370 ACCOUNTING FOR MANAGERS
Accruals accounting A method of accounting in which profit is
calculated as the difference between income
when it is earnedand expenseswhen they are
incurred.
Activity-based budgeting A method of budgeting that develops budgets
based on expected activities and cost
drivers – see also activity-based costing.
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.
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 See depreciation, but usually in relation to assets
attached to leased property.
Annual Report The report required by the Stock Exchange for
all listed companies, containing the company’s
financial statements.
Assets Things that the business owns.
Avoidable costs Costs that are identifiable with and able to be
influenced by decisions made at the business
unit (e.g. division) level.
Balanced Scorecard A system of non-financial performance
measurement that links innovation, customer
and process measures to financial performance.
Balance Sheet A financial statement showing the financial
position of a business – its assets, liabilities and
capital – at the end of an accounting period.
Bank Money in a bank cheque account, the difference
between receipts and payments.
Bank overdraft Money owed to the bank in a cheque account
where payments exceed receipts.
Batch A group of similar products produced together.
Bill of materials A listing of all the materials and quantities that
go to make up a completed product.
Breakeven point The point at which total costs equal total
revenue, i.e. where there is neither a profit nor a
loss.