Accounting Terms (N)

NAA

National Association of Accountants. This organization's name was changed to Institute of Management Accountants and currently is referred to as IMA.

National Association of Accountants (NAA)

This organization has changed its name to Institute of Management Accountants. It is currently using the name IMA to reflect the many backgrounds of its membership.

natural resources

Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.

net

The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the combination of the debit balance in accounts receivable and the credit balance in the allowance for doubtful accounts. The book value of equipment is also a net amount: the cost of the equipment minus the accumulated depreciation of the equipment.

net assets

Generally this refers to total amount of assets minus the total amount of liabilities; similar to owner's equity or stockholders'equity.

net carrying amount

This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation - Equipment has a credit balance of $130,000, we might say that the equipment has a net carrying amount of $170,000. Similarly, if Bonds Payable has a credit balance of $1,000,000 and Premium on Bonds Payable has a credit balance of $8,000, the net carrying amount is $1,008,000. This is similar to book value.

net cash flow from financing activities

The third major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.

net cash flow from investing activities

The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.

net cash flow from operating activities

The first major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.

net credit sales

The net amount of gross sales minus sales returns, sales allowances, and sales discounts.

net current assets

Current assets minus current liabilities. Also see working capital.

net income

This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular corporation) provided the result is a positive amount. If the net amount is a negative amount, it is referred to as net loss.

net income available for common stock

A corporation's net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).

net loss

The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).

net method of recording accounts payable

The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method because the liability is recorded at the amount that will be paid and the purchase is recorded at the cash equivalent amount.

net of tax

A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the gain will result in income taxes of $3,000,000, the gain net of tax is $7,000,000.

net pay

Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as "take home pay" or the amount the employee "cleared." To learn more, see Explanation of Payroll Accounting

net payroll payable

This current liability account reports the “net” amount a company owes its employees as of the date of the balance sheet. The "net" amount is the amount of the employees’ paychecks—their take-home pay, or the amount the employees cleared after deducting payroll taxes and voluntary deductions. To learn more, see Explanation of Payroll Accounting.

net present value

The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.

net purchases

The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.

net realizable value

The amount you would likely receive if an item is sold in a typical transaction minus any cost incurred in order to get the item sold.

net sales

Net sales is the gross amount of Sales minus Sales Returns and Allowances, and Sales Discounts for the time interval indicated on the income statement.

net working capital

See working capital.

next-in, first-out cost flow assumption

This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the relevant amount.

NIFO

next-in, first-out cost flow assumption (NIFO).

nominal account

See temporary account.

nominal interest rate

See contractual interest rate.

noncash expense

An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an asset's carrying amount will result in a noncash charge against earnings.

noncumulative preferred stock

Preferred stock where past, omitted dividends do not have to be paid before a dividend can be paid to common stockholders. In the case of noncumulative preferred stock, only its current year dividend needs to be paid in order for a corporation to pay a dividend to its common stockholders.

non-current assets

See long term assets.

non-current liabilities

See long term liabilities.

monmanufacturing overhead cost

See Explanation of Nonmanufacturing Overhead.

nonmonetary asset

Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.

nonoperating expense

An expense outside of a company's main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.

nonoperating income/revenue

Income or revenue earned by a company that is outside of its main operating activities. For a retailer the interest earned on its temporary investments is a nonoperating revenue (or nonoperating income).

nonparticipating

This term is associated with preferred stock that does not allow its holders to receive more than its stated dividend. The nonparticipating feature is typical in preferred stock. To learn more about preferred stock, see Explanation of Stockholders' Equity.

nontrade receivables

Receivables other than Accounts Receivable. Examples include amounts due from employees and income tax refunds receivable.

no-par value stock

Stock without a par value.

normal account balance

The debit or credit balance that would be expected in a specific account in the general ledger. For example, asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and stockholders' equity accounts normally have credit balances.

normal costing

The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.

normal operating activities

Retailers' normal operating activities would include the purchase and sale of merchandise and selling and administrative expenses. A retailer's investing of its idle cash is a nonoperating activity. However, a bank's normal operating activities would include investing and lending of the money.

normal spoilage

Spoilage or waste that is likely to occur and cannot be avoided at a reasonable cost.

not sufficient funds (NSF) check

A check often referred to as an NSF check, a rubber check, or a check that bounced. It is a check that was not paid by the bank of the issuer (writer) of the check because the checking account of the issuer did not have sufficient collected funds in the account.

notes payable

The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.

notes receivable

An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any portion of the notes receivable that is not due within one year of the balance sheet date is reported as a long term asset.

notes to financial statements

Also referred to as footnotes. These provide additional information pertaining to a company's operations and financial position and are considered to be an integral part of the financial statements. The notes are required by the full disclosure principle.

NPV

See net present value.

NRV

See net realizable value.

NSF check

not sufficient funds check.