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Accounting Terminology

Narrative: A comment appended to an entry in a journal. It can be used to describe the nature of the transaction, and often in particular, where the other side of the entry went to (or came from).

Net Assets (Owners' Equity): The ownership interest in the assets of an entity; equal total assets minus total liabilities.

Net Income: The proprietary fund excess of operating revenues, non-operating revenues and operating transfers in over operating expenses, non-operating expenses and operating transfers out.

Net Loss: The value of expenses less sales assuming that the expenses are greater (e.g., if the profit and loss account shows a debit balance).

Net of Tax: The price less any tax. E.g., if you sold some goods for $12 inclusive of $2 sales tax, then the 'net of tax' price would be $10.

Net Proceeds: The difference between maturity value and discount when a note receivable is discounted.

Net Profit: The value of sales less expenses assuming that the sales are greater (e.g,. if the profit and loss account shows a credit balance).

Net Realizable Value: The selling price of an item less reasonable selling costs.

Net Realizable Value of Accounts Receivable: The net amount that would be received if all receivables considered collectible were collected; equal to total accounts receivable less the allowance for uncollectable accounts; also called the book value of accounts receivable.

Net Sales: Gross sales less sales discounts and sales returns and allowances.

Net Tax Liability: The amount of tax computed by subtracting tax credits from the gross tax liability.

Nominal Accounts: Accounts that are closed to a zero balance at the end of each accounting period; temporary accounts generally appearing on the income statement.

Nominal Interest Rate: The contractual interest rate shown on the face and in the body of a bond and used to compute the amount of interest to be paid, in contrast to the effective interest rate.

Nominal Ledger: A ledger which holds all the nominal accounts of a business. Where the business uses a subsidiary ledger like the sales ledger to hold customer details, the nominal ledger will usually include a control account to show the total balance of the subsidiary ledger (a control account can be termed 'nominal' because it doesn't relate to a specific person).

Non-Cash Items: Items included in the determination of net income on an accrual basis that do not affect cash; examples are depreciation and amortization.

Non-Cash Transactions: Investing and financing activities that do not affect cash; if significant, they are disclosed below the statement of cash flows or in the notes to the financial statements.

Non-Operating Assets: Investment and other assets not used in a business but held to earn a return separate from operations.

Non-Operating Expenses: Proprietary fund expenses not directly related to the fund's primary activities (e.g., interest).

Non-Operating Revenues: Proprietary fund revenues incidental to, or by-products of, the fund's primary activities.

Non-Profit Organization: An entity without a profit objective, oriented toward providing services efficiently and effectively.

No-Par Stock: Stock that does not have a par value printed on the face of the stock certificate.

Normalize: This term can be applied to many aspects of accounting. It means to average or smooth out a set of figures so they are more consistent with the general trend of the business.

Note Payable: A debt owned to a creditor evidenced by an unconditional written promise to pay a certain sum of money on or before a specified future date.

Note Receivable: A claim against a debtor, evidenced by an unconditional written promise to pay a certain sum of money on or before a specified future date.

Note to Financial Statements: Explanatory information considered an integral part of the financial statements.

NSF (Non Sufficient Funds) Check: A check that is not honored by a bank because of insufficient cash in the customer's account.

Number of Days' of Inventory on Hand: An alternative measure of how well inventory is being managed; computed by dividing 365 days by the inventory turnover ratio.

Number of Days' Sales in Receivables: A measure of the average number of days it takes to collect a credit sale; computed by dividing 365 days by the accounts receivable turnover.

Number of Days' Sales Invested in Working Capital: An alternative measure of the amount of working capital used in generating the sales of a period; computed by dividing 365 days by the working capital turnover.