GLOSSARY OF ACCOUNTING TERMS 375
Intangible fixed assets Non-physical assets, e.g. customer goodwill or
intellectual property (patents and trademarks).
Interest The cost of money, received on investments or
paid on borrowings.
Internal rate of return
(IRR)
A discounted cash flow technique used for
investment appraisal that calculates the effective
cost of capital that produces a net present value
of zero from a series of future cash flows and an
initial capital investment.Inventory Goods bought or manufactured for resale but as
yet unsold, comprising raw materials,
work-in-progress and finished goods.
Investment centre A division or unit of an organization that is
responsible for achieving an adequate return on
the capital invested in the division or unit.
Job costing A method of accounting that accumulates the
costs of a product/service that is produced either
customized to meet a customer’s specification or
in a batch of identical product/services.
Kaizen A method of costing that involves making
continual, incremental improvements to the
production process during the manufacturing
phase of the product/service lifecycle, typically
involving setting targets for cost reduction.
Labour oncost The non-salary or wage costs that follow from
the payment of salaries or wages, e.g. National
Insurance and pension contributions.
Ledger A collection of all the different accounts of the
business that summarize the transactions of the
business.
Liabilities Debts that the business owns.
Lifecycle costing An approach to costing that estimates and
accumulates the costs of a product/service over
its entire lifecycle, i.e. from inception to
abandonment.
Limiting factor The production resource that, as a result of
scarce resources, limits the production of goods
or services, i.e. a bottleneck.
Line item Generic types of assets, liabilities, income or
expense that are common to all businesses and
used as the basis of financial reporting, e.g. rent,
salaries, advertising etc.