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Accounts
Short Definitions
1. Line of Credit: Availability of loan from
the source in a continuous way.
2. Bonus Shares: Free shares issued by
the company to the existing shareholders.
3. Capitalization of revenue: Revenue
used as source of capital.
4. Solvency: Ability of corporation to meet
its debts at the time of maturity.
5. Kinds of Bond: Serial Bonds,
Registered Bonds, Coupon Bonds,
Convertible Bonds.
6. Contingent Liability: A liability which
may or may not arise on the happening of
unexpected events.
7. Interim Dividend is paid: The
Company pays the dividend at any time
before the annual dividend.
8. Internal Control: A system in which
every activity is controls by itself through a
particular procedure.
9. Concept of Financial Reporting: The
report submitted to the directors &
shareholder about the income statement &
balance sheet.
10. Minority Interest: Share portion of
ownership of subsidiary company
presented in the balance sheet of holding
company.
11. Calculation of goodwill methods:
Net Profit Basis, Super Profit Method,
Capitalization of revenue method.
12. Inventory Shrinkage: Reduction in
the value of inventory due to Theft, Fire, &
Pilferage.
13. Contra Asset Account:
Corresponding account of any account
presented in the Balance Sheet or in
Income Statement.
14. Calculation of Inventory turnover:
To know that how many times the
inventory converted into sale during
physical year.

15. Mark down Cancellation: Reduction

in the value of sale but not less than the
amount of Mark Down added in the value
of Sale.
16. Circumstances Stock Dividend
paid: When the company wants to retain
the available cash with herself. Or the
number of outstanding share is sufficient,
or to convert any revenue account in to
capital.
17. Why Cash flow Statement Prepared:
To know that how much cash has been
generated during the period through
Financing, investing & operating activities.
18. Purpose of maintaining the
reserves & provisions: To meet the need
of future events & for the expansion of
business or to replace the assets with new
one & to pay the difference amount from
the provisions.
19. In Which situation the inventories
will be calculated by estimation
procedure: When the financial period not
completed or at any time when the
financial statement is to be prepared
before the end of financial period.
20. Term Lower of cost or market:
Recording the value of ending inventory at
cost or market, whichever is lower to
minimize the profit recognition, & for the
safety of organization not to bear the loss.
21. Concept of present value: the value
of a series of payment to be received in
future & its current value through DCF
technique.
22. Stock Split: Bifurcation of stocks into
much number of shares in order to
increase the number of exiting shares.
23. Bond Yield: Real return of the
investment in bond in shape if interest.
What stands for Management Fraud:
24. Recurring Profit & non recurring
profit: Profit from the operation of the
business & the profit from the sale of

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assets or the item. Operating profit & non

operating profit.
25. Depletion & Amortization: Reduction
in the value of natural assets & intangible
assets.
26. Common size Statement: Converting
of financial statement horizontally or
vertically in ratios.
27. Quick & Liquid Assets: Those assets
which are more near to cash. Cash,
Marketable securities, A/R etc.
28. Account Receivable Turnover
Calculated: Total sale divided by average
receivable.
29. Half year convention: Calculation of
depreciation in fractional period & half
year of both the year is considered at the
beginning & at the end of the year.
30. Define Bond: Certificate issued by
firm to get long term debt.
31. Define Bonus Shares: share issued
to existing shareholders from profit of the
firm without any payment.
32. What is right share: Shares issued to
existing shareholders before outsides.
33. What is fair commercial return: The
percentage of profit determined by the firm
before starting the business.
34. Absorption: When one company
purchases other business (Assets).
35. Intrinsic value of share: Valuation of
shares based on net assets of business
according to last Balance Sheet.
36. Intrinsic paid dividend: dividend paid
before end of the year when company has
sufficient pay.
37. Minority interest: the amount
available to minor shareholders in holding
company balance sheet.
38. Methods of calculating goodwill:
Yield basis Net Asset Capitalization basis.
39. Liquidity: the ability of firm to pay its
debts whenever they become due.
40. Ratio Analysis: process of composing

various items of balance sheet & income

statement in order to evaluate the position
of business.
41. When stock dividend paid: when the
firm has not sufficient cash or the firm
does not want to disturb its working capital
ratio.
42. Why reserves & provisions
maintained: To meet emergency situation
in the business or to exp& the business or
to replace fixed assets.
43. Redemption of Bond: repayment of
long term loan at time of its maturity.
44. Bond yield: The return on the actual
purchase price of the bond by investor.
45. Recurring profit: profit from the
operations in recurring profit.
46. Non recurring profit: Profit from the
sale of fixed assets is non recurring profit.
47. Types of inventories: Raw Material,
Goods in process & finished goods.
48. Primary market: market where
securities are sold for first time.
49. Secondary market: market where
sale or purchase of companys trade of
that instrument already exists in market.
50. Marketing principal: the over liability
of cash and its investment in M/s and vice
versa.
51. Compulsory liquidation: the
liquidation of company by the orders of
court.
52. Capital Reserve: Reserve maintained
by the firm from its shares.
53. Working Capital: the difference
between current assets and current
liabilities.
54. Indenture: securities attached when
the firm get loan from any source.
55. Sinking fund: fund maintained from
the amount of interest to be used for future
payment of debt.
56. Purchase consideration: the amount
paid by purchasing company in

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purchasing other company.

57. Methods to pay purchase
consideration: lump sum, Net Asset
Basis, Payment per share, and Based on
value of both companys shares.
58. Absorption: when one company
purchase assets and liabilities of other
company and later company go into
liquidation.
59. Quantities as cost and: Periodic
System and Perpetual Inventory System.
60. F.O.B Shipping: Title passes to buyer
with the loading of goods at point of
shipment.
61. F.O.B Destination: No recognition of
transaction until goods is received by
buyer.
62. Segregated Goods: When goods are
prepared on special order and segregated
for shipment title may pass with such
segregated.
63. Conditional & installment Sales:
conditional sales & installment sale
contract may provide intention of title by
seller until sale price fully recovered.
64. Trade Discount: Discount that convert
a printed price list of price actually to be
charged to particular buyer. So cost is list
price less trade discount.
65. Cash Discount: Reduction in price
allowed only upon payment of invoice
within limited period.
66. FIFO: Cost charged out in which order
it is in cussed.
67. Moving Average: Method in which
successive arrange recalculation used.
68. LIFO: latest cost should be first to be
charged out.
69. Base Stock or Normal Stock:
assumes that maximum stock is normal
and permanent requirement of business.
70. Standard cost: predetermined cost
based upon representative or normal
conditions of efficiency & volume of

operations.
71. Joint Products: products
manufactured simultaneously by a
common process.
72. by products: products of little value
produced during manufacturing the
primary products.
73. Completed Contract Basis: Revenue
is not realized until a sale is completed,
revenue emerges from sale not
production.
74. Retail inventory Method: in this
method, records of goods place in stock
are maintained in terms of costs and also
market retail price.
75. Original Retail: the established sale
price including original increase over cost
variously referred to as mark on or initial
mark up.
76. Additional Markups: Increase that
raise sales price above original retail.
77. Markup Cancellations: Decrease in
additional markups that do not reduce sale
price below original retail.
78. Markdowns: decrease that reduces
sales price below original retail.
79. Markdown Cancellations: Decrease
in the markdowns that do not raise the
sales price above original retail.
80. Retail life: it requires index numbers
be applied to inventories stated at retail in
assigning at the quantitative changes in
inventories.