing public, after registration requirements have been filed with the appropriate authorities.

Public ownership - 1. The Government owns and operates the productive facility to provide goods or services to citizens. Or 2. In investments, percentage of a company'sstock that is publicly traded and also owned on the open market.

Public relations - An organisation's attempts to communicate with interested parties.

Public saving - Saving on the part of governments. Public saving is exactly equal to government budget surpluses, or government revenues less government expenditures.

Public sector - The portion of an economy in which goods and services are produced by the government or by government owned agencies and firms.

Public-sector borrowing requirement (PSBR) - The old name for the public-sector net cash requirement 

Public-sector debt repayment (PSDR) or Public sector surplus - The old name for a negative public-sector net cash requirement. The (annual) surplus of the public sector, and thus the amount of debt that can be repaid.

Public-sector net cash requirement  (PSNCR) - The (annual) deficit of the public sector (central government, local government and public corporations), and thus the amount that the public sector must borrow.

Purchase account - The account in which all purchases of Inventory are recorded. The purchase account is used when a periodic inventory method is being applied.

Purchase agreement - A contract which states the terms of a speciifc purchase.

Purchase discount  (cash discount)  - A reduction in the purchase price or amount payable for the purchase,  if payment is made within a specified time period.

Purchase ledger - A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is held in the general ledger which shows the total balance of all the accounts in the purchase ledger.

Purchase order - The written authorisation for a vendor to supply goods or services at a specified price over a specified time period.

Purchase returns (return outwards) - A contra purchase account that records all credits from returned inventory purchases.

Purchases budget - A budget of the expected levels of usage of materials that will be used in the production process and the purchase of those direct materials that are required.

Purchasing power– Refers to the value of a particular monetary unit in terms of the amount of goods or services that can be purchased with it.

Purchasing power of money - The amount of goods and services that can be purchased with a unit of money. The purchasing power of money varies inversely with the price level. Also called value of money

Purchasing power parity - A situation that occurs when money has equal value across countries.

Purchasing power parity theory - The theory that over the long term, the exchange rate between two currencies adjusts to reflect relative price levels (relative purchasing power).

Pure fiscal policy - Fiscal policy that does not involve any change in money supply.

Pure research Research that is motivated exclusively by the search for knowledge for its own sake.

Push-down accounting - An accounting method of accounting in which the financial statements of a subsidiary are presented to reflect the costs incurred by the parent company in buying the subsidiary instead of the subsidiary's historical costs.

Push-pull strategy – The simultaneous use of a combination of two marketing strategies: PUSH = 1. (physical distribution definition) A manufacturing strategy aimed at other channel members rather than the end consumer. The manufacturer attempts to entice other channel members to carry its product through trade allowances, Inventory stocking procedures, pricing policies, etc. 2. (sales promotion definition) The communications and promotional activities by the marketer to persuade wholesale and retail channel members to stock and promote specific products. PULL = 1. (physical distribution definition) A manufacturing strategy aimed at the end consumer of a product. The product is pulled through the channel by consumer demand initiated by promotional efforts, inventory stocking procedures, etc. 2. (sales promotion definition) The communications and promotional activities by the marketer to persuade consumers to request specific products or brands from retail channel members.

Put - 1. option to sell a specific security at a specified price within a desig­nated period for which the option buyer pays the seller (writer) a premium or option price. Contracts on listed puts (and CALLS) have been standardized at date of issue for periods of three, six, and nine months, although as these contracts approach expiration, they may be purchased with a much shorter life. Or 2. bondholder's right to redeem a bond prior to maturity.

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There is less to fear from outside competition than from inside inefficiency, discourtesy and bad service.