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ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY

OVER 3,200 ACCOUNTING TERMS

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RAB is REGULATORY ASSET BASE.

RABBI TRUST is a nonqualified deferred compensation plan whereby an employer and employee agree to defer payment for the employee's services until a specified future date. The rabbi trust features an irrevocable grantor trust that is set up by the employer to hold the contributions set aside for the employee. While this provides the employee some degree of safety that the money will be available when desired, the terms of the trust must be such that exposes the trust assets to the claims of the employer's creditors.

R&D see RESEARCH & DEVELOPMENT.

RANDOM SELECTION is a probability-based selection protocol in which each unit has a known probability of being selected. The chances of selection need not be equal for each unit, as long as the chances are known for each unit.

RAR, dependent upon context, is Resource Allocation Request, Revenue Agent Report (US IRS), Remedial Action Report, Report of Actual Reimbursements or Refill Authorization Request.

RATE BASE is the value of a regulated public utility and its operations as defined by its regulators and on which the company is allowed to earn a particular rate of return.

RATE OF RETURN is the gain or loss for a security in a particular period, consisting of income plus capital gains relative to investment, usually quoted as a percentage. The real rate of return is the annual return realized on that investment, adjusted for changes in the price due to inflation.

RATIO is the relative size, expressed as the number of times one quantity is contained in another (for example, the ratio of assets to liabilities of a company having total assets of $200,000 and liabilities of $150,000 would be $200,000 divided by $150,000 = 1.33).

RCLD see REPRODUCTION COST LESS DEPRECIATION.

REACH, in advertising, is the total number of people within a target market that will be reached through an advertising campaign.

REAL, dependent upon usage, means either 1. in economics, refers to measures such as cost, price and income, which are corrected for inflation over time in order to permit a comparison of actual purchasing power; or, 2. actual cost, as opposed to nominal.

REAL ACCOUNTS, also called permanent accounts, are the accounts; asset, liability, reserve and capital; whose balances are not canceled out at the end of an accounting period, but are carried over to the next period. These accounts appear on the post-closing trial balance and the statement of condition (balance sheet).

REAL ESTATE see REAL PROPERTY.

REALIZABLE VALUE is the expected proceeds from converting assets into cash.

REALIZATION is the amount of money received from the sale of assets.

REALIZATION PRINCIPLE is that revenue should be recognized at the time goods is sold and services are rendered.

REALIZED GAIN/LOSS, in securities, is a capital gain or loss on securities held in a portfolio that has become actual by the sale or other type of surrender of one or many securities. See also CAPITAL GAIN.

REALIZED INCOME see REALIZED NET INCOME.

REALIZED NET INCOME, in relation to a particular investment, is the amount by which the total cash gains from an investment exceeds the total losses from the investment. The Realized Net Income from any investment cannot be less than zero.

REAL PROPERTY is land and / or any permanent structures attached to it; to include saleable natural resources, e.g., vacant land, buildings, farms, oil, gas, timber, etc.

REASONABLE CERTAINTY is the degree of certainty that would be found to be in existence by a reasonable person.

REASONABLENESS TEST is where the expected value is determined by reference to data partly or wholly independent of the accounting information system, and for that reason, evidence obtained through the application of such a test may be more reliable than evidence gathered using other analytical procedures.

REASONABLE PERSON is a phrase to denote a hypothetical person who exercises qualities of attention, knowledge, intelligence, and judgment that society requires of its members for the protection of their interest and the interest of others.

REBATE is a. payment to a customer upon completion of a purchase as an inducement or sales promotion tactic; b. unearned interest refunded to borrower if the loan is paid off prior to maturity; c. amount paid back or credit allowed because of an over-collection or the return of an object sold (i.e., a refund).

RECAPITALIZATION: It is dependent upon how you use the term. The term recapitalization in itself is, dependent upon the scenario, simply an adjustment of the relationships between the debt and equity that funds a firms assets. However, it can become quite complex dependent upon under what conditions or reasons the firm is being recapitalized. This is specially true if recapitalization is being pursued to ward off a hostile takeover.

RECAST EARNINGS is a recalculation of earnings based on the assumption that certain expenses could be eliminated through new forms of cost savings. Recast earnings are often used in the analysis of a takeover or merger.

RECEIPT is a written acknowledgment that a specified article, sum of money, or shipment of merchandise has been received.

RECEIPTS this term, unless otherwise qualified, in accounting means cash received.

RECEIVABLE is an amount awaiting receipt of payment.

RECEIVABLES TURNOVER see ACCOUNTS RECEIVABLE TURNOVER.

RECEIVER is a court appointed person who takes possession of, but not title to, the assets and affairs of a business or estate that is in a form of bankruptcy called RECEIVERSHIP. The receiver collects rents and other income and generally manages the affairs of the entity until a disposition is made by the court.

RECEIVERSHIP is equitable remedy whereby a court orders property placed under the control of a RECEIVER so that it may be preserved for the benefit of affected parties. A failing company may be placed in receivership in an action brought by its creditors. The business is often continued but is subject to the receiver's control. See also BANKRUPTCY.

RECHARGE, in accounting, normally involves an activity that provides a specific, ongoing and repetitive good or service to an entity or projects and recovers the cost of providing the good or service from the entity served on a fee basis. Operating costs are supported by recharges to the departments or specific activity receiving the service.

RECIPROCAL INVESTMENT is primarily a protection measure between states (governments) that ensures that investment between two or more states is balanced.

RECOGNIZE or RECOGNITION is the recording of a revenue or expense item in a given accounting period.

RECONCILIATION is the adjusting of the difference between two items (e.g., balances, amounts, statements, or accounts) so that the figures are in agreement. Often the reasons for the differences must be explained. One example would be reconciling a checking account (bringing the checking ledger and bank balance statement into agreement).

RECORDING PRINCIPLE of 'Accrual Basis' of accounting is the recording of data based upon the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. The recording principle of ‘Cash Basis’ is the recording of data based on a cash transaction occurrence between two parties (an actual event).

RECOURSE, in finance, is the right to demand payment from the maker or endorser of a negotiable instrument (as a check). See RECOURSE NOTE.

RECOURSE NOTE is a note where the default may result in loss of collateral and also personal suit and judgment. Most notes are recourse notes.

RECOVERY, in finance, a. absorption of cost through the allocation of depreciation; b. residual cost or salvage value of a fixed asset after all allowable depreciation; or, c. collection of an accounts receivable that had been previously been written off as a bad debt.

RECURRING ENTRY is a scheduled accounting entry that occurs consistently as to date and amount, e.g. a monthly lease payment.

REDEEMABLE means cashable, i.e. able to be converted into ready money or its equivalent, e.g. redeemable stocks and bonds or a cashable check.

REDEMPTION is the repayment of the principal amount of a debt or security at or before maturity (as when a corporation repurchases its own stock).

RED HERRING is a preliminary registration statement describing the issue (the IPO) and prospects of the company that must be filed with the SEC or provincial securities commission. There is no price or issue size stated in the red herring. Red Herring's are sometimes updated several times before it is called the final prospectus. It is known as a red herring because it contains a statement typed in red that the company is not attempting to sell their shares before the registration is approved by the SEC.

REDISCOUNT is to discount short-term negotiable debt instruments for a second time, after they have been discounted with a bank.

RED-WELLS are when legal records are set up in file folders and file pockets called "red-wells." Clients usually have several matters. Red-wells are usually four-inch filing media in which file folders are inserted. A legal file may have several standard components called "sub-files." These sub-files are normally inserted into red-wells.

REFERENDUM is when a legislative act is referred for final approval to a popular vote by the electorate, e.g., a bond referendum.

REFLATION is, upon recovering from a depression or a recession, the period during which prices are returned to the level they had attained during a period of prosperity by lowering the purchasing power of money is known as reflation.

REFUNDING is redeeming a bond with proceeds received from issuing lower-cost debt obligations with ranking equal to or superior to the debt to be redeemed.

REFURBISH is to renovate or clean up.

REG A see REGULATION A.

REG D see REGULATION D.

REGISTER, in accounting, is a formal or official recording of items within a book or register, e.g., Fixed Asset Register or Invoice Register.

REGISTERED BONDS are bonds for which the names and addresses of the bondholders are kept on file by the issuing company.

REGISTERED INVESTMENT ADVISOR (RIA) is an investment advisor registered with the SEC. No certification is required.

REGISTRATION RIGHTS is the right to require that a company register restricted shares. Demand Registered Rights enable the shareholder to request registration at any time, while Piggy Back Registration Rights enable the shareholder to request that the company register his or her shares when the company files a registration statement (for a public offering with the SEC).

REGRESSIVE TAX is a tax system to where the more income that is realized the lower the tax rate becomes.

REG S see REGULATION S.

REGULAR COST see STANDARD COST.

REGULATION is the act of controlling or directing according to rule (e.g., the Securities Act of 1933 or SEC and FASB accounting regulations), i.e. it is the act of bringing to uniformity.

REGULATION A, in the USA, is a regulation under the Securities Act of 1933 providing for a simplified form of filing with the SEC, used for certain public offerings of not more than $5,000,000 and exempting such offerings from full registration.

REGULATION D, in the USA, is a regulation under the Securities Act of 1933 which exempts limited offers and sales of securities from registration if the offering satisfies certain requirements as to the number and nature of investors and the value of the offering. Advertising and resale are restricted. In general, Rule 504 of Reg D is used for offerings of $1 million or less; Rule 505 of Reg D is used for offerings of $5 million or less, with no more than 35 purchasers who are not Accredited Investors; and Rule 506 of Reg D is used for offerings over $5 million, with no more than 35 purchasers who are not Accredited Investors, but who must be either sophisticated or represented by a Purchaser Representative.

REGULATION S, in the USA, is a regulation under the Securities Act of 1933 which exempts from registration certain offers and sales of securities made outside of the United States by USA or foreign issuers.

REGULATORY ASSETS are those assets under control of a government entity, normally a utility, controlling access to the asset base as well as ascribing fees for gaining access to the use of the regulatory asset base being regulated.

REIMBURSEMENT is to pay back to someone, e.g. to pay an employee for travel expenses that was paid by the employee out of that employees own personal funds.

REIT is Real Estate Investment Trust.

RELATED ENTITY, in relation to a person, means any of the following:

(a) a relative of the person;
(b) a body corporate of which the person, or a relative of the person, is a director;
(c) a body corporate that is related to the body corporate referred to in paragraph (b);
(d) a director, or a relative of a director, of a body corporate referred to in paragraph (b) or (c);
(e) a beneficiary under a trust of which the person, or a relative of the person, is a trustee;
(f) a relative of such a beneficiary;
(g) a relative of the spouse of such a beneficiary;
(h) a trustee of a trust under which the person, or a relative of the person, is a beneficiary;
(i) a member of a partnership of which the person, or a relative of the person, is a member.

RELATED PARTY TRANSACTION is an interaction between two parties, one of whom can exercise control or significant influence over the operating policies of the other. A special relationship may exist, e.g. a corporation and a major shareholder.

RELATIVE CHANGE is a value that is properly related in size or degree or other measurable characteristics, e.g. cost of goods enjoyed a relative change of 9% as compared to prior period performance.

RELEVANCE CONCEPT refers to the capacity of accounting information to make a difference to the external decision makers who use financial reports.

RELEVANT is having a bearing on or connection with the subject at issue, e.g. relevant revenues from sales of Model XXX.

RELEVANT COST, in managerial accounting decision-making situations, is any negative-implications phenomenon which is consequent upon the production process, whether it is denominated in money terms or not.

RELEVANT RANGE is the range of activity over which changes in cost are of interest to management

RELIABILITY CONCEPT is a quality of information that assures decision makers that the information represented in the financial records and financial statements captures the actual conditions and events of the reported entity.

REMITTANCE ADVICE is a notice of payment due, either in paper form or as a notice of an electronic data interchange financial transaction.

REMITTING BANK is a bank that sends a draft to the overseas bank for collection.

REMUNERATION is the act of paying for goods or services or to recompense for losses (Example: Receiving remuneration for work, i.e., a paycheck).

RENEWAL NOTE is a note that renews a previous note due date.

RENT EXPIRED is based upon prepaid rent and the amount of time that has elapsed that is covered under the prepaid term of the rental.

REPLACEMENT COST is the total cost at current prices of an asset that is not necessarily an exact duplicate of the subject asset but serves the same purpose or function as the original.

REPLACEMENT RESERVE FUND, in real estate, is a fund set aside for replacement of common property in a condominium, PUD, or cooperative project; particularly that which has a short life expectancy, such as carpeting and furniture.

REPLACEMENT VALUE CONCEPT, in insurance, is loss coverage for assets at the cost required to purchase like assets at market value. The replacement value concept eliminates the often troublesome factor of used or depreciated value when claims for losses are adjusted.

REPLACEMENT VALUE is the cost to replace an item on the present market. Replacement value is a valuation similar to an adjusted book value analysis. Replacement value is different than liquidation value in that is uses the value of the replacement value of assets, which is usually higher than book value. Liabilities are deducted from the replacement value of the assets to determine the replacement value of the business.

REPO is a contract under which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. Also called repurchase agreement or buyback.

REPORTABLE CONDITION is a matter coming to the auditor’s attention relating to SIGNIFICANT DEFICIENCIES in the design or operation of the entity's internal control that could ADVERSLY AFFECT an entity’s ability to fulfill future obligations with customers and/or the satisfaction of liabilities.

REPORTABLE EVENT see REPORTABLE CONDITION.

REPORTABLE SEGMENT is a business segment or geographical segment for which IAS 14 requires segment information to be reported.

REPORTED EARNINGS PER SHARE is the earnings per share after profit owed to preference shareholders or minority interests is subtracted, i.e. it is the profit that actually belongs to the ordinary shareholders.

REPORTING ENTITY is the legal entity for which financial reports are prepared and made available.

REPORTING PERIOD see ACCOUNTING PERIOD.

REPRESATIONAL FAITHFULNESS in the FASB's Accounting Concept Statement #2 it is defined as "correspondence or agreement between a measure or description and the phenomenon that it purports to represent." In short, representations are verifiably as they are claimed, e.g. a map's representational faithfulness may be determined by how well the map describes the coastline.

REPRESENTATION EXPENSES are those expenditures whose character and primary purpose is for representational or entertainment related activities, including receptions or banquets.

REPRODUCTION COST LESS DEPRECIATION (RCLD) is a technique for valuing electric distribution assets.

REQUIRED RATE OF RETURN see HURDLE RATE.

REQUISITION is a written request to buy something. Usually, once approved, the requisition is then transformed into a purchase order.

RESEARCH & DEVELOPMENT (R&D) is research as a planned activity aimed at discovery of new knowledge with the hope of developing new or improved products and services. Development is the translation of the research findings into a plan or design of new or improved products and services.

RESERVE is an accounting entry that properly reflects contingent liabilities.

RESERVE ACCOUNTS, generally, are those accounts where retained earnings are set aside to satisfy dividends, improvements, contingencies, retirement of preferred stock, etc.

RESERVE CAPITAL is that part of the nominal (current value) of a business that has not yet been called up. It is thus a reserve, which can be drawn on in case of need.

RESIDUAL, generally, is something left after other parts have been taken away.

RESIDUAL CLAIM is a claim to a share of earnings after debt obligations have been satisfied.

RESIDUAL EQUITY THEORY is the theory that common stockholders are considered to be the real owners of the business, i.e., Assets - Liabilities - Preferred Stock = Common Stock.

RESIDUAL INCOME is income from efforts which continue to generate revenue over time without requiring any additional effort (e.g., a stream of future royalty payments from a book).

RESIDUAL OWNERSHIP see RESIDUAL EQUITY THEORY.

RESIDUAL VALUE is: a) Realizable value of a fixed asset after deducting costs associated with its sale; b) Scrap value or the value to a junk dealer; or c) The amount remaining after all depreciation has been deducted from the original cost of a depreciable asset.

RESOURCE ABSORPTION, in business, is the depletion of the finite resources available to a company, i.e., labor, machinery, materials, etc.

RESPONSIBILITY ACCOUNTING is the collection, summarization, and reporting of financial information about various decision centers throughout an organization; can also be called profitability accounting or activity accounting. It tracks costs, revenues, or profits to the individual managers who are responsible for making the decisions about costs, revenues, or profits and taking action about them.

RESPONSIBILITY CENTER is a subunit in an organization whose manager is held accountable for specified financial results of its activities.

RESTATEMENT OF FINANCIALS are sometimes required by the IRS when the IRS, through audit, determines that IRS rules were not followed; either lawfully or fraudulently. Such restatements usually have a negative effect on the financial results of the audited entity for the periods in question.

RESTRICTED is something that is curbed or regulated, e.g. restricted assets.

RESTRICTED ASSETS are assets / resources which are restricted by legal or contractual requirements for use under specific circumstances or purposes.

RESTRICTED DONATIONS see RESTRICTED ASSETS.

RESTRICTED STOCK is stock which is acquired through an employee stock option plan or other private means and which may not be transferred. Restricted stock may be forfeited if any SEC regulations related to it are violated or the employee either does not exercise his/her option or terminates employment prior to fully vesting.

RESTRUCTURING is the termination of employees and the reorganization of those remaining; can include reductions in plant and equipment. Restructuring is usually implemented to realize cost savings.

RESULTS FROM OPERATION is a synonym for the financial statement of a corporation: P&L, balance sheet, statement of cash flows, and sometimes a statement of owners equity. See FINANCIAL STATEMENT.

RETAIL is the selling of goods directly to consumers; usually in small quantities and not for resale.

RETAINAGE, in a construction contract, is the money earned by a contractor but not paid to the contractor until the completion of construction or another predetermined date. The retainage is held back as assurance for the quality of the contractors work.

RETAINED EARNINGS are profits of the business that have not been paid out to the owners as of the balance sheet date. The earnings have been "retained" for use in the business (Retained Earnings is an account in the equity section of the balance sheet). It is comprised of the balance, either debit or credit, of appropriated or unappropriated earnings of an entity that are retained in the business. NOTE: Appropriated earnings are not available for dividends, but may be used to reduce a deficit or may be transferred to stated capital. Other appropriations of profits require a vote of the shareholders.

RETAINED EARNINGS STATEMENT see STATEMENT OF RETAINED EARNINGS.

RETAINED PROFIT see RETAINED EARNINGS.

RETROACTIVE is to affect and modify things past, e.g. a retroactive tax increase.

RETROSPECTIVE is to be concerned with or related to the past, e.g. management's review of the prior years performance.

RETROSPECTIVE REIMBURSEMENT, in healthcare, is where reimbursement came after medical care was delivered.

RETURN ON ASSETS (ROA) shows the after tax earnings of assets. Return on assets is an indicator of how profitable a company is. Use this ratio annually to compare a business' performance to the industry norms: The higher the ratio the greater the return on assets. However this has to be balanced against such factors as risk, sustainability and reinvestment in the business through development costs. Formula: Earnings After Tax [EAITDA] / Total Assets

RETURN OF CAPITAL is the distribution of cash that resulted from tax savings on depreciation, sale of a capital asset or securities, or any other sources unrelated to retained earnings.

RETURN ON CAPITAL EMPLOYED (ROCE) is a measure of how effectively the company is using its capital. The formula to measures the return on all the assets the company is using: Profit before interest and tax (PBIT) / (total assets - current liabilities)

RETURN ON EQUITY (ROE) measures the overall efficiency of the firm in managing its total investments in assets and in generating a return to stockholders. It is the primary measure of how well management is running the company. ROE allows you to quickly gauge whether a company is a value creator or a cash consumer. By relating the earnings generated to the shareholders' equity, you can see how much cash is created from the existing assets. Clearly, all things being equal, the higher a company's ROE, the better the company. Formula: Net Income / Stockholders Equity

RETURN ON INVESTED CAPITAL (ROIC) is a measure of how effectively a company uses the money (owned or borrowed) invested in its company operations. It is calculated by: net income after taxes / (total assets less excess cash minus non-interest-bearing liabilities).

RETURN ON INVESTMENT (ROI) is a profitability measure that evaluates the performance of a business. ROI can be calculated in various ways. The most common method is Net Income as a percentage of Net Book Value (total assets minus intangible assets and liabilities).

RETURN ON NET WORTH see RETURN ON STOCKHOLDERS EQUITY.

RETURN ON RATE BASE is the ratio of net operating income earned by a utility, calculated as a percentage of its rate base.

RETURN ON SALES is a measure of a company's profitability, equal to a fiscal year's pre-tax income divided by total sales.

RETURN ON STOCKHOLDERS EQUITY is a measure of how profitably the company is utilizing shareholders' funds. It is calculated: profit after tax ÷ total stockholder's equity. Also called RETURN ON NET WORTH.

RETURNS INWARDS are goods sold on credit to a customer and returned for some reason to be refunded for (Sales returns).

RETURNS OUTWARDS are goods bought on credit from a supplier and returned for some reason to be refunded for (Purchases returns).

REVALUATION, in general, is the reconsideration of the value or worth of a property. In currency, it is the increase in the exchange rate of a currency as a result of official action.

REVALUATION RESERVE see ASSET REVALUATION RESERVE.

REVALUATION SURPLUS, under the revaluation model, increases in carrying amount above a cost-based measure are recognized as revaluation surplus.

REVENUE is the inflows of assets from selling goods and providing services to customers; including the reduction of liabilities from selling goods and providing services to customers.

REVENUE ADJUSTMENT is a journal entry to either increase or decrease revenue based upon new data; thereby either increasing or decreasing cash.

REVENUE BONDS are a type of municipal bond where principal and interest are secured by revenues such as charges or rents paid by users of the facility built with the proceeds of the bond issue. Projects financed by revenue bonds include highways, airports, and not-for-profit health care and other facilities.

REVENUE CONTRACT is a binding agreement between a governmental body and another party that defines the terms under which revenue will be received. A contract can be distinguished from a customer purchase order by the fact that a contract will contain the signatures of both parties, while a purchase order will contain only the signature of the customer.

REVENUE EXPENDITURE is the cost of resources consumed or used up in the process of generating revenue, generally referred to as expenses.

REVENUE JUSTIFIED is where the revenue realized from a product or service will pay for the cost and expenses of that product or service, i.e. the product or service will pay for itself.

REVENUE PRINCIPLE is where revenues are recorded when they are earned regardless of timing of cash receipts.

REVENUE RECOGNITION is the process of recording revenue, under one of the various acceptable methods, in the accounting period. In each period of revenue recognition, all related expenses should be matched to revenue. The most common method of recognizing revenue is at the time of sale or provisioning of service.

REVENUE RESERVE is a fund that is not a CAPITAL RESERVE, i.e. the funds are distributable.

REVERSE COST-BENEFIT METHOD is based on the short-cut rate of return formula and amounts to asking the question: given the cost of the investment, what level of annual benefits would produce a given rate of return (8 percent, for instance) on the investment?

REVERSE REPO see REVERSE REPURCHASE AGREEMENT.

REVERSE REPURCHASE AGREEMENT (reverse repo) is the opposite of a repo in that it is the purchase of securities (usually government debt) tied to an agreement to sell the security back at a later date at a higher price. Reverse repo's are normally short term agreements; primarily on an overnight basis.

REVERSE TAKEOVER can occur in different forms: 1. a smaller corporate entity takes over a larger one.; 2. a private company purchases a public one; or, 3. a method of listing a private company while bypassing most securities regulations, whereby which a shell public company buys out a functioning private company whose management then controls the public company.

REVERSING ENTRY is a very special type of adjusting entry. Generally, it is a debit or credit bookkeeping entry made to reverse a prior bookkeeping entry. They can be extremely useful and should be used where necessary. A reversing entry comes in two parts: the original adjusting entry, and the reverse, or opposite entry. The second entry is written by simply reversing the position of all debits and credits. Ultimately, the end result on the books is zero, but the adjusting entry serves to correctly allocate an expense, so the financial statements are correct.

For example: X Company has a payroll department, and cuts checks every two weeks after tabulating hours, and calculating net pay. A large number of allocations have to be made to various withholding accounts. The accountants don't want to interfere with the operations of the payroll department. And the employees also want the department to run efficiently so they can get their pay checks on time.

At the end of the year the accountants need to appropriately allocate payroll expenses, plus taxes due and payable. Rather than interfere with the payroll department the calculation is made on paper (or computer), and entered as an adjusting entry. It is marked to be reversed. After the closing entries are made, the first entries of the new year are the reversing entries. They undo the effects of the adjusting entry.

If the adjusting entry is not reversed, the books will not be correct. Both the accountants and payroll department will be making entries related to payroll. The reversing entry effectively allows the accountants to make adjusting entries without causing the books to be incorrect; the payroll department continues to make routine entries, and doesn't need to make any special entries or allocations.

REVERSION ASSET see ASSET REVERSION.

REVIEW is an accounting service providing some assurance to the Board of Directors and interested parties as to the reliability of financial data without the CPA conducting an examination in accordance with generally accepted accounting standards. The AICPA auditing standards board formulates review standards for public companies while the AICPA Accounting and Review Services Committee provides review standards for non-public businesses.

REVOCABLE LETTER OF CREDIT is a letter of credit which can be cancelled or altered by the drawee (buyer) after it has been issued by the drawee's bank.

REVOLVING COLLATERAL are accounts receivable or inventory which change from day to day.

REVOLVING CREDIT is a line of credit extended to customers who may use it as often as desired up to a certain dollar limit. Items purchased using this line of credit may be paid in full upon receipt of a monthly statement, or they may be paid for in several installments, for which an interest charge is added. Also known as REVOLVING LINE OF CREDIT.

REVOLVING LINE OF CREDIT in commercial banking is a contractual agreement between a bank and, usually, a company where the bank agrees to provide loans up to a specified maximum over a specified period, usually a year or more. In consumer banking, it is a loan account requiring monthly payments less than the full amount of the loan, and the balance is carried forward with a finance charge on that balance. Also known as REVOLVING CREDIT.

REVOLVING FINANCING is financing secured by collateral.

REVOLVING FUND is money that is renewed as it is used.

REVOLVING LOAN is a loan that is automatically renewed upon maturity.

REWORK is to change an item in order to improve it or make it more suitable for a particular purpose, e.g. to rework a defective product into one that exhibits the quality required for acceptance.

RFP is Request for Proposal.

RFSB is Rehabilitation Fund for Small Businesses.

RISK is the measurable possibility of losing or not gaining value. Risk is different from uncertainty. Uncertainty is not measurable.

RISK ADJUSTED RETURN is when we subtract from the rate of return on an asset a rate of return from another asset that has similar risk. This gives an abnormal rate of return that shows how the asset performed over and above a benchmark asset with the same risk. We can also use the beta against the benchmark to calculate an alpha which is also risk adjusted performance.

RISK-BASED CAPITAL is one of three capital standards adopted for savings institutions in 1989. The standard is designed to require savings institutions to hold more capital for higher-risk assets. The value of each asset is weighted according to its risk and then capital is calculated at a fixed percent of each risk-weighted asset. The standard adopted in 1989 was 8 percent of risk-weighted assets. See TANGIBLE CAPITAL and CORE CAPITAL.

RISK MANAGEMENT is the process of defining and analyzing risks, and then deciding on the appropriate course of action in order to minimize these risks, while still achieving business or investment goals.

ROA see RETURN ON ASSETS.

ROACE stands for Return on Average Capital Employed.

ROBUST is when a business is considered fully developed and healthy.

ROCC is an acronym for Return On Committed Capital.

ROE see RETURN ON EQUITY.

ROG, in business, is an acronym meaning “Receipt Of Goods�.

ROI (Return on Investment) can be calculated in various ways. The most common method is Net Income as a percentage of Net Book Value (total assets minus intangible assets and liabilities).

ROIC see RETURN ON INVESTED CAPITAL.

ROLL FORWARD, in accounting, it is the systematic establishment of a new accounting period's balances by using (rolling forward) prior accounting period data. There are two approaches: 1. Roll forward both asset and liabilities on a consistent basis from a consistent earlier date (possibly the last annual review); or, take the most up to date asset and liability figures as the starting point (which may be at different dates) to produce roll forward estimates of assets and liabilities; in securities, it is when an investor replaces an old options position with a new one having a later expiration date (and same strike price).

ROLL FORWARD BUDGET see CONTINUOUS BUDGET.

ROLLING STOCK is the equipment available for use as transportation, as automotive vehicles, locomotives, or railroad cars, owned by a particular company or carrier. Does not include aircraft or water borne craft.

ROLLOVER is: a. in U.S. real estate tax law, a delayed tax that allows you to apply the profit you make selling your old house to pay for the new one without paying capital gains taxes on the profit. In order to rollover the profits, the new house must be more expensive than the old and the two sales must occur within two years of each other; b. in investments, it is the transferring of funds from one investment to another such as rolling over the proceeds from a bond which has matured into another bond, or the rolling over of the proceeds of a share sale into a tax-efficient investment vehicle like a Venture Capital Trust; or, c. in banking, it is the term used when a borrower obtains authority from a bank to delay a principal payment on a loan.

ROYALTY is the share of the product, or of the proceeds realized from the product, reserved by an owner for permitting another entity to exploit and use that entity’s property, i.e. it is the rental paid to the original owner of property based upon a percentage of sales, profit or production. Royalty can involve literary works, inventions, and other intellectual property, as well as mining leases and conveyances.

RPI, among many others, can be Retail Price Index, Real Property Inventory, Rapid Process Improvement, or Responsive Production Inventory.

RPU is Revenue Per User (telecommunications), Revenue Per Unit, or Revenue Protection Unit.

RULE OF THUMB is a rough and useful principle or method, based on experience rather than precisely accurate measures.

RULES-BASED ACCOUNTING is where specific accounting rules are set forth and must be followed in order to comply with GAAP. For example, if an airline company leases a jet, the company must follow specific GAAP rules to determine if the transaction is an operating lease or a capital lease. The main difference being that a capital lease would have to appear on the balance sheet of the airline. Therefore, two virtually identical lease transactions could be classified entirely differently based upon how they follow the GAAP leasing rules. See also PRINCIPLES-BASED ACCOUNTING.

RUNNING RATE is a sustained constant rate, often the only important single rate except for zero observed under a given schedule (as in some ratio performances); also known as stream rate.

RUNNING TOTAL is the sum of any given set of numbers that is incremented/decremented as additional numbers become available over time. For example, a retail store makes sales throughout a time period, the running total is the sum of their sales, including returns/credits, at any given point of time during that time period: day, week, month, quarter, year.

RUN RATE, in finance, is how the financial performance of a company would look if you were to extrapolate current results out over a certain period of time. In accounting, it is the average annual dilution from stock option grants at a company over the most recent three year period reported in the annual report.