Absolute owner This is the sole owner of a piece of property, such as a building, vehicle or piece of equipment.
Abstract of title This is a document which summarises all the title deeds to a property such as a house. It is drawn up for the seller when a property is being sold.
Accounting date Organisations prepare their annual accounts covering a period of 12 months. The last day of the period is called the accounting date.
Accrual rate This is the rate by which a pension from an earnings-related occupational pension scheme builds up from one year to another. The rate is shown as a fraction or a percentage of the member's final yearly salary.
Accrue If something is accruing, it is building up day by day. If an organisation owes money for goods and services but has not received a bill up to the date it prepares its accounts, it will estimate what it owes. It will then include the debt in its accounts. This estimated liability is called an accrual.
Accrued income security This is a security (investment) which pays interest at regular intervals. When it is sold, interest may have built up and this interest will be paid to the new owner. Interest built up like this is called accrued interest.
Accumulation date This is the date when income will be credited to a unit trust which reinvests its income (an accumulation unit), instead of paying the income out to the investors.
Accumulation unit The type of unit trust which reinvests the income it earns, instead of paying it out immediately to the investors, is called an accumulation unit.
Actuary An actuary is an expert on pension scheme assets and liabilities, life expectancy and probabilities for insurance purposes (the likelihood of things happening). An actuary works out whether enough money is being paid into a pension scheme to pay the pensions when they are due.
Ad valorem If a duty is ad valorem the duty varies with the price of the asset which is being transferred.
Additional voluntary contribution People in occupational pension schemes can pay in extra money to increase their pension benefits. The extra money they pay in an additional voluntary contribution.
Ademption This happens when someone is left something in a will, but the item no longer exists so cannot be bequeathed.
Administration order If a court appoints someone to look after a company's affairs the court issues an administration order. This order gives the person appointed power to run the company.
Administrator This is someone who:.
- has been appointed to manage the affairs of a bankrupt business; or
- has been appointed to manage the estate of someone who has died without leaving a will.
- Advance corporation tax. Until 1999 this tax was paid by companies on the dividends they paid. The advance corporation tax paid could usually be offset against the corporation tax due on the company's profits.
AER This stands for annual equivalent rate. It is quoted by financial institutions, such as banks, to show how much the interest rate would be if the interest was worked out just once a year. It is intended to make it easier for people to judge how much interest they pay (or receive) when it is being worked out more than once a year. It is also intended to make it easier to compare different financial products.
Affidavit An affidavit is a written statement which is sworn to be true by the person signing it. It is sworn before someone authorised by the court.
Allocation rate When money is paid into a fund (such as a pension fund) the allocation rate is the percentage of the money left which can be invested after the charges have been taken off. For example, if the charges were 2% the allocation rate would be 98%.
Allotment An allotment of shares in a company gives the owner (of the allotment) an unconditional right to buy the shares at a fixed price.
Alternate director If a director appoints someone to take his or her place, the substitute is called an alternate director.
Annual accounts These are the summary of an organisation's financial transactions during the year covered by their accounts, and a 'snapshot' of the assets and liabilities at the end of the year.
Annual general meeting (AGM) This is the yearly meeting of the members of an organisation which must be held to meet legal conditions. The annual accounts are presented for approval at this meeting.
Annual management charge This is a yearly charge made by the managers of unit trusts or investment trusts. It is usually a percentage of the value of the funds being managed.
Annual payment An annual payment is an amount paid out every year, such as an annuity. It may be split up into smaller amounts and be paid out more frequently than once a year.
Annuity An annuity is an amount paid out every year to someone. The money usually comes from an insurance policy. It can be split up into smaller amounts and paid out more frequently, such as monthly. It is usually paid for the rest of the beneficiary's life.
APR This stands for annual percentage rate. It is intended to give people a more accurate idea of how much they are being charged when they borrow money.
Arbitrage This is borrowing money to lend out again at a higher rate of interest.
Arrangement fee This is the fee that banks charge their customers for arranging an overdraft facility.
Articles A company's articles set out its rules. The articles form part of the memorandum and articles of association.
Assets These are things which are owned such as buildings, vehicles, stock and money in the bank.
Assignment This is the formal transfer of rights to something. For instance, a bank's customer may assign, to the bank, the right to receive the benefits from a life insurance policy to give the bank security for a loan.
Attorney An attorney is a person appointed to act for another person (such as when someone is unable to look after their own affairs). A formal document called a power of attorney is used to appoint the attorney.
Audit An audit is an independent examination of an organisation's records and financial statements (report and accounts) to make sure that:.
- the financial statements show a fair reflection of the financial position at the accounting date;
- the income and spending is shown accurately;
- the financial statements meet any legal conditions; and the financial statements are drawn up clearly.
Auditing standards The organisations which regulate auditors, such as The Institute of Chartered Accountants in England and Wales, set standards which have to be followed during an audit. These are called auditing standards.
Auditor's report This is a report and opinion, by an independent person or firm, on an organisation's financial records.
Authorised share capital This is the highest amount of share capital that a company can issue. The amount is set out in the company's memorandum of association.
BACS payment BACS stands for Bankers Automated Clearing System which is a system for sending money electronically between banks. A BACS payment happens when money is sent electronically from one bank account to another.
Bail If someone is given bail, they are let out of prison until their court case. Usually someone has to pay, or promise to pay, an amount of money as a condition of bail being granted. If the accused person does not appear at the trial, the court can keep the money put up for bail.
Bailee A bailee is the person or organisation which looks after valuable items to keep them safe for the owner.
Bailiff A bailiff is an officer of the court. The bailiff carries out the court's orders, such as taking goods belonging to a debtor and selling them to get money to pay the debts. The bailiff can also personally deliver (serve) court documents on people.
Bailment This involves transferring possession of goods from the owner to someone else. The ownership of the goods is not transferred.
Bailor A bailor is the owner of valuable items which are in the possession of another person or organisation for safekeeping.
Balance sheet A balance sheet is a summary of an organisation's financial position. It lists the values, in the books of account on a particular date, of all the organisation's assets and liabilities. The assets and liabilities are grouped in categories, to paint a picture of the organisation's strengths and weaknesses.
Balloon payment Some loan and finance agreements have lower repayments than normal in return for a high final payment. This is called a balloon payment.
Bankruptcy If someone cannot pay their debts when they are due to be paid, a court may issue a bankruptcy order against them. This order takes ownership of the debtor's property away from the debtor and allows much of the property to be sold. The money raised is divided between the creditors following strict rules.
Bare trustee A bare trustee holds property ‘on trust' for another person until asked to return the property.
Barter This is a way of paying for things, without using money, by exchanging goods.
Basic-rate tax Once you have used up all your tax allowances and all your lower-rate tax band, you pay basic-rate tax. The basic-rate is 22% at the moment (2000).
Basic state pension This is the retirement pension the Government pays to people who have paid enough national insurance contributions. Some people may receive a reduced basic state pension because they have not paid enough contributions.
Bear A bear is someone who expects share prices to fall in the future and sells shares now so that they can buy them back later at a lower price.
Bearer The bearer of a document is the person who has it in their possession.
Beneficial interest If something really belongs to a person, even though they do not legally own it, they have a beneficial interest in it. If, for instance, parents hold an investment on behalf of their child, they are the legal owners but the child is the beneficial owner of the investment.
Beneficiary This is someone who benefits from a will, a trust or a life insurance policy.
Benefit statement If employees are in an occupational pension scheme, they receive regular benefit statements which explain how much pension benefit they have earned.
Benefits in kind If an employee or a director gets benefits (perks) from their work, such as a company car, the benefits are called benefits in kind. They may have to pay tax on the value of the benefit in kind.
Bequeath If you bequeath something, you leave it to someone in your will. You cannot bequeath land or real property but you can devise them.
Bequest A bequest is something given in a will, other than land or real property.
Bid/offer spread This is the difference between the bid price and the offer price.
Bid price If you are a member of a unit trust, this is the price you will get for each unit if you cash them in.
Bill of exchange A bill of exchange is a signed written order, instructing the person it is addressed to to pay an amount of money to someone. A cheque is a type of a bill of exchange.
Bill of lading This is a document recording the goods a ship carries and the terms the goods are carried under.
Bill of sale A bill of sale is a document which transfers ownership of goods from one person to another.
Bona vacantia This means belonging to nobody.
Bond A bond is a written promise to repay a debt at an agreed time and to pay an agreed rate of interest on that debt.
Bonus issue If a company offers free shares to its shareholders in proportion to their existing shareholdings, it is called a bonus issue (or a scrip issue). The company accounts for it in its books by transferring the face value of the shares from the reserves to issued share capital.
Book debts Book debts are the debts owed to a business, as recorded in the business's accounting records.
Book value This is the value of a fixed asset, such as a building or machine, as recorded in an organisation's books. It is usually the amount paid for the asset less an amount for depreciation.
Books of account These are the books which a business must keep to record its financial transactions accurately.
Bought note Stockbrokers produce bought notes for their clients. The bought note shows details of the investments the broker has bought for the client, including the price paid and any commission and duty charged.
Breach of duty A breach of duty is failing to carry out something which is needed by law (or doing something the law forbids).
Breach of trust A breach of trust happens if a trustee does something which is against the trust's rules or fails to do something needed by the trust's rules.
Brokerage Brokerage is the commission earned by brokers.
Budget Each year, the Chancellor of the Exchequer presents to the UK parliament estimates of the Government's income and spending for the following year. The budget also sets out the financial policies the Government will follow.
Bull A bull is someone who buys shares now because they expect the price to rise in the future. After the price has risen they may sell the shares at a profit.
Buying charge This is the charge made when you first invest in a fund such as an ISA, ICVC or unit trust.
Call A company makes a call when it asks buyers of its new shares to pay some or all of the share price. When this happens the shares are being called up.
Called-up share capital When a company issues shares it asks the buyers to pay for part or all of the share price. The name for this request is a call and all the shares called are the company's called-up share capital. When calls have been made for the whole of the share price and the shareholders have paid, the shares become paid-up share capital.
Cancelled from inception (CFI) This phrase refers to a contract for an investment product (such as a personal pension) which has been cancelled within the 'cooling-off' period.
Capital adequacy requirement Banks and some other financial organisations have to have a certain amount of capital to make sure that there is enough money to support their business. It is called the capital adequacy requirement.
Capital allowances You can sometimes claim capital allowances when you buy long-term assets, such as machines, to use in your business. You claim part of the cost each year against your profits, before your tax is worked out.
Capital charge If a unit trust manager takes the management charges out of the fund's capital instead of the income it has generated, it is called a capital charge.
Capital commitment If, before the end of its financial year, an organisation has agreed to spend money after the end of its accounting period on buying fixed assets, it is called a capital commitment. This is shown in the financial statements.
Capital expenditure If you spend money buying or improving fixed assets, it is called capital expenditure.
Capital gain You make a capital gain if you sell or dispose of a long-term asset (such as a building) for more than it cost you.
Capital gains tax This is a tax chargeds on certain capital gains.
Capital receipt This is money received from selling fixed assets, such as buildings or machines.
Capital redemption policy A capital redemption policy is a life insurance policy which is linked to an investment such as a unit trust.
Capital transfer Tax (CTT) This was introduced in the 1970s to tax money and assets given away by people during their lifetime, as well as on the estates of people who died. Its name was later changed to inheritance tax.
Card This is the plastic credit card or cash card which banks give their customers to use.
Cardholder This is a bank customer who has been given a credit card or cash card.
Cash card A cash card can be used to draw money from automated teller machines (cash machines).
Cash ISA You can invest money in a cash ISA to earn tax-free interest.
Cash option (or commutation) If you are in a pension scheme and take this option, you will receive a lump sum straightaway. However, you will then get a lower pension than if you had not had the lump sum.
CAT standard The Government has created a system to show which ISAs meet stated standards for charges, access and terms. The ISAs which meet these will have reached the CAT standard.
Caveat A caveat is a warning.
Caveat emptor This is a Latin expression which means 'buyer beware'. It is used to warn people buying goods that they may not be able to get compensation if the goods they buy are faulty.
Chancellor of the Exchequer The Chancellor of the Exchequer is a Government minister responsible for raising money for the Government, mainly through taxes, and for controlling money spent by the Government.
CHAPS This stands for Clearing House Automated Payments System. It is a computer system which allows payments to be made electronically. The payment goes from the paying bank to the receiving bank on the same day.
Charge card A charge card is a type of credit card. It is often issued by a store to its customers so that the customers can buy goods from the store on credit.
Charge certificate The Land Registry issues this certificate to the legal mortgagee (the lender) who has lent money on the security of registered land. It is proof of the legal mortgagee's right to the security.
Chargeable asset This is an asset on which capital gains tax may have to be paid, if it is sold or disposed of.
Chargeable event If a chargeable event happens, it may create a tax liability (tax bill).
Charging clause If this clause is written into a trust, trustees can charge the trust for their services.
Charity A charity is an organisation set up to help needy causes.
Cheque A cheque is a written order, addressed to a bank, instructing the bank to pay an amount of money to the person or organisation named on the cheque. The bank also has to take the amount from the relevant account.
Cheque card This type of card is issued by a bank to a customer. It guarantees that a cheque used with the card will be paid if the person issuing the cheque has kept to all the conditions.
Chief rent A chief rent is money charged regularly on land, but it is not rent.
Close company A close company is one controlled by five people or fewer or by its directors.
Collateral If there is a main security for a debt, such as a house securing a mortgage, any extra security supplied is called collateral.
Collector of taxes After the inspector of taxes has worked out how much tax is owed, the collector of taxes sends tax demands for the money and collects it from the taxpayer.
Commercial paper Large organisations which are regarded as soundly based financially can borrow money for the short term without giving any security. The document which confirms the debt is known as commercial paper.
Company pension scheme This is a pension scheme organised by the employer to provide pension benefits for the employees.
Compensation Compensation is money given to make up for damage caused.
Completion When there is a contract to sell land, the completion happens when the land is conveyed to the person buying it in return for the receiving the rest of the purchase price.
Compound interest Compound interest is interest on the money lent, plus interest on any interest already added to the loan.
Condition A condition is an essential part of an agreement. The agreement or contract may collapse if a condition is broken.
Consumer Credit Act 1974 This act sets out the rules which lenders must follow when they lend amounts of £15,000 or less to consumers.
Contingent annuity This is an annuity which is paid to someone when someone else dies.
Contingent liability This is money which might be owed if a particular event happens.
Contract A contract is an agreement between two or more people (or groups) to do (or not to do) something. The agreement can be enforced by law.
Contract in Members of occupational pension schemes can contract in to the state earnings related pension scheme (SERPS) by paying full national insurance contributions. When they retire they will be able to draw their occupational pension as well as their state earnings related pension.
Contract out If someone contracts out of the state earning related pension scheme (SERPS), they pay less national insurance. Instead they pay into a private pension scheme which has to meet certain conditions.
Conversion This is changing the type of bank account you have.
Conveyance This is the name of the document which transfers the ownership of land.
Conveyancing This is the name for carrying out all the actions needed to transfer the ownership of a piece of land.
Corporate body This is a group of people acting together. The group has a separate legal identity to the individual members' identities. A company is an example of a corporate body.
Corporation tax This is a tax companies pay on their profits.
Council Tax This is a tax charged locally on private houses. It provides some of the money to run local councils.
Coupon A coupon is a dated piece of paper attached to a bond. The coupon has to be surrendered (given back) to get the interest or dividend on the bond.
Covenant A covenant is a contract.
Credit A credit is:
- money received;
- income from selling goods or services; or
- an entry on the right-hand side in a double-entry bookkeeping system.
Credit agreement This is a written contract between a bank or other lender and a customer. The bank allows the customer to borrow money under the terms and conditions in the agreement.
Credit card A credit card is an identity card issued by a lender, such as a bank, to a customer. The card allows the customer to buy on credit.
Credit limit This is the most a customer is allowed to borrow on their account.
Credit reference agency This is an organisation which keeps records of people's credit agreements and how well they keep to them. Banks and other organisations use these agencies to check on people before lending them money.
Credit scoring This is a way of working out the risk of not being repaid if money is lent. Points are awarded for the answers given by the potential borrower to a series of questions. A high score means that the risk of them not being able to repay is low.
Credit transfer A credit transfer involves transferring of money from one bank to another.
Creditor This is someone who is owed money.
Critical illness cover This is a type of insurance cover which pays out if the policyholder gets a serious illness such as heart disease or cancer.
Cum-dividend If a share is sold cum-dividend, the buyer will receive the dividend declared just before they bought the share.
Cumulative market capitalisation This is the total market capitalisation of all the companies in the sector under review.
Current assets These are short-term assets which are constantly changing in value, such as stocks, debtors and bank balances.
Current liabilities These are short-term liabilities which are due to be paid in less than one year, such as bank overdrafts, money owed to suppliers and employees' PAYE.
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