ACCOUNTING POLICIES AND PROCEDURES MANUAL. Glossary of Terms. Appendix A

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1 ACCOUNTING POLICIES AND PROCEDURES MANUAL Glossary of Terms Appendix A Diocese of Pueblo Colorado 1001 N. Grand Avenue Pueblo, CO Phone Fax

2 Glossary of Terms A ACCOUNTING: The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof. ACCOUNTING CONCEPTS: The assumptions underlying the preparation of financial statements, i.e., the basic assumptions of going concern, accrual, consistency and conservatism. ACCOUNTING PACKAGE/SOFTWARE: A commercially available software program or suite that, with little customization, will satisfy the accounting system of the purchasing entity. ACCOUNTING PERIOD: The time period for which accounts are prepared, usually one year. ACCOUNTS PAYABLE: Open vendor accounts and note obligations, which are owed but not yet paid. ACCOUNTS RECEIVABLE: A current asset; money due for services performed or merchandise sold on credit. ACCRUAL BASIS OF ACCOUNTING: Revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. This is the accounting basis that generally is required in order to conform to Generally Accepted Accounting Principles (GAAP). ACCRUED EXPENSES: Expenses incurred during an accounting period for which payment is postponed. ACCRUED INCOME: Income earned during a fiscal period but not received. ADJUSTING ENTRIES: Entries to update and/or correct accounts. ASSET: Anything owned by an individual or enterprise, which has commercial or exchange value. Assets may consist of specific property or claims against others, in contrast to obligations due others. B BALANCE SHEET: An itemized statement listing the total assets and the total liabilities of a given enterprise that portrays net worth at a point in time. The amounts shown on a balance sheet are generally the historic cost of items to the entity and not their current values. BANK: An institution that accepts deposits, makes loans, and provides other financial services. Appendix A - 1

3 BANK RECONCILIATION: Verification of a bank statement balance and the depositor s cash account balance. BDF BISHOP S DIOCESAN FUND: The annual diocesan wide fund raising campaign that supports the departments, programs, and ministries for the operation and administration of the Diocese of Pueblo. BINGO/RAFFLE ACCOUNT: A separate account maintained to record receipts from gaming activities in accordance with regulations imposed by the State of Colorado. Sate required reporting and disbursements from this account are to be made in accordance with said regulations. BONUSES/GIFTS: Bonuses (for example, Christmas and performance bonuses) and gifts of more than $25 is compensation to employees and is reportable taxable income. Monetary bonuses or gifts, or gift certificates, which have monetary value, are also reportable as taxable income. Gifts of nominal value of $25 or less (i.e., fruit basket, coffee mug, or ink pen) are not considered taxable income. Bonuses and gifts are not entitlements; they are given at the discretion of the parish. (See also the definition of Entitlements.) BOOKKEEPING: The systematic recording of financial transactions affecting an enterprise. BUDGET: An itemized listing of the amount of all estimated revenue, which an entity anticipates, receiving, along with a listing of all estimated costs and expenses that will be incurred in obtaining the income during a fixed period of time. A budget is typically for one business cycle, such as a fiscal year, or for several cycles (such as a five year capital budget). BUDGET CONTROL: Actions carried out to ensure that deviations from planned income and expenses are monitored and investigated. Through the use of a budget as a standard, and the measurement of actual performance against planned budget, an organization is able to monitor the effectiveness of its financial plan. C CAPITAL ASSET/LAND: A long-term depreciable asset that is not purchased or sold. Includes fixed assets, e.g., land, building, furniture, fixtures and equipment. CAPITAL EXPENDITURE: A disbursement to acquire or improve long-term assets such as property, plant or equipment. CASH BASIS OF ACCOUNTING: The accounting basis in which revenue and expenses are recorded in the period they are actually received or expended in cash. CATHOLIC DIOCESE OF PUEBLO FOUNDATION: The Catholic Foundation (a registered nonprofit 501 C3 separate from the Diocese) was established as a perpetual gift in service to all the faithful in southern and western Colorado. The mission of the Catholic Foundation is to encourage Appendix A - 2

4 spiritual and material growth by providing financial assistance for needs that exceed parish or diocesan resources. The Foundation is presently focused on increasing its corpus to better support worthy and needy causes in our diocese through various charitable giving vehicles. CHART OF ACCOUNTS: A list of general ledger account names and associated account numbers arranged in an order to facilitate the preparation of financial statements. CLEARING ACCOUNT: Account utilized to record activities resulting from special collections, Mass intentions, BDF payments to the parish, etc. which are neither income nor expense to the parish. CLERGY BENEFIT SOCIETY: A society established by the Diocese of Pueblo to provide retirement and health benefits to the clergy of the Diocese. CLOSING ENTRY: A journal entry at the end of a period to transfer the net effect of revenue and expense items from the income statement to equity (fund balance).. CORPORATION: An artificial being, invisible, intangible, and existing only in contemplation of the law. Its characteristics include, a separate legal existence; transferable units of ownership; limited liability of stockholders; and continuity of existence. CORPORATION SOLE: A corporation consisting of only one person. The Bishop of Pueblo, A Corporation Sole. CREDIT: A portion of an accounting entry that decreases assets and expenses or increases liabilities and income. CREDIT CARD: A card authorizing purchases on credit at a predetermined interest rate and payment conditions. D DEBIT: A portion of an accounting entry that increases assets and expenses or decreases liabilities and income. DEPRECIATION: The amount of periodic expense charged against earnings to write off the cost of plant or equipment over its useful life, giving consideration to wear and tear, obsolescence and salvage value. DISBURSEMENT: Paying out of money to acquire assets or to satisfy a debt or an expense. DIVIDEND: That portion of a corporation s earnings which is paid to the stockholders. DIVIDEND YIELD: The annual rate of return, expressed as a percentage on an investment. DOUBLE-ENTRY ACCOUNTING: A system of recording transactions in a way that maintains the equality of the accounting equation. The accounting technique records each transaction as both a Appendix A - 3

5 credit and a debit. E EARNED INCOME: Income realized by providing goods and services to unrelated parties. ENDOWMENT FUND: An established fund of cash, securities, or other assets used to provide income for the maintenance of a not-for-profit organization. The use of the assets of the fund may be permanently restricted, temporarily restricted, or unrestricted. Endowment funds generally are established by donor-restricted gifts and bequests to provide permanent endowment (to provide a permanent source of income) or a term endowment (to provide income for a specified period). The principal of a permanent endowment must be maintained permanently, that is, not used up; expended or otherwise exhausted-and is classified as a permanently restricted asset. The principal of a term endowment must be maintained for a specified term and is classified as a temporarily restricted net asset. An organization s governing board may earmark a portion of its unrestricted net assets as a board-designated endowment to be invested to provide income for a long but unspecified period. The principal of a board-designated endowment, which results from an internal designation, is not donor restricted and is classified as an unrestricted net asset. ENTITLEMENT: Monetary remuneration or employee benefits that are made part of the employment agreement such that the employee has a right to receive this remuneration or benefit each year. Salary, vacation, health insurance (if provided) and holidays are normally entitlements. Note: bonuses and gifts made from the parish when circumstances warrant are normally NOT entitlements, and there is no obligation to provide them, whether they have been provided in the past or not. EXPENSES: Periodic costs incurred in running and maintaining an entity. F FAIR LABOR STANDARDS ACT (FLSA): A U.S. Federal Law that dictates a group of minimum employment standards. FEDERAL INSURANCE CONTRIBUTION ACT (FICA): A federal law requiring employers to withheld amounts from employees pay and to pay a matching amount for Social Security (OASDI) and Medicare taxes. FINANCIAL ACCOUNTING STANDARDS BOARD (FASB): The recognized accounting rule setting body that establishes standards of financial accounting and reporting. FISCAL YEAR: The declared accounting year of a company. Generally used to indicate a year-end other than a calendar year end. Fiscal years, in some cases are designated as fifty-two or fifty-three week years. FIXED ASSETS: Assets of a permanent nature required for the normal conduct of a business. For example, furniture, fixtures, land and buildings are all fixed assets. Appendix A - 4

6 FUND BALANCE: Net worth in a nonprofit organization; total assets minus total liabilities. G GAAP Generally Accepted Accounting Principles: A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, as established by the Financial Accounting Standards Board. GENERAL LEDGER: A summary of the accounting transactions that show all the financial transactions during the course of a year. GROSS RECEIPTS: The total amount of income prior to the deduction of any allowances, discounts, credits, etc. I INCOME: Money received by a person or organization because of the effort (work), from gifts, or from return on investments. INVOICE: A detailed list of goods shipped or services rendered, with an account of all costs; an itemized bill. J JOURNAL: Where transactions are recorded as they occur. M MINIMUM WAGE: The minimum compensation an employer is allowed to pay an employee for hourly work as defined by Federal, State, and in some cases local laws. N NET: In general, is the figure remaining after all relevant deductions have been made from the starting or gross amount. NET INCOME: The difference between an enterprise s total revenue and total expenses. NET WORTH: The difference between Total Liabilities and Total Assets. O OFFERTORY COLLECTION: Monies received during Mass celebrations or during Sunday celebrations in the absence of a priest. Appendix A - 5

7 OFFERTORY LOG: A worksheet for reconciling categories of receipts to a deposit slip. This worksheet may take one of many forms; examples are provided in Chapter 20 Administrative Tools. OPERATING EXPENDITURES: The amount incurred for periodic expenses in support of day-to-day operations such as wages, maintenance, office supplies, etc. P PARISH: The Code of Canon Law, Can. 515, defines a parish as a definite community of the Christian faithful established on a stable basis within a particular church; the pastoral care of the parish is entrusted to a pastor as its own shepherd under the authority of the diocesan bishop. For the purposes of this accounting policies and procedures manual, the term parish shall be interpreted to apply both to individual parishes and to clusters of parishes where there is consolidation of pastoral and administrative functions. PAYMENT: The satisfaction of a debt or claim; primarily money paid to fulfill an obligation. PETTY CASH: An account and location where cash is stored for use in purchasing or the reimbursing of inexpensive out-of-pocket expenditures. PREPAID EXPENSES: Amounts that are paid in advance to a vendor or creditor for goods and services. Typically, insurance premiums are paid in advance of the coverage contained in the policy. PURCHASE ORDER: A written authorization to expend funds for a specific purpose, often with a specific vendor. R RECEIPT: A written acknowledgment that a specified article, sum of money, or shipment of merchandise has been received. RECONCILIATION: An analysis of the difference between two items (e.g., balances, amounts, statements or accounts) so that the figures are in agreement. REIMBURSEMENT: Payment to an individual or business entity to compensate them for authorized expenditures of their own funds on behalf of the parish/school, e.g. to pay an employee for travel expenses paid by the employee out of that employees personal funds. RESTRICTED FUNDS: Temporarily Restricted Assets: Contributed assets whose use has been limited by donors to a specific time period or purpose. Permanently Restricted Assets: Contributed assets which have been restricted by the donors to be maintained in perpetuity the income of which is typically restricted to a specific purpose. Appendix A - 6

8 Assets Whose Use is Limited: Unrestricted assets that have been earmarked by the Parish/School/Diocese for specific purposes such as capital improvements, including renovation and expansion, self insurance, debt service, etc. S SCHOOL YEAR: A period of 9 to 10 months which coincides with the time during which schools are normally in session. SCRIPT: Certificates for groceries, gasoline or other commodities purchased in coupons, vouchers, or gift cards and resold by an organization. Script should be handled in the same manner that cash is handled with appropriate internal control procedures. STIPEND: Monies received for Mass Intentions that is neither income nor expense to the parish and is held in a Custodial Account until dispersed to the Priest who celebrates the Mass. STOLE FEE: The monetary offering received for services performed by the clergy on the occasion of celebrations of sacraments and funerals. These fees are general revenue to the parish. V VOUCHER: A piece of substantiating evidence; a) proof; or b) a written record of expenditure, disbursement, or completed transaction; or, c) a written authorization or certificate, especially one exchangeable for cash or representing a credit against future expenditures. W WAGE: Compensation paid to an employee for services rendered. WITHHOLDING TAX: Monies withheld from an employee s wages or salary and deposited to the IRS on the employee s behalf to pre-pay individual tax liability on compensation required by federal or state law. Appendix A - 7