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Glossary of Terms

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Accrual Basis Accounting - Revenue and expenses are recorded in the accounting periods (e.g. fiscal years) in which they apply, regardless of when revenue is received, liabilities are incurred or payments are made. This is the method used by the University. (Compare with Cash Basis Accounting.)

Accrued Expense - An expense that has been incurred in an accounting period (e.g. fiscal year) but for which there is no enforceable claim in that accounting period by the party who rendered the service. It arises from the purchase of services that have been only partly performed during the accounting period but are not yet billable and have not been paid for in that accounting period.

Accrued Revenue - This is revenue that has been earned in an accounting period (e.g. fiscal year) but for which there is no enforceable claim in that accounting period against the party for whom the service was rendered. It arises from the sale of services that have been only partly performed during the accounting period but are not yet billable and have not been paid for in that accounting period.

Actuals - Actuals refers to revenue earned and expenses incurred (during the period) as opposed to planned (or budgeted) revenue and expenses.

Ancillary Operations - A revenue producing activity provided supplementary to the primary functions of teaching and research; normally includes such functions as food service, residences, and parking.

Appropriation Account - See Fund Center.

Audit - There are many different types of audits including internal audits, external audits, management audits, compliance audits, etc. They all involve some form of: (a) independent examination of evidence (e.g. client's records, operations, procedures, etc.), (b) evaluation (e.g. for accuracy, compliance, efficiency, etc.), and (c) reporting to stakeholders. (See Internal Audit.)

Audit Finding - Any error, exception, deviation or deficiency noted by an auditor as a result of an examination of audit evidence. Findings generally relate to (a) compliance with policies, procedures and legal requirements, (b) adequacy and effectiveness of controls, and/or (c) efficiency and effectiveness of administration.

Audit Trail - See Management Trail.


Cash Basis Accounting - Revenue is recorded when cash is received and expenses are recorded when cash is disbursed. (Compare with Accrual Basis Accounting.)

Compliance Test - An audit procedure used to gain evidence as to whether the identified controls are operating effectively. This can include tests of transactions (e.g. for proper approval). Compare with Substantive Test.

Computer Assisted Audit Techniques (CAAT's) - Audit techniques that use computer applications as the primary tool. Uses generally include sampling, statistical analyses and exception reporting. The Internal Audit Department uses specialized software for this purpose.

Contract - An agreement, intended to give rise to legal obligations, entered into between two or more persons to do or abstain from doing something.

Control - A control is any policy, procedure, practice, or mechanism designed to provide reasonable assurance that the organization's objectives will be achieved. This includes controls designed to safeguard assets, ensure the timeliness, accuracy and reliability of financial and management reporting and to promote operational efficiency, effectiveness and compliance with all applicable laws, regulations, policies and procedures. For information and recommended control activities by business process, please see Controls.

Control Account - See Reconciliation Account.

Corporation - A legal entity separate and distinct from its owners or members. It will usually be identified by the words Limited, Ltd., Incorporated, or Inc.

CRA - Canada Revenue Agency (Formerly 'Revenue Canada').



Designated Endowment - A fund functioning as an endowment by designation of University management, rather than by a donor or outside agency.  University management retains the right to release the funds from such designation.


Encumbrance - See Reserve.

Endowment - An endowment is a gift or bequest in the form of cash or investments, the principal of which must be maintained intact and the interest/investment revenue is to be used for general or specific purposes according to the conditions attached to the fund.

Expenditure - A disbursement or liability incurred for the acquisition of a good or service. (Compare with Expense.)

Expense - A cost properly identifiable with the operations of a period (e.g. fiscal year) or with revenues earned during that period; i.e. expenses are recorded in the accounting periods (e.g. fiscal years) in which they apply, regardless of when liabilities are incurred or payments are made. Expenses include both expenditures and accrued expenses.


Finding - See Audit Finding.

Fiscal Year - The 12 consecutive month period used by a business entity to account for and report on its operations. The fiscal year end is often assigned at an annual low point of activity. The University's fiscal year runs from May 1 to the following April 30.

Fraud/Financial Impropriety - One or more intentional acts (usually the misrepresentation or concealment of financial information) designed to deceive other persons. It often includes the misappropriation of assets. (See Fraud and Financial Impropriety.)

Fund - (As used within FIS) An account holding a restricted fund (grant or trust fund) budget and subsequent transactions (e.g. PI's will have the budget for their grants and/or contract awards held in one or more funds); reserves and expenditures; and funds available (unreserved and unexpended balances). Funds are hierarchically attached to fund centers. When the funds available is zero, the system will normally not permit further expenditures. In addition, certain expenditure restrictions may be established for a fund. (See Fund Center.)

Fund Accounting - Fund accounting, used by the University (through the use of Fund Centers, Funds, budgets, and reserves), has three attributes: (1) segregation of funds by purpose or restriction, (2) the incorporation of budgetary controls into the accounts to ensure that expenditure limits are not exceeded, and (3) the tracking of outstanding commitments as well as expenditures.

Fund Center - (As used within FIS) An account showing the original budget (appropriation) and subsequent transactions; reserves and expenditures; and funds available (unreserved and unexpended balances). Departments normally have at least one fund center to hold their annual budget. When the funds available is zero, the system will normally not permit further expenditures. (PI's will have their own fund centers. A PI fund center will normally be used as an administrative link to join all of a PI's funds together.)



General Ledger (G/L) - A ledger comprising accounts for all assets, liabilities, fund balances, revenues, and expenses either in detailed or reconciliation account form or in a combination of these forms. (See Sub-ledger.)

Generally Accepted Accounting Principles (GAAP) - The standards and rules that determine how accountants may record and summarize transactions and prepare financial statements. The standards are established by standard-setting bodies, industry practice and convention, and authoritative support from accounting literature. The standards include such things as double-entry bookkeeping, matching expenses to revenues, amortization rules, etc.


Imprest Expenditure Bank Account - A separate bank account with a specific fund balance entrusted to a staff member for making minor disbursements. The account is replenished, upon submitting a request for reimbursement form, by an amount equal to the vouchers (receipts/proof of payment) covering the disbursements. At any time, the bank balance plus the vouchers not reimbursed should equal the amount of the fund.

Indemnification - A clause, usually in a written agreement, whereby one party agrees to assume the legal liabilities associated with an activity or transaction and waive the right to claim from the other party(ies) any compensation for liabilities or injuries that may result.

Institute of Internal Auditors (IIA) - The IIA is an international professional association dedicated to the promotion and development of the practice of internal auditing, including standards, guidance and information on best practices. The Institute is responsible for awarding and administering the Certified Internal Auditor (CIA) designation worldwide.

Internal Audit - An assurance and consulting service involving an independent review of an organization's records, operations and procedures to evaluate for efficiency, effectiveness, compliance and the existence of adequate internal controls to mitigate risks to the achievement of the organization's objectives. For a detailed description of the University's Internal Audit Department services, please see Services. (Also, see Audit.)



Liquidity - This is the convertibility of assets into ready cash.


Management Trail - The route by which data can be traced either forward or backward through the processing cycle.


Partnership - A relationship between two or more individuals who join together to carry on a business.


Reconciliation - The process of identifying any differences between two related records in which the figures should agree. For example; comparing one's own accounting records for bank transactions with the corresponding bank statement to identify outstanding cheques, bank charges and any other explanations for the difference in reported balances.

Reconciliation Account - (As used within FIS) A G/L account which contains summary information from a sub-ledger. No direct postings are allowed to a reconciliation account, since all detail transactions must be posted to the sub-ledger.

Reserve - Also known as "encumbrance". An expenditure commitment for goods, salary, or services to be delivered, or rendered in the future. Reserves are charged against a Fund Center's budget such that funds available for other purposes is decreased. Example: An employee's annual salary can be removed from the budget and set up as a reserve. Each time the salary is paid, the reserve is reduced.

Revenue - The proceeds from the sale of goods and services, gains from the sale or exchange of assets, interest and dividends earned on investments, donations and grants, and other increases in fund balances; i.e. gross proceeds from sources other than borrowing. Revenue is recorded in the accounting periods (e.g. fiscal years) in which it applies, regardless of when it is received. (See Accrued Revenue.)


Segregation of Incompatible Duties - An internal control activity to prevent or detect errors and irregularities that may occur if individuals have responsibility for incompatible activities. Where staffing levels permit, it is preferable to segregate responsibility for the three components of a transaction: initiation, processing and reconciliation/review. For example; one person should not have responsibility for approving payment of invoices and issuing cheques.

Shadow Accounting System - An independent accounting system for recording accounting entries separate from the entries in an organization's accounting system of official record.

Sole Proprietorship - An unincorporated business wholly owned by an individual. A sole proprietorship can operate under an individual's name or under a registered name. The business does not have separate legal status from the owner.

Sub-ledger - A ledger in which individual accounts of the same type are kept (e.g. customers' accounts), the aggregate of these accounts being maintained in a reconciliation account in the general ledger. (See General Ledger.)

Substantive Test - An audit procedure designed to test for dollar errors affecting the correctness of account balances. This can include tests of transactions (e.g. selecting a representative sample of transactions and checking for monetary errors), direct tests of account balances (e.g. a confirmation of accounts receivable balances or physical examination of inventory) and analytical review procedures (evaluations of overall reasonableness of transactions and balances). Compare with Compliance Test.


Withholding Tax - A withholding tax is a tax deduction at source, required to be remitted by the employer to the tax authorities on behalf of the employee.  It is also applicable to nonresidents of Canada who receive payments from the University.


Last updated: April 25, 2007