LOMA 361 EXAM STUDY GUIDE
account - Answers -The basic tool that a company uses to record, group and
summarize similar types of business transactions
account form - Answers -a type of balance sheet presentation in which asset account
appear on the left and liability accounts and owners' equity accounts appear on the right
accounting - Answers -a system or set of rules and methods for collecting, categorizing,
measuring, recording, summarizing, reporting, analyzing and monitoring financial
information about the financial condition and performance of a company as a whole, as
well as of segments, product lines or divisions within the company
accounting controls - Answers -the policies and procedures used to authorize financial
transactions, safeguard assets, and provide reliable, timely and fairly presented
financial information about a company
accounting entry - Answers -a record of business transaction that includes at least one
debit and one credit and shows the monetary value of the transaction in balance on a
specified date, also known as a journal entry
accounting period - Answers -a specified length of time during which a company
records, summarizes and reports its financial transactions
Accrural basis accounting - Answers -an accounting system under which a company
records revenues when they are earned and expenses when they are incurred, even if
the company has not yet received the revenues or paid the expenses.
Accrued income - Answers -income that the insurer has already earned but that is
receivable after the end of the accounting period
accumulated cost of insurance - Answers -for a given product, the total of benefits paid,
accumulated at interest
Accumulated Depreciation - Answers -the total amount of depreciation allocated to an
asset as of a specified date
accumulated value of net premiums - Answers -for a given produce, the total of net
premiums collected accumulated at interest
acquisition expenses - Answers -the category of operating expenses that includes the
costs for obtaining and issuing new business
,active life reserves - Answers -a type of accident and health reserves that identify the
expected future amounts an insurer will pay on claims that have not yet occurred but
are expected to occur at some future date
activity - Answers -any procedure that generates work, such as processing a policy
application, sending a premium due notice and investigating a claim
activity cost - Answers -the cost attributable to a specified activity
activity driver - Answers -the output of an activity being performed; the purpose that
propels the activity
activity ratios - Answers -financial ratios that measure the speed with which a
company's various assets are converted into sales or cash; also known as operating
efficiency ratios or turnover ratios
Activity-based costing (ABC) - Answers -the process of linking costs to products based
on the activities performed in producing the products or services
actuarial assumptions - Answers -assumed values used in a life insurance or annuity
product design
actuary - Answers -a technical expert in insurance, annuities, and financial instruments
who applies mathematical knowledge to industry and company statistics to calculate
various financial values
adjusting entry - Answers -an accounting entry that a company makes to record accrual
for revenues and expenses, unearned revenues and unpaid expenses
administrative controls - Answers -the policies and procedures that guide employees in
conducting their normal day-to-day tasks.
admitted asset - Answers -an asset whose full asset value can be reported on the
assets page of the Annual Statement
adverse opinion - Answers -a type of non-standard auditor's opinion stating that the
financial statements do not fairly present the company's financial position
aggregate reserves - Answers -reserves for a block of insurance policies or contracts, a
line of business or the entire company
allocation base - Answers -a measure of use that exhibits a logical relationship of
indirect costs to cost centers
,Amortization - Answers -the periodic and systematic increase (decrease) of the original
cost of an investment to its ultimate value at maturity; typically applies to an insurer's
long-term assets such as bonds, mortgages and other debt securities
annual report - Answers -a document that a company's management sends to
interested parties to report on the company's financial performance during the past year
annual statement - Answers -an annual report that every insurer in the US must file
annually, as well as on a quarterly basis with NIAC and the insurance regulatory
organizations in every state in which the insurer conducts business
annuity reserves - Answers -contractual reserves that are calculated at annuity contract
issue
assets - Answers -the items of value owned by an individual or company
associating cause and effect - Answers -Under GAAP, an expense recognition concept
that states that expenses that have a direct relationship to specified future revenues are
charged to future accounting periods instead of being charged to the current accounting
period
association examination - Answers -an onsite regulatory examination that conforms to
the procedures outlined in the NIAC's examiners handbook
audit - Answers -the examination and evaluation of a company's accounting records
and procedures to ensure that (1) the financial information, financial statements and
source documents comply with accounting standards and are a fair and consistent
depiction of a company's financial condition and performance (2) quality assurance is
maintained and (3) operational procedures and polices are effective
audit trail - Answers -a chronological, sequential set of accounting records and reports
from the beginning to the end of a business transaction
auditing - Answers -the process of conducting a financial audit
auditor's opinion - Answers -a statement, prepared by a public accounting company,
that attests that the information contained in an insurer's annual report fairly represents
the insurer's operations and that the audit was conducted in accordance with applicable
auditing standards
authorization level - Answers -within the context of an internal control system, the
maximum monetary amount a company employee has been granted the power to
approve for disbursement
balance sheet - Answers -a financial statement that shows a company's financial
condition or position by summarizing the company's assets, liabilities and owners' equity
, as of a specified date; also known as a statement of financial position or statement of
financial condition
bank reconciliations - Answers -the process of identifying and explaining the difference
between (1) the bank statement balance and (2) the balance in the insurer's accounting
records
base period - Answers -the earliest financial reporting period used in horizontal analysis
basic accounting equation - Answers -the formula that expresses the relationship
among the three key account classifications, assets, liabilities and owners' equities, on
the balance sheet
benchmarking - Answers -an analytical process wherein an insurer selects a number of
other companies to use a "best-practices" standard for comparison with the insurer's
own operations and expenses
benefits budget - Answers -a type of expense budget, that indicates the amount of
money the insurer expects to pay for an insurance policy or annuity contract benefits;
such as claims, cash surrenders and policy dividends during the next accounting period
bond - Answers -a debt security issued by a borrower, typically a corporation or
government entity
bond discount - Answers -the amount by which a bond's purchase price is lower than
it's par value
bond issuer - Answers -the entity that sells the bond to raise money
bond premium - Answers -the amount by which the bond's purchase price is higher
than it's par value
bondholder - Answers -Owner of a bond
Book Value - Answers -the value at which an asset is recorded in a company's
accounting records
bottom-up budgeting - Answers -budgeting that is generated in each department or
responsibility center in a company by lower-level managers and is presented in the form
of recommendations to senior management
breakeven point - Answers -the point at which the costs of producing a product equal
the revenue made from selling the product
budget - Answers -a financial plan of action, expressed in monetary terms, that covers
a specified period; such as one year
account - Answers -The basic tool that a company uses to record, group and
summarize similar types of business transactions
account form - Answers -a type of balance sheet presentation in which asset account
appear on the left and liability accounts and owners' equity accounts appear on the right
accounting - Answers -a system or set of rules and methods for collecting, categorizing,
measuring, recording, summarizing, reporting, analyzing and monitoring financial
information about the financial condition and performance of a company as a whole, as
well as of segments, product lines or divisions within the company
accounting controls - Answers -the policies and procedures used to authorize financial
transactions, safeguard assets, and provide reliable, timely and fairly presented
financial information about a company
accounting entry - Answers -a record of business transaction that includes at least one
debit and one credit and shows the monetary value of the transaction in balance on a
specified date, also known as a journal entry
accounting period - Answers -a specified length of time during which a company
records, summarizes and reports its financial transactions
Accrural basis accounting - Answers -an accounting system under which a company
records revenues when they are earned and expenses when they are incurred, even if
the company has not yet received the revenues or paid the expenses.
Accrued income - Answers -income that the insurer has already earned but that is
receivable after the end of the accounting period
accumulated cost of insurance - Answers -for a given product, the total of benefits paid,
accumulated at interest
Accumulated Depreciation - Answers -the total amount of depreciation allocated to an
asset as of a specified date
accumulated value of net premiums - Answers -for a given produce, the total of net
premiums collected accumulated at interest
acquisition expenses - Answers -the category of operating expenses that includes the
costs for obtaining and issuing new business
,active life reserves - Answers -a type of accident and health reserves that identify the
expected future amounts an insurer will pay on claims that have not yet occurred but
are expected to occur at some future date
activity - Answers -any procedure that generates work, such as processing a policy
application, sending a premium due notice and investigating a claim
activity cost - Answers -the cost attributable to a specified activity
activity driver - Answers -the output of an activity being performed; the purpose that
propels the activity
activity ratios - Answers -financial ratios that measure the speed with which a
company's various assets are converted into sales or cash; also known as operating
efficiency ratios or turnover ratios
Activity-based costing (ABC) - Answers -the process of linking costs to products based
on the activities performed in producing the products or services
actuarial assumptions - Answers -assumed values used in a life insurance or annuity
product design
actuary - Answers -a technical expert in insurance, annuities, and financial instruments
who applies mathematical knowledge to industry and company statistics to calculate
various financial values
adjusting entry - Answers -an accounting entry that a company makes to record accrual
for revenues and expenses, unearned revenues and unpaid expenses
administrative controls - Answers -the policies and procedures that guide employees in
conducting their normal day-to-day tasks.
admitted asset - Answers -an asset whose full asset value can be reported on the
assets page of the Annual Statement
adverse opinion - Answers -a type of non-standard auditor's opinion stating that the
financial statements do not fairly present the company's financial position
aggregate reserves - Answers -reserves for a block of insurance policies or contracts, a
line of business or the entire company
allocation base - Answers -a measure of use that exhibits a logical relationship of
indirect costs to cost centers
,Amortization - Answers -the periodic and systematic increase (decrease) of the original
cost of an investment to its ultimate value at maturity; typically applies to an insurer's
long-term assets such as bonds, mortgages and other debt securities
annual report - Answers -a document that a company's management sends to
interested parties to report on the company's financial performance during the past year
annual statement - Answers -an annual report that every insurer in the US must file
annually, as well as on a quarterly basis with NIAC and the insurance regulatory
organizations in every state in which the insurer conducts business
annuity reserves - Answers -contractual reserves that are calculated at annuity contract
issue
assets - Answers -the items of value owned by an individual or company
associating cause and effect - Answers -Under GAAP, an expense recognition concept
that states that expenses that have a direct relationship to specified future revenues are
charged to future accounting periods instead of being charged to the current accounting
period
association examination - Answers -an onsite regulatory examination that conforms to
the procedures outlined in the NIAC's examiners handbook
audit - Answers -the examination and evaluation of a company's accounting records
and procedures to ensure that (1) the financial information, financial statements and
source documents comply with accounting standards and are a fair and consistent
depiction of a company's financial condition and performance (2) quality assurance is
maintained and (3) operational procedures and polices are effective
audit trail - Answers -a chronological, sequential set of accounting records and reports
from the beginning to the end of a business transaction
auditing - Answers -the process of conducting a financial audit
auditor's opinion - Answers -a statement, prepared by a public accounting company,
that attests that the information contained in an insurer's annual report fairly represents
the insurer's operations and that the audit was conducted in accordance with applicable
auditing standards
authorization level - Answers -within the context of an internal control system, the
maximum monetary amount a company employee has been granted the power to
approve for disbursement
balance sheet - Answers -a financial statement that shows a company's financial
condition or position by summarizing the company's assets, liabilities and owners' equity
, as of a specified date; also known as a statement of financial position or statement of
financial condition
bank reconciliations - Answers -the process of identifying and explaining the difference
between (1) the bank statement balance and (2) the balance in the insurer's accounting
records
base period - Answers -the earliest financial reporting period used in horizontal analysis
basic accounting equation - Answers -the formula that expresses the relationship
among the three key account classifications, assets, liabilities and owners' equities, on
the balance sheet
benchmarking - Answers -an analytical process wherein an insurer selects a number of
other companies to use a "best-practices" standard for comparison with the insurer's
own operations and expenses
benefits budget - Answers -a type of expense budget, that indicates the amount of
money the insurer expects to pay for an insurance policy or annuity contract benefits;
such as claims, cash surrenders and policy dividends during the next accounting period
bond - Answers -a debt security issued by a borrower, typically a corporation or
government entity
bond discount - Answers -the amount by which a bond's purchase price is lower than
it's par value
bond issuer - Answers -the entity that sells the bond to raise money
bond premium - Answers -the amount by which the bond's purchase price is higher
than it's par value
bondholder - Answers -Owner of a bond
Book Value - Answers -the value at which an asset is recorded in a company's
accounting records
bottom-up budgeting - Answers -budgeting that is generated in each department or
responsibility center in a company by lower-level managers and is presented in the form
of recommendations to senior management
breakeven point - Answers -the point at which the costs of producing a product equal
the revenue made from selling the product
budget - Answers -a financial plan of action, expressed in monetary terms, that covers
a specified period; such as one year
