AMORTIZATION: An account that records the value reduction of intangible assets registered in fixed assets. The loss in value of capital invested to acquire industrial or commercial property rights and any others, with a limited existence or period of duration.
ASSETS: All of the assets, rights and values receivable of an entity. Asset accounts have debit balances, except for adjustment accounts (such as accrued depreciation and provisions for adjustment to market value).
CURRENT ASSETS: Cash or money deposited in bank accounts; assets, rights and values receivable in the maximum period of a year, that is, short-term receivables (trade notes, produced goods in stock, etc.); resources invested in expenses of the following fiscal year. Also known as Short-term Assets.
DEFERRED ASSETS: A subgroup of Permanent Assets that highlights the resources invested in the realization of expenses that contribute to the result of more than one future fiscal year. Income accounts are only appropriated insofar as this contribution influences the generation of the result of each fiscal year.
PERMANENT ASSETS: A group of accounts that encompasses the resources invested in all long-term assets or rights meant for the regular operation of the company and of its enterprise, as well as the rights exercised for this purpose. Permanent Assets are composed of subgroups: Investments, Fixed Assets, Intangible Assets and Deferred Assets. From 12/4/2008 onwards this terminology was repealed by Provisional Measure 449/2008, becoming part of Non-current Assets.
NON-CURRENT ASSETS: This group includes all long-term assets, meant for the regular operation of the company and of its enterprise, as well as the rights exercised for this purpose. Non-current Assets are composed by the following subgroups:
- Long-term Realizable Assets
- Investments
- Fixed Assets
- Intangible Assets
BALANCE: A framework (map, chart, etc.) that states the economic/financial situation of the company on a particular date. Although the balance evaluates the wealth, that is, the value of the company, it does not state its results. It only states a total value, the demonstration of which is made in another document called "income statement". The balance is composed of two parts, which are always in equilibrium. Assets are equal to Liabilities plus Net Equity.
BALANCE SHEET: An accounting statement that demonstrates, qualitatively and quantitatively, on a given date, the equity and financial position of the company.
GOODS: All economically valuable things that satisfy human needs.
CONSUMER GOODS: (non-durable or spent/consumed in the productive process): after consumption, they represent expenses, such as: fuel and lubes, office materials, cleaning products, etc.
INCOME PROPERTY: Property not meant for company purposes (real estate meant for income or rental).
FIXED ASSETS: (durable goods with a useful life longer than 1 year): real estate, vehicles, machinery, facilities, equipment, furniture and utensils.
INTANGIBLE ASSETS: Assets without physical existence, although they represent an investment of capital crucial to company goals, such as trademarks and patents, formulas or manufacturing processes, copyrights, authorizations or concessions, business site and goodwill.
DEBT CAPITAL: Resources borrowed from third-parties, used for acquisition of assets owned by the company. It corresponds to current liabilities.
EQUITY: Resources from company partners or stockholders, or from their partnership operations. It corresponds to net equity.
CAPITAL STOCK: The value stipulated in contract or statute, that forms the participation (in money, assets or rights) of company partners or stockholders.
TOTAL CAPITAL AVAILABLE TO THE COMPANY: The sum of the company's own capital plus debt capital. It also equals company assets total.
ACCOUNTING: It is the science that studies and controls equity, graphically representing it, highlighting its variations, setting rules for its interpretation, analysis and auditing. It is also a basic instrument for decision making by all sectors directly or indirectly involved with the company.
CIVIL ACCOUNTING: Accounting exercised by persons not ultimately motivated by profit, but by survival or social welfare.
PRIVATE ACCOUNTING: Accounting that studies and records the administrative events of private persons, whether natural persons or legal entities, besides the graphical representations of their equities, divided in civil and commercial spheres.
GOVERNMENTAL ACCOUNTING: Accounting that studies and records the administrative events of government persons, graphically representing their equities, focusing on three distinct systems: budgetary, financial and accrual accounting, to reach their goals, branching off in accordance with their scope in federal, state, municipal and autarchy levels.
INCOME STATEMENT ACCOUNTS: Accounts that record revenues and expenses, stating the result of the fiscal year.
EQUITY ACCOUNTS: Accounts that represent assets and liabilities (assets, rights, obligations and net worth).
ASSET ADJUSTMENT ACCOUNTS: Accounts classified in assets with credit balances, hence stated with the sign (-).
CASH FLOW STATEMENT: This statement lists the set of financial inflows and disbursements of a company in a given period. It seeks to analyze every transfer of each currency unit within the company.
STATEMENT OF RETAINED EARNINGS / ACCUMULATED LOSSES (DLPA) This statement demonstrates the operations of the account of accumulated profits or losses, not yet distributed to partners or stockholders, revealing the events that influenced balance changes. This demonstration must also reveal the dividend per stock of contributed capital.
STATEMENT OF CHANGES IN NET EQUITY (DMPL) This statement demonstrates the operations occurred during the fiscal years in Net Equity component accounts, clearly indicating the flow from one account to another, as well as the origin of each Net Equity increase or reduction.
STATEMENT OF SOURCES AND USES OF FUNDS (DOAR): This accounting statement demonstrates the changes that caused net working capital variations in the company. It also presents data related to financing (resource origins) and investments (uses of funds) of the company during the fiscal year. These resources affect the net working capital (NWC) of the company (also known as net current assets).
INCOME STATEMENT FOR THE FISCAL YEAR (DRE): This statement demonstrates the formation of the fiscal year's net result by confronting revenues, costs and expenses calculated in accordance with the accrual system.
BASIC FINANCIAL STATEMENTS: Balance Sheet; Income Statement; Statement of Retained Earnings or Accumulated Losses; Statement of Changes in Net Equity; Statement of Sources and Uses of Funds; Explanatory Notes.
ACCRUED DEPRECIATION: The wear and tear of physical assets registered in fixed assets, whether by use, natural causes or obsolescence.
PREPAID EXPENSES: Expenses paid in advance to be regarded as costs or expenses during the following fiscal year. Examples: insurance payments due, leasing payments due and charges to be appropriated.
EXPENSES: Expenditures incurred to generate revenues, whether directly or indirectly. Expenses may reduce assets and/or increase current liabilities, but they always reduce the net situation.
DEFERRED: Resources invested in expenses that contribute to profits in more than one period; research and development.
RIGHTS: Values to be received from third parties, by sales in installments or values we own currently held by third parties.
CASH AND EQUIVALENTS: Resources immediately available, comprised of cash accounts, bank account transactions, checks for collection and open market investments.
TRADE NOTE: A credit bill the clearance of which proves the payment of a liability from goods purchased or services received. It is issued by the creditor (seller of goods) to the debtor (buyer), who signs it (ACCEPTANCE), recognizing their debt. This procedure is called acceptance.
FUNDAMENTAL ACCOUNTING EQUATION: Assets = Liabilities + Net Equity
STOCK: Goods meant to be sold depending on the activity of the company. Example: finished products, unfinished products, raw-materials and goods.
DEPLETION: The exhaustion of non-renewable natural resources, due to its use for economic purposes, recorded in fixed assets.
FISCAL YEAR: The period of time (12 months) at the end of which legal entities calculate their results. It may or may not coincide with the calendar year, depending on the articles of incorporation. Income tax laws call it base period (monthly or yearly) to calculate the calculation base of taxes due.
LONG TERM LIABILITIES: Until 12/4/2008, they were classified as liabilities due after the closing of the subsequent period. From this date onwards, such liabilities are called "Non-current Liabilities".
ADMINISTRATIVE EVENTS: Are events that effect changes to equity elements or to results. Thus, they are also called accounting events.
MIXED OR COMPOUND EVENTS: They combine permutative events with modifying events, so they can be augmentative (combining permutative events with augmentative modifying events), or reductive (combining permutative events with reductive modifying events).
MODIFYING EVENTS: Events that effect changes to net equity value (PL) or net equity status (SL). They can be augmentative (when they increase equity value) or reductive (when they reduce equity value).
PERMUTATIVE EVENTS: Events that do not effect changes to the net equity value (PL) or net equity status (SL), but alter the composition of other equity elements.
ACCOUNTING FUNCTIONS: Register, organize, demonstrate, analyze and monitor equity changes caused by economic or corporate activities performed by the company in the economic context.
FIXED ASSETS: Assets and rights meant for company activities: land, buildings, machinery and equipment, vehicles, furniture and utensils, work in progress for own use, etc.
INVESTMENTS: Resources invested to participate in other corporations and in rights of any nature not meant for maintaining company activity. The main concept requires that the company not use the assets in its routine activities, actions, patents, art works, real estate properties meant for leasing, unused real estate properties.
RETAINED EARNINGS: Positive accumulated company results. While not distributed or capitalized, they are regarded as surplus reserves.
PROMISSORY NOTE: A payable net debt security for which one person commits to pay another a given amount of money in a specific period. As a bill issued by the debtor to benefit the creditor, it requires no formal acceptance.
EXPLANATORY NOTES: Notes that provide the information required to clarify equity status; that is, of a given account, balance or transaction, or valuesrelated to fiscal year results, or to mention events that may change such equity status in the future, or it may even be related to any other of the Financial Statements, whether the Statement of Sources and Uses of Funds or the Statement of Retained Earnings or Accumulated Losses.
LIABILITIES: Debts or commitments of any kind or nature incurred to third parties, or third party assets held by the company.
UNSECURED LIABILITIES: When company total assets (assets and rights) are less than current liabilities.
CURRENT LIABILITIES: Liabilities that must be paid during the following year; trade notes payable, accounts payable, bills payable, bank loans, income taxes payable, salaries payable.
SHORT-TERM LIABILITIES: Financial liabilities to third parties. Short-term liability accounts have credit balances.
NET EQUITY: The value invested by the owners. Net equity accounts have credit balances, divided into: Capital stock; Capital reserves; Revaluation reserves; Surplus reserves; Retained earnings/accumulated losses.
NON-CURRENT LIABILITIES: Company liabilities, which include financing for the acquisition of rights to non-current assets, if due after the following fiscal year.
PERMANENT ASSETS: Up to 12/4/2008, they were related to assets and rights classifiable as investments, fixed, deferred and intangible assets. After this date, this group is called Non-current Assets, with the deferred subgroup also extinguished.
ACCUMULATED LOSSES: Account that records the accumulated losses of the company, already absorbed by other reserves or retained earnings.
ACCOUNTING PRINCIPLES: Rules now followed and accepted – constituting the theory upon which Accounting Science is based. In Brazil, accounting principles are those laid down by Resolution CFC 750/93 – which compose this dictionary.
CURRENCY RESTATEMENT PRINCIPLE: This principle exists because the currency – although universally accepted as a measure of value – is not a constant unit of purchasing power. Consequently, its formal expression must be adjusted so that the values of equity components, hence the net equity, remain substantially correct in accordance with original transactions.
COMPETENCE PRINCIPLE: The principle that establishes when a given component ceases to integrate equity, to become a modifying element of Net Equity.
CONTINUITY PRINCIPLE: This principle states that the equity of the company, in its qualitative and quantitative composition, depends on conditions under which company operations are likely to develop. The suspension of its activities may affect the usefulness of specific assets, which may even lose their value entirely. A drop in its level of activity may also have similar effects.
ENTITY PRINCIPLE: This principle recognizes Property as an accounting object and affirms the autonomy of property, the need to differentiate a specific property in the universe of existing properties, regardless of whether it belongs to a specific person, to a set of persons or to a partnership or institution of any nature or purpose, for profit or non-profit. Consequently, in this sense, the property is not confused with those of its partners or owners, in the case of a corporation or institution.
OPPORTUNITY PRINCIPLE: This principle simultaneously refers to the timing and integrity of the asset register and to its changes, determining that they be done immediately and to the correct extension, regardless of their original causes.
PRUCENCE PRINCIPLE: This principle determines the adoption of the smallest value for ASSET components and of the highest for those of LIABILITIES, every time equally valid alternatives exist for the quantification of asset changes that affect Net Equity.
PRINCIPLE OF REGISTRATION AT ORIGINAL VALUE: This principle determines that equity components be registered at the original values of transactions with the outside world, expressed at present value in the country's currency, to be maintained when evaluating future equity variations, even when those consist of accretions or breakdowns within the company.
PROVISION FOR DOUBTFUL DEBTS: An account that records losses verified in previous periods, with a certain value to cover trade notes regarded as uncollectable.
LONG-TERM RECEIVABLES: Rights receivable after the end of the subsequent fiscal year; rights derived from sales, advances or loans to related or controlled companies, stockholders, directors or profit-sharing beneficiaries (which do not constitute usual business).
REVENUES: Inputs of elements to company assets, in the form of assets or rights that always increase net worth.
CASH SYSTEM: When calculating fiscal year results, only payments and receipts made in the period are taken into account. Only non-profit organizations, in which receipts and payments often correspond to revenues and expenses, can use this system.
ACCRUAL SYSTEM: This system only takes revenues and expenses into account to calculate fiscal year results, regardless of receipts or payments. It is required in for-profit organizations.
CAPITAL RESERVES: Contributions received by owners or from third parties, which have nothing to do with either revenues or earnings.
REVENUE RESERVES: Obtained by the appropriation of company profits for various reasons, including legal or statutory requirements.
REVALUATION RESERVES: Reserves that indicated value increases to the acquisition costs of assets already monetarily adjusted, based on the market, up to 12/31/2007. Such reserves were extinguished by Statute 11,638/2007.
FUTURE EARNINGS: Revenues received in advance (anticipated revenue) which, in accordance with the accrual system, belong to a future fiscal year, deducted from respective expenses and costs. This group was extinguished by Provisional Measure 449/2008.
OPERATING RESULT (operating profits or losses): The result of the primary or ancillary activities that comprise the purpose of the legal entity.
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