Important concepts and definitions of the technical terms used by the user of Fixed Assets module are provided in a simple and clear manner.
Share 
A document that indicates ownership of a fraction of a company's capital (joint stock company). It is traded in the primary market and in the secondary market (stock exchange). It is classified as types and classes, each defining the share of its holders in the profits as well as the extension of their ownership. It can also be sold in the over-the-counter market.
Appropriation
Recognition of the occurrence of expense or income, independent of inflow or outflow of cash.
Assets
Refers to the set of amounts representing investments in equity and capital of a company. By analogy, setting aside the concept of Accounting, it can be extended to the investments of a person. In the balance sheet, it is subdivided into short term assets, long term assets and permanent assets.
Short-term Assets
Also called Current Assets, it represents that part of the Assets composed of amounts in permanent movement in a company, like: cash, bank deposit, goods, raw material, bonds etc.
Deferred Charges
Represent the expenses incurred, pre-operating expenditure (expenses incurred before commencement of the company's operations with the company's restructuring. They must be amortized within a maximum of 10 years.
Available Assets
Set of assets composed of amounts that represent capital in the most liquid form - cash.
Financial Assets
Assets characterized by rights due to liabilities assumed by economic agents normally negotiated in the financial market. It mainly comprises government bonds, bank deposit certificates (CDBs), debentures and others.
Fixed Assets
Consist of accounting values inherent in the assets for production or used in selling, some of them prone to wear and tear and others unalterable, but without ignoring consumption. As follows: land, building, mines, machines, installations, vehicles, etc. They are confused with fixed assets or fixed capital.
Liquid Assets
All that remains of the assets, after deducting the liabilities.
Operating Assets
Total assets, divided into short term and long term assets. They represent all the investments made by the managers and can be classified into increase of wealth and for use in business activity.
Fixed Assets
Represents the fixed assets, fixed investments or permanent investments; used for maintenance and progress of the company's activities.
Groups amounts destined for production and not for sales, even if not in use, kept in reserve, however without the intention of disposal (plant and equipment) and the amounts of deferred expenses, amortizable in future years, the so-called permanent investments.
Realizable Assets
Grouping of amounts representing investments that can be converted into cash with relative ease, amounts with an intermediate position between cash and permanent investments relating to goods, materials, finished products, accounts receivable and other credits, etc. It is divided into short term receivables when it can be converted into cash within one year, and long term receivables if its conversion into cash takes more than one year. Such grouping can include amounts that can be converted into cash but the period is uncertain.
Total Assets
Investments in the company's activities, current and non-current investments.
Trial Balance
List of accounts extracted from the ledger with its debit and credit balances. In this internal document, you must observe the same characteristic of accounts planning.
Balance Sheet (Balanço Geral)
A set of official documents issued by accounting, divided into reports, statements and opinion.
Balance Sheet (Balanço Patrimonial)
A statement containing all the equity elements at a given moment. It combines all the assets and the rights by order of liquidity and the liabilities with third parties and the owners in the order of demand.
Assets
All that the company owns (cars, tables, computers, land, telephone lines, etc.). In accounting terms, are the assets of the company, more specifically, the Permanent Assets.
Property
Refers to those that have a form and cannot be shifted from their natural location.
Materials
Are those that have a form, material and recognized for their tangibility.
Movable Properties
Are those that have a form and can be removed from the place.
Goods Produced by the Company
To arrive at the costs of the units produced, the following must be considered:
- costs of materials used
- labor
- charges
- direct and indirect costs
While transferring goods produced in the head office, to the branches and vice versa, you must consider the value of stocks (costs).
Low Value Goods
These can be considered as expenses or costs provided the unit value of the goods is lower than a value adjusted by law or with their useful economic life less than one (1) year. Some goods are useful to the company as a group and thus, the value above refers to each group.
Assets Used
For depreciation of assets used, half the useful life of a new asset or the remaining useful life of the asset (whichever is higher) is considered.
Example:
New Machines - 10 years of useful life
Used Machines - 5 years of useful life
Working Capital
Function of cash and sales cycles of a company. Difference between short term assets and liabilities.
Account
Technical name given to the equity components (assets, rights, liabilities and net equity) and the elements of the final result (expenses and incomes).
In a wider form, it is a graphic representation of the debit and credit relationship in accounting the administrative fact.
Account of the Results
Is that which happens during the sale of goods, provision of services and other inflows that increase the company's liquidity and also the disbursements necessary for obtaining new incomes.
Accounting
Instrument used by the company to register all the facts that occur in the daily business, to reflect its actual standing. In a broader perspective, it is seen as a set of orderly information that seeks to register the administrative facts in statutory books according to established norms, controlling the equity and generating the reports necessary for the company's multiple users in decision making and in planning.
Credit
It signifies positive status, have credit with someone, ability to buy in installments. In accounting terms, it is understood as origin of resources of third parties and investors.
Cost
It represents the expenses necessary for manufacturing the products of the company for sale.
Variable Cost
That which varies according to the sales projected by the company or with the manufactured product.
Fixed Cost
That which is independent of sales, must be absorbed by the company's income.
Consortia
Normative Opinion 01/83 (Norms and Procedures)
- Amounts paid before receiving the asset can be classified in Permanent Assets or Current Assets. Companies usually classify it as Current Assets.
- Upon receipt of the asset, it will be capitalized by the invoice amount.
- After receipt, the changes in amounts will be registered in the accounts:
- Monetary Variation - [Expenses]
- Monetary Variation Income - [Profits]
Control of Assets
Control of fixed assets is the application of accounting techniques and procedures. The following accounting path is determined through the chart of accounts.
- Norms (purpose, application fields, criteria, inspection, application of norms/amendments).
Norms can be fixed.
- Asset Inventory - list all the assets in the company and compare the survey with what is registered in the quality department.
Building in Progress
All the material will be registered in a capitalized account and, when the construction is completed, these amounts will be transferred to the account of the capitalized asset.
Indexation
Corresponds to the variation in the value of the asset in local currency, based on its original value in hard currency and updated by the quotation of this currency on the last day of the month.
Indexation of Depreciation
Corresponds to the variation of the balances already depreciated in local currency and, based on this balance, calculating and updated by the quotation of this currency on the last day of the month.
Acquisition Costs
All expenses regarding acquisition of the asset, as well as expenses to put them into productive use.
Depreciation
It is a form of registering the loss of value of asset due to wear and tear, obsolescence, natural action etc. These are classified as reducing accounts.
Generally, depreciation is made by usage because, for obsolescence or nature's action, a Technical Report from competent authorities is required. Depreciation rates are determined by the economic useful life of the assets.
Depreciation generates expenses (administrative area) or costs (production area). It starts being calculated only from the moment it was started to be used.
Assets that do not involve values (increase) are not depreciated. Examples: work of art, land etc.
The system calculates Depreciation based on Annual Rates entered for each item till the accumulated depreciation amounts are equal to the Acquisition Amounts in hard currency. For assets acquired during the year, the rate must be proportional to the period the asset is depreciated. |
Leasing
English term equivalent to \"arrendamento mercantil\": It is a financial operation between a company owning several assets (machines, equipment, vehicles, manufacturing units) and another company that uses these against payment of installments, under specific contracts for a determined period, at the end of which the leaseholder shall have preference in the purchase of assets. It offers a big advantage in non-capitalization of capital, especially in case of high cost and limited use assets, regulated in Brazil since 1975.
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Investments
In a general sense, any financial investment in assets or securities (shares , bills of exchange, etc.) with the purpose of obtaining profits. Economic theory, however, restricts the scope of the term to those monetary resources destined to the acquisition of capital goods (installations, machinery, vehicles. etc.) or the purchase of new shares in the primary market that result in the same purpose: production.
Principle of Essence and Form
Form - legal aspect of the operation.
Essence - economic aspect of the operation.
Whenever there is a conflict between the legal and economic aspects, the economic aspect (essence) prevails. It is the case of consortia where accounting principle is applied, the correct method would be to consider it fixed asset but due to the economic aspect, it is considered expense. The tendency would be to capitalize the total contract amount.
Revaluations
All the revaluations must be done with technical reports through authorized companies. The technical reports must be based on the statements of calculations and parameters for arriving at the stipulated values of the asset. Only the values of permanent assets can be evaluated.
Debit
It signifies debt, negative status, being in debt with someone. In the company, debits are represented by assets and rights, considering that these are due to the owners, following the entity principle of accounting.
Depreciation
Corresponds to the decrease in the value of elements classified as fixed assets due to wear and tear, nature's action or normal or abnormal obsolescence.
Expenses
Are those occurring in relation to the consumption of goods and utilization of services (electricity, gas, telephone, materials, salaries, contributions, etc) necessary for generating income.
Non-operating Expenses
Are those due to transactions not included in the company's principal or ancillary operations.
Operating Expenses
Are those relating to the execution of a company's normal activities.
Journal
A book required by business law and subject to legal formalities - extrinsic and intrinsic.
Dividends
Correspond to that part of the net profit distributed to the owners through the pecuniary value or new interests.
Company
Unit of production resulting from the combination of three factors of production (land, labor and capital).
Bookkeeping
Technique consisting of recording in the right books (journal, ledger, cash book etc.) all the administrative facts occurring in the company.
Cash Flow
A practical instrument par excellence for the finance manager, can be compared to other denominations to be used by other professionals. It refers to the movement of accounts that represent money available immediately like cash, bank account, rotative funds, financial investments, etc.
Expenses
Disbursements made by the entity to meet its administrative, business or production needs. Depending upon their destination, they can be classified as costs or expenses.
Inventory
Physical count of an asset item to tally it with the company's records.
Interest
Remuneration for use of third party money, calculated based on time.
Interest Income
Represents interest in the company's favor. Classified as income increasing the liquidity position.
Interest Expense
Represents negative interest. Classified as expenses that reduce the liquidity position.
Entry
Means by which bookkeeping is done.
Liquidity
Function written by equity means to meet the payment needs.
Static Liquidity
Is that reflects generally in the balance sheets, showing the modes of payment and the needs of payment.
Cash Book
Is where all the administrative facts involving inflow and outflow of cash are registered.
Current Account Book
It serves to control the accounts that represent the rights and obligations for the company. It is the subsidiary book to the ledger.
Tax Records
Represent the bookkeeping of documents related to municipal, state and federal tax authorities, for display and control of the business entity.
Corporate Books
Represent the movement of social activities laid down in law and/or statutes.
Labor Records
Representation of the annotation and records of employees in accordance with legislation.
Operating Profit
Profit obtained from the difference between the incomes and expenses that were registered in the company's activities.
Profit Margin
Liquid operating margin; profit margin on sales; profitability on sales; rate of profit on sales; rate of profit on sales; margin.
Quotation
Administrative plan that covers all the operations of the company for a specific period of time and expressed in monetary terms.
Total Liabilities
Source of resources contemplating working and non-working capital.
Equity
Denominated as a set of assets, rights and liabilities of an individual or legal entity, in monetary terms.
Net Equity
Difference between the sum of assets and rights against the resources obtained from third parties. Represented in accounting terms by accounts of owners (capital), reserves and economic and financial results. When assets + rights > third party liabilities, we have a surplus; similarly, the opposite signifies a situation of deficit of the company's capital.
Chart of Accounts
List of all the names envisaged by the company's accounting department as necessary for registering the day-to-day events. Legislation standardizes the preparation of this planning through groups and sub-groups of accounts and sub-accounts.
Provisions
Are records of contingent liabilities justified by the fundamental principles of accounting, safeguarding the entity from a certain loss or obligation in the future.
Forecast
Is a future estimate that may become an administrative fact. The intention of an act must be consonant with the future provision.
Losses
Refer to the assets and services in an abnormal and involuntary manner. Depending on the event, they may be classified as cost or expense.
Damages
Symmetrical and unfavorable difference between incomes and expenses and costs in an equity survey.
Receivables
Long term conversion amounts considered as such those that renew after a period of twelve months. Also known as non-working capital, considered as those receivable in a period that stretches beyond the following year.
Revenue
Represented by sales or provision of services from operational or non-operational transactions linked to the company's activities.
Reserves
Are constituted, according to tax legislation, with the purpose of preserving the owners' equity. Called capital, when they represent the offset of increase in assets in replacement of the exit of money or recognition of a liability. May also be calculated on positive results, according to social statistics.
Gross Income
Difference between incomes from sales and services and the costs of these incomes, applicable taxes, returns and cancellation of sales or services.
Net Income
Gross income, summing non-operating incomes minus operating expenses and other expenses not related to the company's activities. Basis of calculating the income tax, in case of positive results.
Apportionment
Proportional division of an amount, considering a basis for allotment. Procedure much used in cost accounting, indicating a base whose total value shall be divided into parts equal to those suggested in the planning of cost of goods sold.
Ledger
A very useful statutory book for accounting, where the events are registered for controlling the transaction of each account separately. Also known as Trial Ledger.
Net Status
Difference between Assets and Liabilities with third parties.
Scrap
Items representing undue manufacture of the product or abnormal surplus, representing a cost for the entity.
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