Accounting, Business Studies and Economics Dictionary

Natural-rate hypothesis - The claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation.

Natural rate of unemployment - The unemployment rate when the economy is at full employment and the labour market clears. Frictional, structural and seasonal unemployment may exist at the natural rate of unemployment.

Natural resources  - The factors of production that are not man-made, including land, water, air and all the minerals that they contain.

Natural scale - A scale in which equal absolute amounts are represented by equal distances.

Natural wastage - When a firm wishing to reduce its workforce does so by not replacing those who leave or retire.

Near cash assets - Non-cash highly liquid assets which can easily and quickly be exchanged for cash e.g.,   money market funds short-term CD's.

Near money - Liquid assets that are easily convertible into money without risk of significant loss of value and can be used as short term stores of purchasing power but are not themselves media of exchange.

Needs - Goods or services essential for living.

Negative goodwill - A Term used in a business combination. Negative goodwill is accounted for under the purchase (accounting) method when the fair market value of the net assets of the acquired company exceeds the purchase price paid. The credit difference reduces certain assets acquired. If any remaining credit exists, it is accounted for as an extraordinary gain.

Negative income tax - A combined system of tax and benefits. As people earn more, they gradu­ally lose their benefits until beyond a certain level they begin paying taxes.

Negative working capital - Is when the current liabilities of an organisation are greater than its current assets.

Negligence - 1. refers to the act or omission of something that a reasonable and prudent man, who is responding to ordinary considerations would or would not do. Or 2. accountant's failure to conduct an audit with "due care." Ordinary negligence applies to judgment errors resulting from a lack of experience, training, or oversight: it is unintentional. Gross negligence results when the accountant recklessly disregards estab­lished accounting, reporting, and auditing standards.

Negotiable instrument - A cheque, bill of exchange, promissory note, security or any other document which represents money that is payable and can be transferred by on entity to another.

Negotiation - Another name for collective bargaining - joint decision-making involving bargaining between representatives of the management and of the workforce within a firm.

Net - 1. gross amount reduced by applicable reductions. For example, net sales equals gross sales less sales returns and allowances and sales discounts. Another example is net purchases that equal gross pur­chases less purchase returns and allowances and purchase discounts. Or 2. (informal) net profit after taxes.

Net accounts receivable - Total accounts receivable, minus an estimate (provision for doubtful debts)  for amounts the entity believes it will be unable to collect.

Net assets - The value of total assets minus current liabilities minus long term liabilities. The value is equal to capital and reserves on the balance sheet

Net book value - Is the historical cost of an asset less provision for depreciation (accumulated depreciation).

Net capital outflow - The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.

Net cash flow - Is equal to cash receipts less cash payments over a period of time.

Net current assets  - Current assets minus current liabilities. Also known as working capital.

Net debt – Long term debt + short term loans minus cash on hand.

Net domestic product - Gross domestic product less capital consumed (depreciation) in the production of GDP.

Net errors and omissions - A statistical adjustment to ensure that the two sides of the balance of payments account balance. It is necessary because of errors in compiling the statistics.

Net exports (NX) - The value of total exports minus the value of total imports. Represented by the expression X - M as a component of aggregate expenditure, where X is total exports and M is total imports.

Net income - Revenue less all expenses; also called net profit.

Net investment - Net additions to the capital stock ­ Gross investment minus replacement investment (depreciation).

Net loss - When total expenses are greater than total revenues for a business.

Net of tax - The price of something less any tax. i.e. minus VAT or GST from the selling price.

Net migration - The difference between the number of people entering a country (or region) and the number leaving it.

Net national product (NNP) - GNP minus depreciation.

Net operating income (NOI) - Income after the deduction of operating expenses but before income taxes and interest are deducted.

Net present value (NPV) – The present value from future income from an investment project, less the cost. This method is used to evaluate investments, where the NPV of all cash outflows (such as the cost of the investment) and cash inflows (returns) is calculated by using a predetermined discount rate.

Net profit - When total revenues of a business are greater then total expenses of a business. It is normally calculated as gross profit minus other expenses

Net profit margin (NPM) – Shows a firms ability to control overheads and expresses net profit before tax as a percentage of turnover. 

Net purchases - Total purchases minus purchase returns and any other discounts and/or allowances on the purchases.

Net realisable value (NRV) - The value of an asset when sold. i.e. the amount received.

Net receivables - Accounts receivable less provisions for bad or doubtful debts.

Net sales - Gross sales minus discounts, sales returns, allowances and freight out.

Net tax revenue - Total tax revenue minus transfer payments.

Network analysis or Critical path analysis - A technique used to find the cheapest or fastest way to complete an operation.

Net worth - Total assets less total liabilities. Net worth, for an indi­vidual, is equal to his or her personal equity. In a business, net worth represents the stockholders' equity

Neutrality – 1. Economics. Money is  neutral in an economic model in there is a change in the model and the level of the nominal money has no effect on the real level of equilibrium. Or 2. Accounting. Absence of bias. For example, financial information should be neutral and is not intended to favour an investor over a cred­itor. Neutrality is one of the ingredients of reliability.

Neutrality of money - The doctrine that the money supply affects only the absolute level of prices and has no ef­fect on relative prices and hence no effect on the allo­cation of resources or the distribution of income.

New classical economics - An approach to explaining macroeconomic fluctuations under the maintained hy­pothesis that cyclical unemployment is always zero. Fluctuations in economic activity are explained by shocks to technology and tastes rather than to mar­kets that fail to clear.

New Keynesians - Economists who seek to explain the downward stickiness of real wages and  the resulting persistence of unemployment.

Newly industrialising countries (NICs) - A small group of countries with advanced industrial or financial sectors involved in international trade and in advanced stage of development. (Argentina, Brazil, Greece, Hong Kong, South Korea, Mexico, Portugal, Singapore. Spain, Taiwan and former Yugoslavia).

Next in, first out (NIFO)  - Inventory valuation method whereby the cost of sale of the item is based on the cost to replace it rather than on historical cost.

NICs  (Newly industrialised countries) – These are countries  such as Singapore, Malaysia and Mexico which have recently gone through the process of industrialisation.

Node - in program evaluation and review technique (PERT), circle in a network representing the beginning and ending of activities. A node symbolizes an event.

Nominal - Refers to small payments or value.  The distinction between nominal and real figures. Nominal figures are those using current prices, interest rates, etc. Real figures are figures corrected for inflation.

Nominal accounts - Accounts in which expenses, income and capital are recoreded.

Nominal capital - The total face value of authorised issuable capital.

Nominal dollars - Dollars that have not had the effects of inflation taken into account.

Nominal exchange rate - The rate at which a person can trade the currency of one country for the currency of another.

Nominal GNP - The output off all goods and services valued at current prices.

Nominal interest rate - The stated interest rate on the face of a debt security or loan.  the nominal interest rate may differ from the true or effective and/or real interest rate.

Nominal ledger (also called general ledger) - A ledger in which impersonal accounts are kept.

Nominal national income - Total national income measured in dollars; the money value of national income. Also called money national income, current-dollar national income.

Nominal rate of tariff - The tax charged on any imported commodity.

Nominal value (accounting) - Refers to the face, or par value of an item e.g. a bond issue.

Nominal values (economics) - The values of variables expressed in current prices.

Nominal variables - Variables measured in monetary units

Non accelerating-inflation rate of unemployment (NAIRU) - The rate of unemployment associated with potential national income and at which a steady, non accelerating or non decelerating inflation can be sustained indefinitely. Also called the natural rate of unemployment.

Non-cooperation - A form of industrial action when employees refuse to comply with new working practices.

Non cooperative equilibrium - An equilibrium reached when firms calculate their own best policy without consider­ing competitor's reactions.

Non cash expense - An expense that is recognised in the financial records of a company without actual cash having being paid for it  e.g. depreciation, or amortisation.

Non current assets – Assets which are expected to owned by the business for more than twelve months e.g. property, plant and equipment. This is different from current assets which a business expects to turn into cash in under twelve months i.e. inventory and accounts receivable.

Non collusive oligopoly - Where oligopolists have no agreement between themselves, either formal, informal or tacit.

Non co-operation - A form of industrial action when employees refuse to comply with new working practices.

Non discretionary – 1. Accounting, means it is mandatory, not up to the individual or company. Or 2. Economics, effects that happen to government revenue and spending with changes in the business cycle.

Non excludability - Where it is not possible to pro­vide a good or service to one person without it thereby being available for others to enjoy.

Non interest bearing bond -  A bond that has been issued at a discount from the par par value stated on the bond but does not pay any interest. The interest earned is the difference between the purchase price and the redemption price.  United States treasury bills for example are a non-interest bearing bond.

Non market sector - The portion of the economy in which goods are provided freely so that producers must cover their costs from sources other than sales revenue.

Non performing asset - An asset which has no effect in the earning of income.

Non price competition - The means by which firms strive to increase sales and increase market share other than by undercutting rivals e.g. branding and advertising.

Non profit accounting - Accounting policies, procedures, and techniques employed by non profit organisations.

Non profit organisation - An organisation that is not setup to make a profit but to provide a service such as a charity or sports club.

Nonrecurring - Is an income statement item that is infrequent in occurrence or unusual in nature.

Non renewable resources - Any productive resource that is available as a fixed stock that cannot be replaced once it is used.

Non rivalry - Where the consumption of a good or service by one person will not prevent others from enjoying it.

Non strategic behaviour - Behaviour that does not take account of the reactions of rivals to one's own behaviour.

Non tariff barriers (NTBs) - Restrictions other than tariffs designed to reduce the flow of imported goods.

Normal activity – The level of production that will satisfy average demand by consumers over a time span (often five years) that includes trend, seasonal, and cyclical factors. It is a long-run average expected activity that is a basis for developing the factory overhead application rate.

Normal costs - 1. the annual average of product costs, not actual product costs that are affected by month-to-month fluctuations in production volume and by erratic or seasonal behaviour of many overhead costs. Typical examples of erratic behaviour include repairs and maintenance, fuel, air-conditioning costs, vacation and holiday pay, and the employer's share of Social Security taxes. All the costs that distort monthly overhead rates are collected in the annual overhead pool along with the kinds of overhead that do have uniform behaviour patterns. In summary, normal costs are the sum of actual direct materials, actual direct labour, and applied factory overhead. Or 2. the pension plan costs incurred during an accounting period for services performed during the period.

Normal distribution - A naturally occurring frequency distribution where many of the values cluster around the mean, but where there are a few high and low values away from the mean.

Normal distribution curve – A graphical representation of the normal distribution.

Normal good - A good (or service) for which demand increases as income increases.

Normal loss - This is the loss that can be considered under normal efficient operating procedures in the production process e.g. the loss of liquid through evaporation in chemical production. It is an inevitable consequence of the production process  under efficient operation conditions and is therefore  considered to be unavoidable. Losses greater  or less are refereed to as abnormal gains or losses and may have resulted from reduced or improved efficiency.

Normal profit - The opportunity cost of capital and risk taking just necessary to keep the owners in the indus­try. Normal profits are usually included in what economists (but not businesspersons) call total costs.

Normal rate of return - The rate of return (after taking risks into account) that could be earned elsewhere.

Normal spoilage – The product deterioration that is expected even under the best operating conditions. It is inherent and unavoidable in the short run. Costs of normal spoilage are allocated to the remaining good units in inventory.

Normative statement - A statement about what ought to be, in an ethical sense, as opposed to what actually is, in a positive sense. An expression of an opinion that cannot be verified by observation.

Notes to the financial statement – This is a detailed set of notes that are submitted with the financial statements. These notes explain specific points in relation to parts or items on the statements.

No-strike agreements - Trade unions and management agree to have pay disputes settled by an independent arbitrator instead of tiling strike action.

Numerical flexibility - Where employers can change the size of their workforce as their labour requirements change.

NPV - Net Present Value.