Author: Buy Khmer Book

Purchase Method of Accounting:​ ACCOUNTING for a MERGER by adding the acquired company’s ASSETS at the price paid for them to the acquiring company’s assets.

Public Oversight Board (POB):​ The POB is an independent oversight board, composed of public members, which monitors and evaluates peer reviews conducted by the SEC Practice Section (SECPS) of the AICPA’s Division for CPA Firms as well as other activities of the SECPS.

Public Offering:​ Offering shares to the public. Generally done through SEC filings.

Public Company Accounting Oversight Board (PCAOB):​ A private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the AUDITORs of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.

Proxy:​ Document authorizing someone other than the shareholder to exercise the right to vote the stock owned by the shareholder.

Prospective Financial Information (Forecast and Projection):​Forecast: Prospective financial statements that present, to the best of the responsible party’s knowledge and belief, an entity’s expected financial position, results of operations, and changes in financial position. A financial forecast is based on the responsible party’s assumptions reflecting conditions it expects to exist and the course of action it expects to take. Projection: Prospective financial statements that present, to the best of the responsible party’s knowledge and belief, given one or more hypothetical assumptions, an entity’s expected financial position, results of operations, and changes in financial position.

Projection:​ Prospective FINANCIAL STATEMENTS that include one or more hypothetical assumptions.

Profit Sharing Plan:​ DEFINED CONTRIBUTION PLAN characterized by the setting aside of a portion of an entity’s profits in participant’s accounts.

Profit Margin Pricing:​ An approach to cost-based pricing in which price is computed using a percentage of a product’s total costs and expenses.

Profit Margin:​ Used to measure the percentage of each sales dollar that results in NET INCOME.

Production:​ The act or process of creating something.

Product Line:​ In ACCOUNTING, all costs associated with the acquisition of an ASSET.

Pro Rata:​ Distribution of an expense, fund, or DIVIDEND proportionate with ownership.

Pro Forma:​ Presentation of financial information that gives effect to an assumed event (e.g., MERGER).

Privity:​ An interest in a transaction, contract or legal action to which one is not a party, arising out of a relationship to one of the parties.

Privilege:​ A right or immunity granted as a peculiar benefit advantage.

Private Placement:​ Sales of SECURITIES not involving a PUBLIC OFFERING and exempt from registration pursuant to certain EXEMPTIONS.

Prime Rate:​ Rate of INTEREST charged by major U.S. banks on loans made to their preferred customers.

Primary Earnings Per Share:​ Earnings available to COMMON STOCK divided by the number of common shares OUTSTANDING.

Price/Earnings (P/E) Ratio:​ A ratio that is used as a way of measuring investor confidence in a COMPANY and comparing stocks for profitability. It is found by dividing MARKET PRICE per share by EARNINGS PER SHARE (EPS).

Price Range:​ High/low range in which a stock has traded over a particular period of time.

Preventive Controls:​ These have the objective of preventing errors or fraud from occurring in the first place that could result in a misstatement of the financial statements.

Prenuptial Contract:​ Agreement between a future husband and wife that details how the couple’s financial affairs are to be handled both during the marriage and in the event of divorce.

Premium Bond:​ BOND with a selling price above face or REDEMPTION VALUE.

Preemptive Right:​ Right giving existing stockholders the opportunity to purchase shares of a new ISSUE before it is offered to others.

Predetermined Overhead Rate:​ A rate that is used as a way of estimating and assigning OVERHEAD costs to products or jobs for each department or operating unit before the end of an accounting period.

Post-Retirement Benefits:​ PENSIONS, health care, life insurance and other benefits that are provided by an employer to retirees, their dependents, or survivors.

Post-Closing Trial Balance:​ A trial BALANCE prepared at the end of an accounting period after all adjusting and closing entries have been posted; a final check on the balance of the LEDGER.

Portfolio:​ Combined holding of more than one stock, BOND, commodity, real estate investment, cash equivalent, or other ASSET by an individual or institutional investor

Pooling of Interest:​ Used to account for the acquisition of another company when the acquiring company exchanges its voting COMMON STOCK for the voting common stock of the acquired company when certain criteria are met.

Pledged:​ ASSET placed in a TRUST and used as COLLATERAL for a DEBT.

Plant:​ A building or group of buildings where something is made or processed; factory.

Phantom Income:​ Income reported on a TAX BASIS for which no cash or financial benefit is realized.

Personal Financial Statements:​ FINANCIAL STATEMENTS prepared for an individual or family to show financial status.

Personal Financial Specialist (PFS):​ CERTIFIED PUBLIC ACCOUNTANT who specializes in PERSONAL FINANCIAL PLANNING and completes a series of requirements that include education, experience, ethics and an exam.

Personal Financial Planning:​ Process for arriving at a comprehensive plan to solve an individual’s personal, business, and financial problems and concerns.

Periodicity:​ The recognition that NET INCOME for any PERIOD less than the life of the business, although tentative, is still a useful estimate of net income for that period.

Period:​ An interval of time with a specified length or characterized by certain conditions.

Pension:​ Retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a TRUSTEEwho controls the plan ASSETS.

Penalty:​ The various government codes contain numerous provisions which impose penalties on a taxpayer (any type of taxpayer) for failure to perform a specific act or omitting vital information on a return.

Payout Ratio:​ Percentage of a firm’s profits that is paid out to shareholders in the form of DIVIDENDS.

Payback Period Method:​ A way of judging capital investments that bases the decision to invest in capital equipment on the minimum length of time it will take to earn back in CASH the amount of the initial INVESTMENT.

Patronage Dividends:​ These dividends are amounts paid by a cooperative to its members and customers based on the quantity or value of business conducted with or for the members during the tax year.

Passive Activity Loss:​ LOSS generated from activities involved in the conduct of a trade or business in which the taxpayer does not materially participate.

Owner’s Equity:​ The residual INTEREST in the assets of a business entity that remains after deducting the entity’s liabilities.

Overhead Application Rate:​ Standard rate used to calculate the OVERHEAD cost of a given activity. Activity often measured in LABOR or machine hours.

Overhead:​ Costs of a business that are not directly associated with the production or sale of goods or services.

Over-the-Counter:​ Sold to customers at retail and without any special restrictions.

Outstanding:​ Not settled or paid.

Outsourcing:​ The act or an instance of purchasing essential products or services from another COMPANY.

Output:​ An amount of something produced, especially during a given period of time.

Other Post-Retirement Employee Benefit (OPEB):​ All post-retirement benefits other than pensions, provided by employers to employees.

Other Comprehensive Basis of Accounting (OCBOA):​ Consistent accounting basis other than GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) used for financial reporting. Examples include an INCOME TAX BASIS or a CASH BASIS.

Original Cost:​ In ACCOUNTING, all costs associated with the acquisition of an ASSET.

Organization Expenditures:​ The costs of organizing a trade or business or for profit activity before it begins active business. A taxpayer may elect to amortize such expenses for a tern no less than 60 months. If the election is not made then the expenses are not deductible and may only be recovered when the business ceases operation or is sold.

Organization:​ The act of arranging something in an orderly way.

Option:​ Right to buy or sell something at a specified price during a specified time period.

Opportunity Cose:​ Highest price or rate of return an alternative course of action would provide.

Operating Profit (or Loss) :​ The difference between the REVENUES of a business and the related costs and expenses, excluding INCOME derived from a sources other than its regular activities and before income deductions.

Operating Lease:​ Type of LEASE, normally involving equipment, whereby the CONTRACT is written for considerably less than the life of the equipment and the lesser handles all maintenance and servicing.

Operating Cycle:​ Period of time between the acquisition of goods and services involved in the manufacturing process and the final cash realization resulting from sales and subsequent collections.