Accounting Glossary

NAGBOR is Net Adjusted Gross Box Office Receipts.

NASD is National Association of Securities Dealers.

NASDAQ is a computerized system established by the NASD to facilitate trading by providing broker/dealers with current bid and ask price quotes on over-the-counter stocks and some listed stocks. Unlike the Amex and the NYSE, the NASDAQ (once an acronym for the National Association of securities Dealers Automated Quotation system) does not have a physical trading floor that brings together buyers and sellers. Instead, all trading on the NASDAQ exchange is done over a network of computers and telephones. Also, theNASDAQ does not employ market specialists to buy unfilled orders like the NYSE does. The NASDAQ began when brokers started informally trading via telephone; the network was later formalized and linked by computer in the early 1970s. In 1998 the parent company of the NASDAQ purchased the Amex, although the two continue to operate separately. Orders for stock are sent out electronically on the NASDAQ, where market makers list their buy and sell prices. Once a price is agreed upon, the transaction is executed electronically.

NATURAL ACCOUNTS in the Chart of Accounts are user defined accounts for the activities associated with the accounting entity that capture data at the transaction level. Natural accounts exist for a range of Assets, Liabilities, Equity accounts, Revenues, and Expenses.

NATURAL BUSINESS YEAR is a fiscal year based on the cycle of the given business rather than a calendar year. The year ends with inventories and activities at a low level, e.g., after winter shipments for a ski manufacturer.

NATURAL CLASSIFICATION of costs focuses on the nature of the cost item. In this classification structure, the total operating costs of an activity can be classified into manufacturing costs and commercial costs. Manufacturing costs include all direct materials and direct labor, as well as, factory overhead. Such factory overhead costs include indirect materials (such as factory supplies & lubricants), indirect labor (such as supervision and inspection) and other indirect costs (such as rent, insurance, and utilities). Commercial expenses include marketing expenses (such as advertising, printing, and sales salaries) and administrative (general and administrative (G&A)) expenses (such as administrative office salaries, rent, and legal expenses).

NCD is Negotiable Certificate of Deposit.

NEAR-CASH ASSETS are non-cash assets that can be readily exchanged for cash within a relatively short period (e.g., short-term CD's and money market funds).

NEBT is Net Earning Before Taxes.

NEGATIVE AMORTIZATION is a loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid Interest is added to the outstanding principal, to be repaid later.

NEGATIVE CASH FLOW is where expenditures required to maintain an investment exceed income received on the investment, i.e. spending in a business is greater than earnings.

NEGATIVE CONTRIBUTOR is any item, activity, or cost that offsets attainment of positive results, e.g., a rise in unemployment and its effect upon the economy.

NEGATIVE GOODWILL arises where the net assets at the date of acquisition, fairly valued, exceed the cost of acquisition. It is reflected on the balance sheet net of other intangible assets. Negative goodwill is recognized as income as follows:

To the extent that negative goodwill relates to expected future losses and expenses, it is recognized in the income statement when the future losses and expenses are recognized.
The amount of negative goodwill relating to identifiable non-monetary assets (not exceeding the fair values of such acquired assets), is recognized as income on a systematic basis over the remaining useful lives of the identifiable acquired
depreciable/amortizable assets with a maximum of 20 years.
The amount of the negative goodwill in excess of the fair values of the acquired identifiable non-monetary assets is recognized as income immediately.
The amount of the negative goodwill relating to monetary assets is recognized as income immediately

NOTE: Intangible assets are not revalued.

NEGATIVE PLEDGE CLAUSE is a covenant or promise in an indenture agreement that states the corporation will not pledge any of its assets if doing so would result in less security to the debt holders covered under the indenture agreement. Also called covenant of equal coverage.

NEGATIVE WORKING CAPITAL is when current liabilities exceed current assets.

NEGLIGENCE is the omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do.

NEGOTIABLE INSTRUMENT can be a check, promissory note, bill of exchange, security or any document representing money payable which can be transferred to another by handing it over (delivery) and/or endorsing it (signing one's name on the back either with no instructions or directing it to another). A negotiable instrument is a contract and subject to the rules governing contract law. However, a negotiable instrument may be distinguished from an ordinary contract by the fact that a negotiable instrument may be written in a way that makes it transferable. This quality of negotiation can generally allow the instrument to be used as a substitute for money by holders in due course, despite the defensive claims between the original parties who drafted the negotiable instrument. In order to be negotiable, the bill or note must be payable to order, or to bearer. Some promissory notes contain a clause(s) making them non-negotiable.

NET, in general, is the figure remaining after all relevant deductions have been made from the starting, or gross, amount.

NET ACCOUNTS RECEIVABLE is equal to total accounts receivable, minusan estimate for amounts the company believes it will never collect.

NET ASSETS is the difference between total assets and current liabilities including noncapitalized long-term liabilities.

NET ASSETS BASIS is a simple division of net asset attributable to the class of shareholders with the number of shares, i.e. the per share value of net assets.

NET ASSET VALUE (NAV) in securities, except money market funds which always have a NAV of $1.00, represents the market value or price of one fund share. It is calculated by the total value of the fund's portfolio less liabilities divided by the number of shares; or, in corporate valuations, it is a measure of the shareholders’ aggregate wealth in the company, which is defined as the actual or hypothetical market value of the company’s assets less its liabilities.

NETBACK is linkage of the price of crude oil to the market price of products refined from it.

NET BOOK VALUE is the current book value of an asset or liability; i.e., its original book value net of any accounting adjustments such as depreciation.

NET CASH FLOW equals cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization. also called cash flow. Net cash flow is a measure of a company's financial health.

NET CHANGE IN CASH is calculated by adding cash from operating, investing, and financing activities and foreign exchange effects from the Statement of Cash Flows.

NET CONTRIBUTION is the amount remaining after all relevant deductions have been made to the gross amount, e.g., Net Contribution to Margin.

NET CURRENT ASSETS see WORKING CAPITAL.

NET DEBT is: debt + short term loans less cash on hand.

NET EARNINGS see NET PROFIT.

NET INCOME is the difference between a businesses total revenue and its total expenses. This caption and amount is usually found at the bottom of a company's Profit and Loss statement. Same as Net Profit.

NET INTEREST INCOME see NET INTEREST MARGIN.

NET INTEREST MARGIN is the interest income earned on assets less interest expense paid on liabilities and capital. NET INTEREST MARGIN is the gross margin for financial institutions.

NET LEASES, typically, there are three net leases: net lease, double-net lease, and triple-net lease. A net lease is a base rent plus an additional charge for taxes. A double-net lease is a base rent plus an additional charge for taxes and insurance. A triple-net lease is base rent plus an additional charge for taxes, insurance, and common area expenses.

NET MARGIN see NET PROFIT MARGIN.

NET OF TAXES means the effect of applicable taxes (usually income taxes) has been considered in determining the overall effect of an item on the financial statements. The phrase is used when a company has items that must be disclosed in a separate section. Each such item should be reported net of the applicable taxes.

NET OPERATING INCOME (NOI) is income after deducting for operating expenses but before deducting for income taxes and interest.

NET OPERATING LOSS (NOL) is experienced by a business when business deductions exceed business income for the fiscal year. For income tax purposes, a net operating loss can be used to offset income in a prior year, or a taxpayer can elect to forego the carry back and carry the net operating loss forward.

NET OPERATION PROFIT AFTER TAXES (NOPAT) is a profitability measure that omits the cost of debt financing (i.e. it omits interest payments, along with their associated tax break). NOPAT is primarily used in the calculation of EVA. It is calculated: NOPAT = operating income x (1 - Tax Rate).

NET PATIENT REVENUE (NPR), in hospitals, is gross inpatient revenue plus gross outpatient revenue minus related deductions from revenue.

NET PRESENT VALUE (NPV) is a method used in evaluating investments, whereby the net present value of all cash outflows (such as the cost of the investment) and cash inflows (returns) is calculated using a given discount rate, usually REQUIRED RATE OF RETURN. An investment is acceptable if the NPV is positive. In capital budgeting, the discount rate used is called the HURDLE RATE and is usually equal to the INCREMENTAL COST OF CAPITAL.

NET PROFIT is the company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses. Same as Net Income.

NET PROFIT MARGIN (NPM After Tax) measures profitability as a percentage of revenues after consideration of all revenue and expense, including interest expenses, non-operating items, and income taxes. For a business to be viable in the long term profits must be generated; making the net profit margin ratio one of the key performance indicators for any business. It is important to analyze the ratio over time. A variation in the ratio from year-to-year may be due to abnormal conditions or expenses which need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvements may lead to a further drop in the ratio or even losses before increased profitability is achieved.

NET PROFIT MARGIN (NPM Pre-Tax) incorporates all of the expenses associated with ordinary business (excluding taxes) thus is a measure of the overall operating efficiency of the firm prior to any tax considerations which may mask performance. For a business to be viable in the long term profits must be generated; making the net profit margin ratio one of the key performance indicators for any business. It is important to analyze the ratio over time. A variation in the ratio from year-to-year may be due to abnormal conditions or expenses which need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvements may lead to a further drop in the ratio or even losses before increased profitability is achieved.

NET PURCHASES are those items purchased less returns, discounts and allowances on those purchases.

NET RECEIVABLES are a company's accounts receivable (money owed to the company) minus any provisions for bad debts.

NET REVENUE is GROSS REVENUE less discounts, allowances, sales returns, freight out, etc.

NET SALES is gross sales less discounts, allowances, sales returns, freight out, etc.

NET SALES TO GROSS SALES shows the percent of all transactions that may be considered as "good" net transactions. Differences may arise from returns, bad product, or other sales concessions.

NET 10, 30, etc. usually refers to payment terms on an invoice, e.g. 'Net 10 2%, 30', would mean that if a purchaser pays the invoice within 10 days a 2% reduction in invoice amount may be enjoyed, but full invoice amount is due within 30 days.

NETTING can be the settling of mutual obligations at the net value of a contract as opposed to its gross dollar value; or, the reduction of transfers of funds between subsidiaries or separate companies to a net amount.

NET-TO-NET LEASE is where a tenant pays a basic rental amount typically based on the square footage of the leased property plus all or a portion of the charges associated with the property including but not limited to property taxes, utilities, insurance, assessments and property maintenance.

NET WORTH is the difference between Total Liabilities and Total Assets. Minority interest is included here.

NEUTRALITY, in an economic model, is where money is said to be neutral in the model if changes in the level of nominal money have no effect on the real equilibrium.

NEXUS, dependent upon usage, is a. the means of connection between things linked in series; or, b. a connected series or group; or, c. is the sufficient presence within the jurisdiction of a taxing authority. The taxable income of a multistate corporation may be apportioned to a specific state only if the corporation has a sufficient nexus in the state. The nexus for state sales tax requires a physical presence in the state, whereas the nexus for state income tax purposes requires more than just solicitations of sales.

NFP ACCOUNTING STANDARDS are established by the Financial Accounting Standards Board (FASB) or the Government Accounting Standards Board (GASB). Additionally, the American Institute of Certified Public Accountants (AICPA) influences the accounting for nonprofit organizations with its industry and accounting guides and Statements of Position (SOPs).

NIAT is Net Income After Taxes.

NIM is Net Interest Margin.

NOMINAL means small payment, or value.

NOMINAL ACCOUNTS are those accounts that are closed out each period: revenue accounts, expense accounts, and dividend or withdrawals accounts.

NOMINAL DOLLARS are dollars that have not been adjusted for inflation.

NOMINAL CAPITAL is total face value of authorized issuable capital.

NOMINAL INTEREST RATE is the stated, or named, interest rate in a note or contract; the nominal interest rate may differ from the true or effective interest rate. See EFFECTIVE INTEREST RATE.

NOMINAL LEDGER is the account book showing expenditure on nominal accounts i.e. named business accounts such as postage, printing, etc.

NOMINAL VALUE is the par, or face, value of something e.g. a share issue.

NON-CASH EXPENSE is that expense which is recognized within the financial statements without actual cash being disbursed (e.g., depreciation, amortization, and write-offs).

NON-CASH FINANCING & INVESTING is where information about transactions and other events that do not result in any cash flows during the financial year but affect assets and liabilities that are recognized must be disclosed in the financial report where the transactions and other events: a. involve parties external to the entity; and b. relate to the financing or investing activities of the entity.

NON-CURRENT ASSETS includes PPE (property, plant and equipment) as opposed to current assets which includes cash, cash equivalents (e.g. securities, short-term notes, etc.), inventory and accounts receivable.

NON-DISCRETIONARY means it is mandatory, not up to the individual or company.

NON-DISCRETIONARY ACCRUAL is a mandatory expense/asset that is recorded within the accounting system that has yet to be realized. An example of this would be payroll taxes.

NON-EQUITY SHARE is a share in an entity that a. evidences indebtedness of the entity to the holder of the share, and b. does not represent an equity interest in the entity.

NON-EXPENDABLE PROPERTY is durable (e.g., equipment and furniture), lasting for a year or longer, and generally has a high dollar value. Non-expendable property must be accounted for throughout its useful life.

NON-EXPENSE CASH DISBURSEMENT is spending not shown on the income statement, i.e., the expenditure of cash on something that does not appear on the profit-and-loss statement, for example, spending on a fixed asset or discharging part or the entire principal in a debt.

NON-FIXED ASSET is normally equipment and furnishings with an original purchase value less than some pre-determined value (e.g., <$1,000 in acquisition cost assets are considered to be non-fixed assets). These items are not assigned asset inventory tags. Typical examples of non-fixed asset items are calculators, typewriters, chairs, desks, filing cabinets, shelving units and small tools.

NON-FIXED INCOME refers to any income that is not fixed, e.g. wages, profits realized on the sale of assets and/or securities. See FIXED INCOME.

NON-INTEREST BEARING BOND is a bond issued at a discount from its par value and not paying any interest to the holder. The interest earned is determined by the difference between the redemption price and the purchased price. U.S. Treasury bills are an example of non-interest bearing bonds.

NON-INTEREST INCOME, in securities, is comprised of service fees and trading and other income, excluding gains/losses on securities transactions.

NON-MONETARY ASSET see MONETARY ASSET.

NON-PERFORMING ASSET is an asset not effectual in the production of income. For example, in banking, commercial loans 90 days past due and consumer loans 180 days past due are classified as non-performing.

NON-PROFESSIONAL SUBSCRIBER means any natural person who is neither: (a) registered or qualified in any capacity with the SEC, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association; (b) engaged as an "investment advisor" as that term is defined in Section 201 (11) of the Investment Advisors Act of 1940 (whether or not registered or qualified under that Act); nor, (c) employed by a bank or other organization exempt from registration under federal or state securities laws to perform functions that would require registration or qualification if such functions were performed for an organization not so exempt. See PROFESSIONAL SUBSCRIBER.

NONPROFIT ORGANIZATION is one that has committed legally not to distribute any net earnings (profits) to individuals with control over it such as members, officers, directors, or trustees. It may pay them for services rendered and goods provided. Also known as NOT-FOR-PROFIT ORGANIZATION.

NONRECURRING is an income statement item that is infrequent in occurrence or unusual in nature.

NON-TRADE DEBT is that debt where invoices are issued to individuals not suppliers (trade).

NO-PAR VALUE CAPITAL STOCK are shares designated in the charter that do not have a par or assigned value printed on the issued stock certificate.

NOPAT see NET OPERATION PROFIT AFTER TAXES.

NOPLAT is Net Operating Profit Less Adjusted Taxes.

NORMAL BALANCE, in accounting, is the side of an account, whether debit or credit, to which increases to the account are recorded.

NORMALIZED EARNINGS is earnings that have been adjusted in order to take into account the effect of cycles in the economy.

NORMAL LOSS takes into account the nature of many process operations is such that the output volume is frequently less than the input volume. Because process operations are repetitive, the level of ‘losses’ of materials/product that could reasonably be expected under efficient operating conditions may be established. This is referred to as a ‘normal’ loss; one that is an inevitable consequence of the process operation under efficient operation conditions and is thus considered unavoidable. Losses greater (ABNORMAL LOSS) or less (ABNORMAL GAIN) than normal are referred to as ‘abnormal’ and result from reduced or greater efficiency.

NORMAL PROFIT is the opportunity cost of using entrepreneurial abilities in the production of a good, or the profit that could have been received by entrepreneurship in another business venture. Like the opportunity costs of other resources, normal profit is deducted from revenue to determine economic profit. It is, however, never included as an accounting cost when accounting profit is computed.

NORMAL RATE OF RETURN, for individuals, is the average rate of return on all investments, i.e. the average of all returns yields the normal rate of return. For capital investments for businesses, it is the profit relative to capital investment.

NORMAL SPOILAGE consists of defective units that arise as part of regular operations. If normal spoilage arises from the requirements of a specific job, the cost of the spoiled units is charged to the job.

NORMATIVE ACCOUNTING THEORY is where theorists tend to advocate their opinions on accounting based upon subjective opinion, deductive logic, and inductive methods. In the final analysis, nearly all standards are based upon normative theory. Generally conclude that some accounting rule is better or worse than its alternatives. Normative theorists tend to rely heavily upon anecdotal evidence (e.g., examples of fraud) that generally fails to meet tests of academic rigor. For example, the Wizard reported that Montgomery Ward would fail. However, the Wizard always reports that every company will fail or lose its self identity in a pattern of acquisitions and mergers. Eventually, he will always be correct.

NOSTRO ACCOUNT is an account held by a bank in a foreign country in the currency of that country e.g., a German bank with an account in New York will call the record in its own books of its New York account a nostro account.

NOTARIAL is relating to or done by a notary public.

NOTARY PUBLIC is a certifier of legal documents, i.e., somebody who is legally authorized to certify the authenticity of signatures and documents. Also called notary.

NOTE see PROMISSORY NOTE.

NOTES PAYABLE are all note obligations, including bank and commercial paper. Does not include trade notes payable.

NOTES RECEIVABLE is a debt due from borrowers evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers.

NOTES TO THE FINANCIAL STATEMENTS is a detailed set of notes immediately following the financial statements contained in the annual report that expands upon and/or explains in some depth the information contained in the financial statements.

NOT-FOR-PROFIT ACCOUNTING is the adherence to NFP ACCOUNTING STANDARDS. These standards are established by the Financial Accounting Standards Board (FASB) or the Government Accounting Standards Board (GASB). Additionally, the American Institute of Certified Public Accountants (AICPA) influences the accounting for nonprofit organizations with its industry and accounting guides and Statements of Position (SOPs).

NOT-FOR-PROFIT ORGANIZATION see NONPROFIT ORGANIZATION.

NPPE is Net Property, Plant and Equipment.

NPR see NET PATIENT REVENUE.

NPV is an acronym for Net Present Value.

NRGT (Non-Resettable Grand Total) is a concept used in retail point of sale (POS) terminals that does not allow the Grand Total to be reset, but does allow adjustments to be entered, e.g., errors, overwring, etc. Improved security and control is provided for independent retail and chain operations with a Non-Resettable Grand Total (NRGT). Updated by all sales, this valuable audit figure may be selected by programmability to print on the Daily Business Report.

NRV, in accounting, is Net Reserve Value.

NSF is Not Sufficient Funds (return check reason code).

NTA can mean either Net Tangible Assets or Net Total Assets.

NWC is Net Working Capital.

NZIAS is New Zealand International Accounting Standards.

NZICA stands for New Zealand Institute of Chartered Accountants.

NZIRFS is New Zealand International Financial Reporting Standards.

ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY