Accounting Terminology

A
above the Line
Above the line items are those revenue and expense items that directly affect the calculation of periodic net
income.

Absolute Change
Absolute change is the numeric change in the value of a commodity, expense etc.

Absorb/Absorption
Absorb means that one account or group of accounts combines the amounts from similar or related accounts or
groups of accounts. Thus, the combined account is a new entity while the old ones are removed. For instance, if
you have 3 creditors, John, George and Paul, you can combine them into one 'creditors' account. This is called
absorption.

Absorbed Costs
Absorbed Costs are a combination of both variable and fixed costs.

Absorption Costing
Absorption costing absorbs all costs under two head product costs (manufacturing costs) and period costs (non-
manufacturing costs).

Absorption Pricing
Absorption pricing is setting a price which is the sum of the absorbed cost plus a marked-up percentage of
profit.

Absorption Variance
Absorption variance is the difference between the predicted and actual absorption costs.

Accelerated Depreciation
Accelerated depreciation is a form of depreciation where larger amounts of depreciation are calculated in the
first few years.

Account
An account is the physical record of the transactions incurred related to an asset, liability, revenue, expense etc.

Accounts Analysis
Accounts analysis is a method of cost behavior analysis by classifying records under two heads: fixed or
variable.

Accounts Group
Accounts group is a combination of similar accounts. e.g. fixed assets group, long-term liability group etc.

Accounting
Accounting is the process of recording all the economic events that affect the business/individual over an
accounting period. Accounting is done based on the various accounting principles, concepts and the Golden
Rules. Read on for An Introduction to Financial Accouting and What is Forensic Accounting?

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Forensic accounting essentially encompasses three major areas, which are: investigation, dispute resolution
and litigation support.

Investigation is that act that determines whether or not certain criminal matters like securities fraud, identity
theft, employee theft, and insurance fraud has actually occurred. A major part of a forensic accountant’s job
would be to recommend certain actions that can be taken to minimize any future loss or risk. Not only does
investigation occur in criminal cases, it can also take place in civil cases too. For instance, it is the duty of the
forensic accountants to search for hidden assets, if any, in divorce cases.

Litigation support on the other hand involves presenting factual evidence of economic issues that are related to
any pending or existing litigation. In such a case, it is the duty of the forensic accountant to quantify damages
that could be sustained by the parties involved in any legal disputes. Forensic accountants also help by resolving
disputes, during courtroom proceedings. If a dispute is brought to the courts notice, the forensic accountant can
testify as a witness.

The world of forensic accounting involves grasping the seriousness of a situation and looking way beyond mere
numbers. It is more than just your regular accounting or basic detective work. Because it has such unique
elements, it is an unusual combination that has been and will always be in demand as long as the human race
exists. Who wouldn’t want to enter such a career that offers everything from excitement and financial rewards
to stability?

Accounting Concepts
There are certain assumptions that are taken for granted while recording the accounts. These assumptions are
called accounting concepts. The 4 accounting concepts are Going Concern Concept, Accrual Basis Concept,
Consistency Concept and Prudence Concept. Read on for more about Basic Accounting Concepts and
Principles.

Accounting Cycle
An accounting cycle is the series of steps to be followed while preparing financial statements. The steps in the
accounting cycle are budgeting, journal entries, adjusting entries, ledger posting, preparing financial reports and
closing of accounts.

Accounting Entity Assumption

For legal and tax purposes, a business is treated as a different entity from the owners. Thus, only the
transactions related to the business are recorded and not the ones related to owners.

Accounting Equation
The accounting equation lays down the relationship between total assets, liabilities and owner's equity. The
accounting equation is Total Assets = Total Liabilities + Owner's Equity

Accounting Event
An accounting event is any event where there is a change (increase/decrease) in value of the assets, liabilities or
owner equity.

Accounting Income
Accounting income is the income earned by the business over the accounting year on an accrual basis.

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Accounting Measurement and Disclosure
Accounting measurement and disclosure is the accounting concept that says that adequate dates should be used
and disclosed for the purpose of decision making.

Accounting Periods
An accounting period is the frame of time during which the accounts are prepared. An accounting period is
usually a year.

Accounting Principles
Accounting principles are commonly accepted principles assumed while accounting for the business. For
details, refer to GAAP (Generally Accepted Accounting Principles).

Accounting Ratios
Accounting ratios are mathematical tools which help in performing the comparative financial analysis for two
financial variables.

Accounting System
An accounting system is a holistic approach to accounting. It may be manual as well as computerized. An
accounting system helps identify economic events, record them and generate reports at the end of the
accounting period or even during the period.

Accounting Theory
An accounting theory develops a framework for the accounting procedure. There are four types of theories of
accounting: Classical Inductive, Income, and Decision Usefulness and Information economics.

Accounting Timing Difference

Accounting time difference is the effect that considering a deferred financial event would have on the financial
statements.

Accounting Treatment
Accounting treatment is the set of rules that lays down how to treat an account and how to handle a particular
transaction.

Accounts Payable
Accounts payable are those accounts wherein the business has an obligation to pay for receiving goods or
services. They are classified as a liability.

Accounts Payable to Sales

Accounts payable to sales represents the time taken between the sales and payment to creditors.

Accounts Receivable
Accounts receivable are those accounts where the business is owed money for providing goods or services. It is
an asset.

Accounts Receivable Reserve

An accounts receivable reserve is a pool of money kept aside by the business to protect itself from default on
the accounts receivables.

Accounts Receivable Turnover

Accounts receivable turnover lets the business measure how quickly the customers are paying out the money
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receivable. It is calculated by Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable.

Accrual Concept
Accrual concept is one of the core accounting concepts. Accrual concept states that a economic event should be
recorded in the period in which it is incurred rather than when it is paid for or when cash is received in return.

Accrued Assets
Accrued assets are those assets from which the revenues are earned but not received.

Accrued Expenses
Accrued expenses are those expenses which have been incurred but not paid.

Accrued Income
Accrued income is income that is earned but not yet received.

Accrued Interest
Accrued interest is interest that an asset has earned, but not received.

Accrued Inventory
Accrued inventory is that which has arrived in the warehouse of the business but hasn't yet been paid for.

Accrued Liability
Accrued liabilities are those liabilities that have been incurred by the business and haven't been paid off.

Accrued Payroll
Accrued payroll is employee salaries that remain unpaid at the end of the year.

Accrued Revenue
Accrued revenue is revenue that has been earned but not yet received.

Accumulated Amortization
Accumulated amortization is the accumulated charges against the intangible assets owned by the business.

Accumulated Depreciation
Accumulated depreciation is the charges incurred for the wear and tear of a fixed asset that is calculated
periodically.

Acid Test Ratio

Acid test ratio is a ratio that analyses the liquidity position of the business. It is calculated by Acid Test Ratio =
Total Liquid Assets / Current Liabilities.

Acquisition
Acquisition is a situation where one company takes over the controlling stake of another company.

Activity Based Costing

Activity based costing is a form of costing that analyzes the cost of a product based on the cost of the various
activities performed for it.

Activity Ratio
Activity ratio is the ability of a business to convert their balance sheet assets into cash or sales.
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Actual Cash Value
Actual cash value is a method for determining the actual loss incurred by the business expressed in monetary
terms. It is normally used in context of depreciation.

Actual Cost
Actual cost is the exact amount you pay to buy a fixed asset as opposed to the market value or production cost.

Additional Paid-in Capital

Additional paid-in capital is the amount paid by the shareholders over and above the par value of the asset.

Adequate Disclosure
Adequate disclosure is giving the required amount of information in the form of footnotes to indicate the
financial status of the business

Adjusted Book Value

Adjusted Book Value may be tangible book value or an economic book value. In a tangible book value, the
value of intangible assets is deducted from the total assets. In the economic book value, the assets are adjusted
to their market value as opposed to the cost of purchase.

Adjusting Entries
Adjusting entries are the entries done at the end of the accounting period to update certain items that are not
recorded as daily transactions. The process of recording adjusting entries is known as adjustment.

Administrative Costs
Administrative costs are those which are not directly required for the process of production, but are included in
the final price of the product as they are incurred. e.g sales office rent is an administrative cost as it is not
required in the process of production.

Advance
Advance is an amount of money paid before the business earns it.

Agency
An Agency is the contractual relationship between the principal and his agent where the agent is empowered by
the principal to take certain decisions on his behalf.

Aggregate
Aggregate means total.

Allocation
Allocations are amounts distributed to each department for their working expenses.

Allowance
Allowance is a discount given to customers in the event of provision of unsatisfactory goods or services.

Allowance for Bad/Doubtful Debts

Allowance for bad debts is an amount of money set aside by the business as a cover for possible defaults on
payments.

Alternate Payee Endorsement

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Alternate payee endorsement is when the original payee endorses the draft to another entity, and this other
entity endorses it again.

Amalgamation
Amalgamation is the merger of two or more business entities.

Amortization
Amortization can mean three things.

1. It is a series of payments that result in gradual reduction of a large debt.

2. It is writing off the value of an intangible asset over the useful life of the asset.
3. It can also mean periodic deduction in the value of a fixed asset by means of depreciation.

Amount Due
Amount due is the amount payable by a debtor to a creditor. Read on to know What is Amortization.

Ancillary
Ancillary refers to something that has lesser importance.

Annualized
Annualizing is a method by which all the amounts pertaining to less than a year are calculated to their one-year
equivalents.

Annual Report
An annual report is a detailed report of all the financial statements of a business. It is a mandatory requirement
for public companies

Annuity
An annuity is a series of periodical payments of a fixed amount for a fixed period. e.g. insurance premium.
Read on for Fixed Annuities Explained and the Annuities Pros and Cons.

Appreciation
Appreciation is the increase in the value of the asset due to economic conditions or improvements to the asset.

Appropriation
Appropriation is the allocation of amounts, that are part of the total net profit, under various heads such as
general reserve fund etc.

Arrears
Arrears is a debt that has not been paid yet.

Assessed Value
Assessed value is the estimated value that is taken for calculation of tax.

Assessment
Assessment is the total amount of tax or levy payable.

Asset
Asset is something that is owned by a business that has commercial value or exchange value.

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Asset Earning Power
Asset earning power is one of the profitability ratios that determine the earning power of assets. It is calculated
by Asset Earning Power = Earnings before Taxes / Total Assets.

Asset Turnover Ratio

Asset turnover ratio helps establish the relationship between the sales and the total assets. It is calculated by
Asset Turnover Ratio = Total Revenue / Average Assets.

Asset Valuation
Asset valuation is the process by which the value of an asset or an asset portfolio is determined.

Audit
Audit is the process of checking and validating the business records.

Audit Committee
Audit committee is a special committee appointed in an organization to carry out the audit oversight
responsibility of the board of directors.

Audit Report
Audit report is an official, signed document that provides the details regarding the purpose, scope and findings
of the audit.

Authorized Capital
Authorized capital is the total money that the company has made by selling the issue of authorized shares. It is
calculated by Authorized Capital = Number of Shares Issued * Par Value of Shares

Average Cost
Average cost = Total Cost / Number of Units.

Average Inventory
Average inventory is the average amount of inventory held over the accounting period. It is calculated by
Average Inventory = (Opening Inventory + Closing Inventory) / 2

Average Net Receivables

Average net receivables is the average of the accounts receivable over the accounting period. It is calculated by
Average Net Receivables = (Opening Net Receivables + Closing Net Receivables) / 2

Average Settlement Period

Average Settlement Period is calculated
for debtors Average Settlement Period = (Trade Debtors * 365) / Credit Sales
for creditors Average Settlement Period = (Trade Debtors * 365) / Credit Purchases

Average Tax Rate

Average tax rate = Total Taxes Paid / Tax Base.

Avoidable Cost
Avoidable cost is the cost that can be avoided by taking a particular decision.

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B
Bad Debt
Bad Debt is the amount owed to us but which cannot be recovered. It is a loss.

Balance
Balance is the difference between the credit and the debit sides of an account.

Balance Sheet
A balance sheet is the list of all the assets and liabilities of the business.

Balloon payment
Balloon payment is the final payment on a loan. It is called so as it is considerably higher than the regular
payments.

Bank Balance
Bank balance is the amount of money present in the bank account of the business.

Bank Overdraft
Bank overdraft represents negative balance in the bank account of the company.

Bank Reconciliation
Bank reconciliation is the verification of all the entries in the bank statement with the bank book of the business.
Read on for the Purpose of Bank Reconciliation Process and Steps to Accounts Reconciliation.

Bank Statement
A bank statement is the financial statement showing the details of all the transactions that the business had made
through the particular bank account.

Bankruptcy
Bankruptcy is a situation where a business/individual does not have enough assets to pay off his liabilities. A
person who is bankrupt is called an insolvent.

Barter System
Barter system is a non-monetary system of exchange where commodities are traded for commodities rather than
for money. Read on for History of Barter System.

Base Capital
Base capital = Issued and Paid-up Share Capital + Contributed Surplus + Retained Earnings.

Basic Earning Power

Basic earning power measures the profitability of the assets. It is calculated by the formula Basic Earning
Power = EBIT / Total Assets.

Basis
Basis is the starting point for calculating a variety of variables such as profit, loss, depreciation, amortization
etc. It can also mean the book value of investments.

Batch
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Batch is a collection of items that need to be handled together for production.

B/D
Brought Down. It is the balance from the previous accounting period that is carried forward.

Below the Line

Below the line items are those that directly affect the balance sheet and not the income statements.

Benchmarks
A benchmark is a high standard that is set for performance.

Big 4
Big 4 refers to the 4 biggest accounting firms: PriceWaterhouseCoopers, KPMG, Delloite and Touche and Ernst
and Young.

Billings
A billing is a request sent to the debtor asking for payment for a debt.

Bill of Exchange
Refer: Draft

Bills Payable
Bills payable is a promise made by the receiver of a benefit to the giver of a benefit, to pay an amount of money
in the future.

Bills Receivable
Bills receivable is a record of all the bills that are receivable by a firm.

Bond
A bond is a certificate of debt issued either by a corporation or the government to raise money.

Bond Discount
A bond discount is the difference between the face value of the bond and the issued price. The face value in this
case is higher than the issued price.

Bond Premium
Bond Premium is the difference between the issued price and the face value of the bond. In this case, the issued
price is higher.

Bond Sinking Fund

Bond sinking fund is a provision made by the bond issuing body to pay off the face value of the bond at
maturity.

Bonus
A bonus is the remuneration given to an employee in excess of the stipulated salary.

Books
Books refers to the journals, ledgers and other subsidiary books such as sales books and purchase books, as
maintained by the business.

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Book Building
Book building is a type of share issue where the price of the shares is not fixed, but is determined by investor
bidding.

Book Costs
The book cost is the cost of an asset when it was purchased. It may be a historical cost.

Book Income
Book income is the revenue earned by a business as reported in the financial statement.

Book Inventory
Book Inventory = Cost of Acquiring the Inventory - All the Liabilities associated with the Inventory.

Book Keeping
Book keeping is the process of recording all the economic events and transactions of the business.

Books of Accounts
Refer Ledger

Book to Market Ratio

Book to market ratio is a ratio that calculates the book value of the equity of a firm to the market value of the
equity.

Branch Accounting
Branch Accounting is keeping the books of accounts for geographically separated departments or units of the
same business.

Break Even Analysis

Break even analysis is basically ascertaining how many units of a product sold will cover the costs. The point of
the sales volume where the costs are equal to the volume is called break even point. Read on for Break Even
Analysis Formulas

Brought Forward
Refer B/D

Budget
A budget gives the list of expense heads and the amounts allotted to expense heads. For example, a sales budget
lays down the amount to be spent on sales, etc.

Budgetary Deficit
When there is an excess of expenditure over revenue in a budget, it is known as a budgetary deficit.

Budgetary Control
Budgetary control is a process where the actual amount incurred and the budgeted amount for each expense
head is compared.

Budgeting
Budgeting is estimating the expenditure needs of the department or each expense head based on historical data
and trend analysis.

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Budget Performance Report
Budget performance report represents the comparison between the actual expenditure and the budgeted
expenditure.

Buffer
A buffer is a safety measure over the budgeted amount, in case of contingency.

Business Entity
A business entity may be a proprietorship, partnership, corporation, or LLC. Every entity has to follow a
separate set of rules.

Business Valuation
Business valuation is the amount that would be realized if the business was sold to a hypothetical buyer.

Bylaws
Bylaws are the different provisions that govern the corporate policies.

C
CA
CA may be short for either Chief Accountant or Chartered Accountant.

Call
A call may be

1. The process for redeeming a bond or preferred stock before its maturity date.
2. Right to buy 100 shares/asset within a specified period at a specified price.

Callable Bond
A callable bond is a type of bond which gives the issuer the right to pay off at his discretion.

Capital
Capita is the money or the property available for the purpose of production.

Capital Account
Capital account is the account where all the details regarding the transactions related to the paid-up capital are
given.

Capital Asset
Capital asset is usually used in the context of fixed assets. Assets that are not used in the day-to-day course of
business are called capital assets.

Capital Budget
Capital budget is the amount allocated for the purchase of fixed assets during the accounting period.

Capital Charge
Capital charge is calculated by the formula Capital Charge = Capital * Weighted Average Cost of Capital.

Capital Commitment
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Capital commitment is a commitment to buy capital assets at a fixed time in the future.

Capital Contribution
Capital contribution is the cash and assets a corporation acquires through shareholder money.

Capital Employed
Capital Employed is the actual value of the assets that is contributing to the ability of the business to generate
revenue. It is calculated by Capital Employed = Fixed Assets + Current Assets - Current Liabilities.

Capital Expenditure
Capital Expenditure is the money spent for the improvement and servicing of existing fixed assets or for
purchasing new fixed assets.

Capital Expenditure Ratio

Capital Expenditure Ratio is calculate by the formula Capital Expenditure Ratio = Capital Expenditure / Total
assets.

Capital Fund
Capital funds are calculated by the formula Capital Fund = Total Capital Stock + Capital Debentures +
Surpluses + Undivided Profits + Reserves + Guaranty Fund + Guaranty Fund Surplus

Capital Gain
Capital gain is the positive difference between sale value and the purchase value for an asset.

Capital Improvement
Capital improvement is any value adding activity to an asset that increases its value.

Capital Intensive
Capital intensive is a type of industry that relies more on capital to purchase high end machinery for its
production as opposed to labor intensive that relies more on human resources.

Capital Investment
Refer Capital Expenditure.

Capitalization
Capitalization refers to the statement of the total capital available with the firm.

Capitalization Rate
It is the rate of interest that is required to convert the series of future receivable payments into their present
value equivalent.

Capitalized Cost
Capitalized costs are those that are deducted over several accounting periods on account of depreciation or
amortization.

Capital Loss
Capital loss is a situation where there is a negative difference between the purchased price of an asset and
selling price of an asset. It is the exact opposite of capital gain.

Capital Market
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Capital market is the market where shares and securities of the listed companies are traded.

Capital Profit
Capital profit is when the distribution of cash due to tax savings on account of depreciation, sale of a fixed asset
or any other sources that are not related to retained earnings.

Capital Rationing
Capital rationing is to put a restriction or a cap on capital expenditures.

Capital Receipts
Capital receipt is the amount received on account of the sale of a capital asset.

Capital Redemption Reserve

A capital redemption reserve is an undistributed reserve created out of the profits of a company.

Capital Reduction
Capital reduction means to reduce the total capital available with the company.

Capital Reserve
A capital reserve is one of the reserves that a business creates, out of the yearly profits, for any specific purpose.

Capitation
Capitation is a fixed charge, tax or payment that is levied as a fixed amount per person.

Carried Down
Carried down is the year's closing balance for an account that is carried to the next accounting period.

Cash
Cash refers to the liquid money available with the business in the form of notes and coins for the purpose of
payment.

Cash Basis
Cash basis is the opposite of accrual basis. It is a type of accounting where the transactions are recorded only
when there is an exchange of cash, irrespective of when the transactions occurred. Cash basis accounting is
different from the GAAP.

Cash Book
Cash book is the record of all the cash transactions - receipts and payments, that are made by the business. It
may also be expanded to include the bank transactions if the business does not wish to keep a separate bank
book.

Cash Budget
Cash budget is the allocation towards the cash receipts and payments that the business might incur over an
accounting period.

Cash Deficit
Cash deficit means the excess of cash payment obligations over the total cash available.

Cash Discount
Cash discount is the discount allowed to the debtor to induce him to pay earlier.
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Cash Dividend
Cash dividend is the share of the company profits that is given to the shareholders as dividend.

Cash Earnings
Cash earnings is defined as the excess of cash revenue over cash expenses in an accounting period.

Cash Flow
Cash flow is the difference between the cash inflow and the cash outflow in the business. It does not deal with
accrued payments and only deals with the inflow and outflow of cash.

Cash Flow Analysis

Cash flow analysis is a financial management and analysis technique that is used to compare the amount and
timing of the inflow and outflow of cash into the business.

Cash Flow Statement

Cash flow statement is a financial statement that provides details of the inflow and outflow of cash for the
business. It is divided into three parts: cash flows from financing, cash flows from investing and cash flows
from operations.

Cash Inflow
Cash Inflow is the measure of the total cash coming into the business as a result of various financing,
investment and operational activities.

Cash Outflow
Cash outflow is the measure of the total cash going out of the business as a result of the various financing,
investment and operational activities.

Cash Management
Cash management is a financial management technique that aims to maximize the availability of cash in the
business without changing the levels of fixed assets. It aims to secure faster debtor payments to improve the
liquidity position of the business.

Cash Profit
Cash profit is calculated as Cash Profit = Profit after tax + Depreciation.

Cash Ratio
Cash ratio is calculated by Cash Ratio = (Cash + Marketable Securities) / Current Liabilities.

Cash Receipt
Refer Receipts

Certified Financial Planner

A certified financial planner is a financial planner qualified as per the requirements of the Institute of Certified
Financial Planners. Read on to know more about Becoming a Certified Financial Planner

Certified Public Accountant

Certified Public Accountant is a certification that gives an individual the license to practice public accounting.

Charge Off
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Refer Bad Debt

Chapter S
Chapter S is a special form of incorporated business entity in the United States and is governed by a certain set
of rules and is allowed to avoid payment of corporate taxes.

Charter
A charter is a document of a corporation.

Chart of Accounts
A chart of accounts is a serial listing of all the ledger accounts of a business.

Check
A check is a form of payment, through the bank and can be made payable to a specific person or an unspecified
bearer at large.

Checking Account
A checking account is a form of bank account where the amount can be withdrawn by a check, an ATM card or
a debit card.

Claims
A claim is a legally backed demand for money from a debtor, which if not paid, results in a law suit.

Claims Outstanding
Claims outstanding can be calculated by Claims Outstanding = Claims Against Assets – Claims Settled.

Close
To close an account is to carry forward the balance to the next year at the end of the accounting period.

Closing Accounts
Closing an account is passing the closing entry on the last day of the accounting period.

Closing Date
Closing date is the date where one gets possession of or title to an asset.

Closing Entry
The closing entry is an accounting entry that is passed to carry forward the balance of an unbalanced account to
the next accounting period.

Closing Stock
Closing stock is the stock of inventory available with the business at the end of the accounting period.

Coding
Coding means assigning the proper code to the accounts.

Collateral
Collateral/Security/Mortgage are assets that are given as security for obtaining a loan. In case of a default on the
loan, the lender has the right to take up the ownership of the collateral.

Collateral Note
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Collateral Note is a type of note that is secured using a collateral.

Collection Period
Collection period defines the amount of time it takes to convert your average sales into cash. In other words, it
is the time allowed to sales debtors for payment.

Combined Financial Statement

A combined financial statement is a financial report that combines the financial statements of two or more
merged business entities.

Commercial Loan
Commercial loan is a short term financing given by a lender for a period of around 6 months.

Commercial Paper
Commercial paper is another form of short term financing issued by businesses to investors for a 2 to 270 day
period.

Committed Costs
Committed costs are a long term fixed costs that the business has an obligation to pay.

Commodity
Commodities/goods are the main item that the business deals in and is used for commerce. It may be a product
or a service based on the nature of the business. Read on for more about Commodity Price Index and
Commodity Trading

Common Size Analysis

Common Size analysis is a type of financial analysis where one item/account is taken as the base value and all
the others are compared to it.

Common Size Statement

A common size statement is the financial statement that shows detailed common size analysis.

Company
A company is an association of persons who bring in capital and undertake a legal business activity. A company
may be limited by guarantee or shares.

Company Tax
Refer Corporation Tax

Comparative Statement
A comparative statement is a financial statement that compares the results of two or more previous years with
the current results.

Compensating Errors
Compensating errors are those errors that cancel out a previous error.

Compliance Audit
Compliance audit is a watchdog procedure to ensure that the business is complying with the set of rules and
procedures that are set for it. It can be compared to the accounts audit which ensures that the true accounting
details are disclosed.
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Compliance Panel
A compliance panel is a committee of people in charge of a compliance audit. This can be compared to the
financial audit committee.

Composite Depreciation
Composite depreciation is to combine similar assets in a same class and apply depreciation to all of them at flat
rate.

Composite Financial Statement

A composite financial statement is an average of financial statements of either two or more companies or two or
more periods.

Compound Annual Growth Rate

Compound annual growth rate is the yearly rate applied to an investment over multiple years.

Compound Interest
Compound interest is the interest calculated on the principle over which the interest continues to accrue over
time.

Compound Journal Entry

Compound general entry is an entry of an economic event that simultaneously affects either two or more debits
or two or more credits or both.

Comprehensive Annual Financial Report

A comprehensive annual financial report is the complete annual financial report of the business.

Compulsory Liquidation
A compulsory liquidation is the liquidation of the assets of the company by a court order when the company is
unable to pay off its outstanding debts.

Concessionary Loans
Concessionary loans are sanctioned by the government to the companies to fund a particular activity as
prescribed by the issuing authority.

Conglomerate
A conglomerate is a group of different companies run under the same umbrella ownership and run as a single
entity.

Conservatism Principle
Conservatism principle of accounting says that the estimates of the company should be conservative and not
understated or overstated.

Consistency Principle
Consistency principle of accounting says that the same accounting policies and procedures should be followed
in every accounting period.

Consolidated Capital
Consolidated capital includes all the assets and money that is used in day-to-day business operations.

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Consolidated Financial Statement
A consolidated financial statement is a comprehensive statement that gives details regarding all the assets,
liabilities and operating accounts of the parent company and subsidiary companies under it, if any.

Constraint
A constraint is something that limits or restricts a business activity.

Contingency Budget
Contingency budget is the money set aside for a contingency plan.

Contingency Plan
A contingency plan is implemented if some unfortunate event takes place. It is a 'plan B'.

Contingent
A contingent is something that occurs due to a condition that is not yet established.

Continuity Assumption
The continuity assumption in accounting states that the accounting for the business should be done assuming
that the business will have an unlimited life span.

Contra Entry
A contra entry is a type of ledger entry that gets offset by an exactly opposite entry.

Contributed Assets
Contributed assets are those assets that are owned by a contributing entity to the business.

Contributed Capital
Refer Paid-Up Capital

Contributed Surplus
A contributed surplus is the money earned through selling the shares of the company over the par value.

Contributed Margin
Contributed margin is the excess of proceeds from sales over the variable costs. It gives the total revenue
available for servicing the fixed costs.

Contribution to sales ratio

Contribution to sales ratio is calculated by Contribution to Sales Ratio = (Contribution * 100) / Sales Revenue

Controllable Expense
Controllable expenses are those that can be controlled, restrained or avoided completely by the business.

Conversion Costs
Conversion costs are calculated as Conversion Costs = Direct Labor + Manufacturing Overhead.

Convertible
The word 'Convertible' is generally used to refer to one type of security that can be converted into another type
of security.

Corporate Governance
18
Corporate Governance is a system which governs the direction and control of business corporations.

Corporation
A corporation is a business that has been incorporated and enjoys separate legal rights from its owners.

Corporation Tax
Corporation tax is the direct tax charged to the profits incorporated in business entities.

Correcting Entry
A correcting entry is an entry made to nullify the effect of a previously made wrong entry.

Cost
Cost is the monetary amount that needs to be paid to acquire something.

Cost Accounting
Cost Accounting/Costing is a procedure to find out, analyze and control costs.

Cost Allocation
Cost allocation is the budget alloted to the various cost centers in the business.

Cost Assignment
Cost Assignment is the assigning of costs of an account to the various accounts that are responsible for
incurring the cost.

Cost Benefit Analysis

Cost benefit analysis is the analysis of the costs and benefits associated with any business decision by first
estimating the costs and then the expected return.

Cost Ceiling
Cost ceiling is the maximum budget that will be alloted for a project. It is calculated as Cost Ceiling = Target
Cost + Contingency Cost

Cost Center
A cost center of an organization is one that does not directly add value to the product, but are indirect costs. For
instance, sales and marketing costs are cost centers.

Cost Control
Cost control is an exercise to control the costs incurred under any head in a business.

Cost Driver
Cost driver is an event or a series of events and activities that results in costs being incurred

Cost/Income Ratio
Cost income ratio is a reasonably simple ratio to understand and is calculated as Cost/Income Ratio = Total
Expense / Total Income.

Cost of Capital
Cost of Capital is the rate of return that a business can earn with different investments. It is calculated so that
the best investment decision can be taken by the business.

19
Cost of Debt
Cost of debt is the amount of money it takes for financing a debt in the form of interest, etc.

Cost of Equity
Cost of Equity is the compensation that the investors demand for their investment and risk, that the business has
an obligation to pay.

Cost of Goods Sold

Cost of Goods sold is the cost of procuring and processing goods. It includes direct material, labor and factory
overheads.

Cost Plus
Cost plus is a method of pricing that involves finding out the total cost required to produce a finished good and
then adding a reasonable rate of profit.

Cost Principle
Cost principle of accounting says that the fixed assets purchase should be recorded at the cost at which they
were purchased, as opposed to their economic costs.

Cost Reduction
Cost reduction is an exercise taken to reduce the total costs incurred by the company by not incurring the
avoidable costs.

Cost Rollup
Cost Rollup is the determination of all the cost elements in the total costs incurred during the course of the
business.

Cost Split
Cost split is one of the most fundamental elements of costing and involves systematic breaking down of all the
costs that can be associated with production.

Cost Profit Volume Analysis

Cost profit volume analysis is a study of the response of the total costs, revenues and profit due to the changes
in the output level, selling price, variable costs per unit and the fixed costs.

Coupon Bond
Coupon bond is a financing measure for a business. A coupon bond gives its holder a fixed interest payment on
a yearly basis and the proceeds from redemption at the maturity of the bond

Coupon Rate
Coupon rate is the fixed interest rate that is provided on a coupon bond.

Coverage Ratio
Coverage ratio refers to the ability of a business to meet any certain type of expense.

Credit
Credit is an arrangement between a buyer and a seller for deferred payment on goods and services. A credit
entry is an entry which eventually will reduce assets or increase liabilities.

Credit Control
20
Credit Control is a situation where obtaining credit is discouraged by increasing the cost of credit.

Credit Line
Credit line is the maximum credit allowed by the business to one customer, a group of customers or all the
customers.

Credit Memo
Credit memo is the document which is used while issuing credit to vendors.

Credit Note
When a customer returns the merchandise to the business, then the business issues a credit note to his name,
saying that his account has been credited for the value of the goods returned.

Creditor Account
Creditor account is a cumulative record of all the creditors to the business. It is a record of the money payable to
them.

Creditor Turnover
Creditor Turnover ratio is calculated as Creditor Turnover = (Average Creditors * 365) / Cost of Sales

Credit Record
Refer Credit Entry

Credit Risk
Credit risk is the chance of loss that a business faces from nonpayment by the borrowers.

Credit Sales
Credit sales are sales for which cash is not paid immediately, but the customer promises to pay it on a future
date.

Cumulative Earnings
Cumulative Earnings is the sum total of all the earnings over a period of time.

Cumulative Preferred Stock

Cumulative preferred stock is a type of preferred stock on which if the dividend is not paid in one year, then the
dividend will accumulate to the future years.

Current Asset
Current Assets are those assets in the hands of the company that are usually sold or converted into cash within a
year.

Current Cost
Current cost is the cost that would be incurred if the business decided to replace an asset.

Current Cost Accounting

Current cost accounting is a type of accounting that records the updated amounts according to the current cost
as opposed to the historical cost.

Current Debt to Total Debt Ratio

Current debt to total debt ratio shows the current liabilities of the company as a percentage of the total liabilities
21
of the business. It is calculated by Current Debt to Total Debt Ratio = Current Debt * 100 / Total Debt

Current Liabilities
Current liabilities are the liability obligations of the business which it is expected to pay off within a year.

Current Ratio
Current ratio is the ratio that compares the current assets to the current liabilities in the company. It is calculated
by the formula: Current Ratio = Current Assets / Current Liabilities.

Custodian
A custodian is the business entity that is in charge of maintaining records or is the caretaker for a property.

Customs
Customs is the authority who is in charge of collecting duty on the merchandise that comes into the country.
The duty that is paid for importing goods into the country is called custom duty.

D
Day Book
A day book is a daily written record of transactions.

Day's Cash on hand

Days cash on hand is the average cash available with the business.

Day's Inventory
Day's inventory shows the average amount of time that the items are in the inventory.

Days Payable Outstanding

Days payable outstanding shows the amount of time it takes for the business to pay off its creditors on receipt of
inventory from them.

Days Sales Outstanding

Days sales outstanding is the amount of time it takes for converting debtors/receivables to cash.

Dead Assets
Dead assets are those assets whose life is restricted to their immediate use.

Debentures
Debentures are instruments used by the business to raise money. A debenture may be backed by security or
unsecured.

Debit
A debit is an entry on the left side of a ledger account which eventually increases the amount of assets or
expenses or decreases the liabilities, revenue or the net worth.

Debit Note
A debit note is a document that informs/reminds a debtor of his outstanding debt.

Debit Record
22
Refer Debit

Debt
A debt is money or goods or services which one business owes another business. A business that owes money to
another is said to have a debt over the other.

Debt Coverage ratio

Debt coverage ratio is the comparison between the net income of an investment and the amount required to
service the debt.

Debt Financing
Debt financing means to finance the activities of the business by issuing debt instruments like bonds and
debentures or getting loans.

Debt Instrument
A debt instrument is a written document that acknowledges debt.

Debtor
A person or persons who owe money to the business are collectively known as debtors.

Debtor Days
Debtor days is the average number of days required to convert receivables to sales.

Debt ratio
Debt ratio measures how much of the total funds of the business are provided by outsiders. It is calculated by:
Debt Ratio = Total Liabilities / (Total Liabilities + Shareholder Equity)

Debt Security
Debt security is the security for debt capital i.e debentures, bonds

Debt Service Ratio

Debt service ratio is the amount of total revenue that is spent on paying for debts. It is calculated by Debt
Service Ratio = (Debt Payment * 100) / Total Income

Debt to Equity Ratio

Debt to equity ratio measures the part of the total capital that is financed by debt and the part financed by
equity. It is calculated by Debt to Equity Ratio = Total Liabilities / Stockholder Equity

Debt to Total Assets Ratio

Debt to total assets ratio measures the percentage of assets financed by debt.

Declining Balance Depreciation Method

Declining balance depreciation method is a method of calculation of depreciation at a fixed rate. Under this
method, an asset will continuously be depreciated a fixed rate of percentage and the subsequent depreciations
will be on the reduced balance.

Deduction
Deduction means to subtract.

Deductive Accounting Theory

23
Deductive accounting theory works on the assumption that accounting standards and reporting rules can be
based on logical and mathematical deduction.

Default
Default is when a debtor to the business does not pay the amount due to the business, due to inability or
unwillingness on his part. It is used more commonly in the context of banking where a default is a situation
when a person who has taken a loan does not pay it back.

Defeasance
Defeasance is to release a debtor from his debt obligation to the business.

Deferred
Deferred is an asset or a liability that will be realized at a future date.

Deferred Annuity
Deferred annuity is a series of payments that will start on a future date.

Deferred Development Costs

Deferred Development Costs are those which will be recognized after a certain condition/obligation is satisfied.

Deferred Expenditure
Deferred expenditure is expenditure which is carried forward and written off over subsequent periods.

Deferred Expenses
Refer Prepaid Expenses

Deferred Income
Deferred income is income earned in advance by the business.

Deferred Maintenance
Deferred Maintenance is the expense that should have been paid for maintenance but has been delayed.

Deferred Payment Credit

Deferred payment credit is a letter of credit that states that a payment will be made at the end of the period
specified in the letter of credit.

Deferred Tax Assets

Deferred tax assets are those assets that reduce the tax liability of the business for some years over the validity
of those assets.

Deferred Tax Liability

Deferred tax liabilities are the opposite of deferred tax assets and have the effect of increasing the tax payment
of the business in the following years.

Deficit
A deficit is the excess of expenditure over revenue.

Deficit Budget
A deficit budget is a budget where the budgeted expenses are more than the budgeted income.

24
Deficit Spending
Deficit spending is the external financing required to finance the expenses that are not covered by income.

Deflation
Deflation is a situation characterized by a decline in prices.

Delinquency Ratio
Delinquency Ratio is the ratio that compares the past-due loans to the loans that have been serviced completely.

Demand Deposit
A demand deposit is a deposit kept with a bank from which money may be withdrawn at any time without any
notice.

Demand Draft
Demand draft is an instrument of payment that one person gives to the other and the other person can demand
money against it.

Demand Note
Demand note is a note that is payable on demand from a person who owes the money.

Departmental Accounting
Departmental accounting is maintaining the account of the expenses and revenue of the various departments of
the company that have varying autonomy, but are not geographically separated.

Depreciable Cost
Depreciable cost is the cost of the fixed asset which is subject to depreciation.

Depreciated Historical Costs

Depreciated historical cost is the method of valuing certain assets. Depreciated Historical Costs = Cost of their
Acquisition + Enhancement – Reduced Depreciation till that date.

Depreciation
Depreciation is writing off the book value of a fixed asset every year, due to the reduction in its value caused by
wear and tear, obsolescence etc.

Depreciation Allocation
Depreciation allocation means that instead of simply writing off depreciation each year, the business could
instead make an amortization or a reserve for improving the fixed asset or for buying a new one.

Depreciation Convention
Depreciation convention is determining the method of depreciation to be used for an asset that is purchased at
some time during the accounting period.

Depreciation Reserve
Depreciation reserve is used to create a systematic account by allocating the depreciated price of a fixed asset
over its entire life.

Depreciation Schedule
A depreciation schedule is a statement showing the details of the amounts and timing of depreciation over its
effective life.
25
Derivative
A derivative is a transaction or a contract whose value is derived from the value of the underlying assets.

Designated Receipts
Designated receipts are revenues that are designated for a specific purpose.

Devaluation
Devaluation is reducing the value of something. It is most commonly used in the context of currency value
reduction.

Diluted Earnings Per Share

Diluted Earnings per share are calculated not only on equity stock but also on preferred stock and convertible
debt.

Dilution
Dilution is weakening or decrease in the value of a balance sheet item.

Diminishing Value Method

Refer Declining Balance Depreciation Method

Direct Cost
Direct Cost is a total of the costs that are associated with the actual production of a product. Direct Costs =
Direct Material + Direct Labor.

Direct Expense
Direct Expenses are those expenses which are directly associated with providing a product for sale.

Direct Labor
Direct Labor is the remuneration paid to the employees who produce the product.

Direct Labor Budget

Direct Labor Budget is the planned monetary allocation for paying for the direct labor.

Direct Labor Rate Variance

Direct Labor Rate Variance is the difference between the standard hours to be worked by an employee and the
actual hours worked by the employee.

Direct Materials
Direct Materials includes the cost of purchasing the raw materials for the process of production.

Director's Report
The director's report is written by the director of the company in the annual report as to his analysis and
comments on the performance of the company in the past year and the director's vision for the next year.

Direct Write off Method

Direct write off method is to write off all the bad debts at the time that they are adjudged noncollectable.

Disbursement Voucher
Disbursement voucher is the document used to request disbursement for expenses.
26
Disclosure Note
Refer Disclosure Principle

Disclosure Principle
Disclosure principle in accounting says that any detail regarding the information related to the better
understanding of the financial statement should be disclosed by the management.

Discount
Discount is the decrease in the price of a product.

Discount Allowed
A discount is said to be allowed when the seller reduces the price to induce the customer to make a purchase.

Discounted Cash Flow

Discounted cash flow is to discount the cash flow from an investment at the required rate of interest each year.

Discounted Earnings
Discounted earnings is to reduce the value of future inflows into the company by a specific rate of interest.

Discounted Payback
Discounted payback period is the period of time it will take to cover your initial cash outflow at the discounted
rate of interest.

Discounting Rate
Discounting rate is the rate of interest at which a series of cash inflows/outflows are discounted.

Discrepancy
Discrepancy is the difference between two claims or facts.

Discretionary Costs
Discretionary costs are those costs that can be increased or decreased at the choice of the business.

Discretionary Income
Discretionary income is the income left with the company after all the primary costs are incurred.

Dishonored Note
Dishonored note is a note that the debtor defaulted on, creating a bad debt.

Disintermediation
Disintermediation is the transfer of funds from the low return investment options to the higher return options.

Disposable Income
Disposable income is the income left with the company after all the primary obligations are met.

Dissolution
Dissolution is legally winding up the business.

Distribution Cost
Distribution cost is the cost incurred on distributing the product to its users.
27
Distribution to Owners
Distribution to owners is the payment to owners in the form of dividend.

DIT
DIT is short for Depreciation, Interest and Taxes.

Divestiture
Divestiture is when a company sells its product line, division or a subsidiary.

Dividend
Dividend is a portion of the earnings of the business that is paid to the shareholders of the company.

Dividend Capitalization
Dividend capitalization is the method for estimating the cost of the firm's common equity.

Dividend Payout Ratio

Dividend payout ratio gives the percentage of earnings that are given as dividends.

Dividend Per Share

Dividends per share are calculated by Dividend per share = Total Dividend / Number of Shares.

Dividend Yield Ratio

Dividend yield ratio = Latest Annual Dividends / Current Share Price

Division
A division is a unit or a part of the company that is runs its operations independently.

Document Control
Document control is the department in the company that looks after the documentation in the company and take
care of all the documents.

Document Reconciliation
Document Reconciliation is the synchronization and verification of all the documents.

Document Review
Document Review is a technique of data collection by examining existing records.

Doomsday Ratio
Doomsday ratio is calculated by Doomsday Ratio = Cash in Hand / Total Liability

Double Accounting
Double accounting is a fraudulent or unintentional double counting of assets or liabilities.

Double Entry Accounting

Double entry accounting is recording the debit as well as the credit effect of the entry.

Double Leverage
Double Leverage refers to a situation where the holding company raises the debt and dowstreams it to the
subsidiary company.
28
Doubtful Debts
Doubtful debt is a debt owed to the business the recovery of which, is not certain.

Downpayment
Down payment is a lump sum payment made at the time of purchase.

Draft
A draft is a note that signifies a contract between a buyer and seller, saying that the buyer will pay the specified
sum of money at the end of the specified period.

Draw
Refer Proprietor's Draw

Drawdown
Drawdown shows the quantity of value lost, either as a percentage or in currency terms

Drawee
Drawee is the person in whose favor a check/bill etc. is drawn.

Duality Concept
Duality concept is an accounting concept which says that every accounting entry will have two effects, debit
and credit.

Due Diligence
Due diligence is the level of diligence that the internal audit committee is expected to maintain.

Duty
Duty is the tax which is imposed on imported goods.

E
E & OE
E & OE is an abbreviation for Errors and Omissions Excepted.

E&P
E & P is an abbreviation for Earnings and Profits.

Earned Income
Earned income is the income earned by selling goods and services.

Earning Asset
Earning asset is simply an asset which has a capacity to earn.

Earning Capacity
Earning Capacity is the net average earnings of an asset at any given point of time.

Earning Power
Earning Power = EBIT / Total Assets
29
Earnings
Earnings is the financial ability of the business to make distributions to its shareholders.

Earnings before Taxes

Refer Profit Before Taxes

Earnings from Operations

Earnings from operations = Sales - Operating Costs

Earnings per Share

Earnings per share = Profit After Tax / Number of Shares

EBIT
EBIT is the acronym for Earnings Before Interest and Taxes.

EBITDA
EBITDA is the acronym for Earnings Before Interest, Taxes, Depreciation and Amortization.

EBITDARM
EBITDARM is the acronym for Earnings Before Interest, Taxes, Depreciation, Amortization, Rent and
Management fees.

Economic Cost
Refer Opportunity Cost

Economic Entity
Economic entity is the accounting concept that provides a context for economic events for recording the
transactions.

Economic Order Quantity

Economic order quantity is that level of inventory to be ordered which minimizes the cost of holding and
transporting inventory along with having the required stock all the time so that the production activity does not
get hindered.

Economic Value
Economic value is the value of the asset derived from its earning capacity.

Economies of Scale
Economies of scale is a theory that the more quantity you buy, the lesser is the average cost of each individual
item.

Effective Interest Rate

Effective interest rate is the cost of credit computed on a yearly basis and expressed as a percentage.

Effective Tax Rate

Effective tax rate is the net rate of all the taxes that a person/business pays on income. Effective Tax Rate = total
taxes paid / total income

Efficiency
30
Efficiency is the comparative ratio of output to input.

Embezzlement
Embezzlement is fraud or misappropriation by an entrusted person, e.g. by employees.

EMI
EMI is the acronym for Equated Monthly Installments.

Employee Compensation
Employee compensation is the wages/salaries and all the other benefits provided to the employee by the
employer.

Endorsement
Endorsement is to forward a note/bill/check by the original payee.

Engagement
Engagement is to pledge, bind or come together of two or more entities.

Engineered Costs
Engineered costs are those costs which are directly linked to output.

Entity Concept
Entity concept of accounting says that the business and its proprietors are different entities and the personal
transactions of the proprietor should not be included in the books of accounts.

EOM
EOM is the acronym for End of the Month

EOY
EOY is the acronym for End of the Year

Equity
Equity means the ownership or the percentage of ownership that a person has in a company.

Equity Accounting
Equity Accounting is the practice of showing the undistributed profits of another company in which one
company holds an ownership of below 50%.

Equity Capital
Equity capital is a way of financing where the company's equity is sold to investors.

Equity Financing
Equity financing is a way of financing by issuing common stock or preferred stock.

Equity Holding
Equity holding is holding a share of capital in a company which gives the shareholder the rights to vote, receive
dividend etc.

Equity Share
An equity share is defined as the share of the total equity held by the investor.
31
Equity to Asset Ratio
Equity to asset ratio gives the amount of assets that are financed by the shareholders' equity capital.

Errors of Commission
Errors of commission are those that occur because some incorrect action is taken.

Errors of Omission
Errors of omission are those that occur because some action is not taken.

Errors of Original Entry

Errors of original entry are those where a wrong amount is entered on both debit and credit sides in the journal.

Errors of Principle
Errors of principle are those where the entry is made to a wrong category of account.

Estate
Estate is all the assets owned by the company at the time of death of the holder of the assets

Estate Taxes
Estate taxes are the taxes levied on the transfer of property from the deceased to the legal heirs.

Ethical Standards
Ethical standards are written documents that contain the basic principles and essential procedures along with the
related guidance in the form of explanations and other material.

Excise Tax
Excise tax is the tax that is levied by the federal government or the state government on activities such as
manufacture, occupation, privilege, sale and non-deductible consumption.

Executor
An executor is a legal entity, specified in the will of the deceased that is vested with the power to execute the
will.

Exempt
Exempt is to be free from a tax liability.

Expected Annual Capacity

Expected annual capacity is the production capacity planned for the year.

Expendable
Expendable item is one that can be used and discarded and will not affect the end product.

Expenditure
Expenditure is the cost incurred in trying to generate revenue.

Expenses
Expenses are daily costs incurred to run and maintain a business.

External Audit
32
External audit is the audit performed by an entity which is external to the business.

Extraordinary Items
Extraordinary items are those which occur infrequently and are unusual.

F
Face Value
Face value is the value that is printed on the face of a commodity.

Factoring
Factoring is to buy a debt at a discount.

Factory Overhead
Factory overheads are those costs incurred within the factory that cannot be directly assigned to direct costs.

Fair Market Value

Fair market value of a commodity is the value at which the seller is willing to sell the commodity and the buyer
is ready to buy it.

Fair Value
Fair value is the value at which a seller is willing to sell and the buyer is willing to buy an asset.

F&A
F & A is the commonly used acronym for either Facilities and Administrative costs or Finance and Accounts or
Finance and Administration.

Favorable Variance
A variance is said to be favorable when the actual spending/use of resources by the business is less than the
standard spending/use.

FBWT
FBWT is the acronym for Fund Balance with Treasury.

FDI
FDI is the acronym for Foreign Direct Investment.

Fees Earned
Fees earned is an income statement account which shows the service revenues earned during the period.

Fees Simple
Fees simple implies absolute ownership over a real property.

FF & E
FF & E is the acronym for Furniture, Fixtures and Equipment.

Fictitious Asset
Fictitious asset is the debit balance on the asset side of the balance sheet. Intentional creation of fictitious assets
may amount to fraud.
33
Fiduciary
Fiduciary is a business or an individual that is empowered to act for another in good faith and trust.

FIFO
FIFO is the acronym for First In First Out. It assumes that the inventory that is purchased first is used or sold
before the inventory that is purchased later.

Finance
Finance may be used to mean either money, or the subject that deals with effective management of funds or a
department in the company which is in charge of managing funds.

Finance Charge
Finance charge is the total amount expressed in dollar terms which you will be charged as interest for loan.

Financial Accounting
Financial Accounting is the process of recording all the transactions of the business for reporting and analysis.

Financial Analysis
Financial analysis is the process to analyze the financial statement of a company.

Financial Cash Flow

Financial cash flow is the cash flow which is generated by the assets of the firm and how those funds are
distributed to the shareholders.

Financial Budget
Financial budget can be broken up into two types. Capital budget is the forecast for large expenditures and cash
budget is the forecast for cash receipts and disbursements.

Financial Engineering
Financial engineering is the process that deals with creation and combination of a variety of financial
instruments in order achieve a defined financial objective

Financial Gearing
Financial gearing is any borrowing which the business undertakes.

Financial Interest
Financial interest is any relationship with a commercial entity.

Financial Leverage
Financial leverage is using debt to increase the return on equity

Financial Management
Financial management is a subject that deals with financial management and control, through analysis of
financial statements.

Financing Cost
Financing cost is the difference between the cost of purchasing the asset and the return that the asset provides.

Finished Goods Inventory

34
Finished goods inventory is the stock of finished goods lying unsold in the warehouse.

FIT
FIT is the acronym for Federal Income Tax.

Fixed Asset
Fixed assets are those assets that are required for normal conduct of business.

Fixed Bond
Fixed bond is a type of bond that pays interest at a fixed rate till maturity

Fixed Charge Ratio

Fixed Charge Ratio = Fixed Costs / Total Expenses.

Fixed Costs
Fixed costs are those costs which do not vary depending on the level of production and sales.

Fixed Deposits
Fixed deposits are amounts which you keep with the bank for a specified period of time and earn a specific rate
of interest which is higher than the rate for savings accounts.

Fixed Incomes
Fixed income is the type of income which you get from an investment. Interest on bank savings is an example
of fixed income.

Fixed Overheads
Fixed overhead costs are those costs that are not directly linked to production and remain fixed irrespective of
the level of production and sales.

Flat Interest
Flat interest rate is the rate charged on the starting amount rather than the current balance.

Flat Rate
Flat rate means that the price of a commodity will remain the same, irrespective of the volume sold.

Forecast
Forecast is an estimate or prediction regarding the business results.

Forensic Audit
Forensic Audit is examining the evidence regarding an assertion made in the court of law.

FP & A
FP & A is the acronym for Financial Planning and Analysis.

Freight
Freight is the cost incurred in transporting assets or goods to or from a warehouse or place of production.

Fringe Benefit
Fringe benefits are the non-monetary benefits provided to employees.

35
FRS
FRS is the acronym for Financial Reporting Standard.

Full Charge Bookkeeper

A full charge bookkeeper is one who can do all the accounts work right from journal preparation to making the
final financial statements.

Full Cost Recovery

Full cost recovery is adjusting the prices of goods/services so that all the fixed and variable costs of the product
are met.

Fully Depreciated
An asset is said to be fully depreciated when it has already been charged with the maximum total depreciation
as is allowed by the tax authorities for that asset.

Fund
A fund is an amount of money that is set aside for a certain purpose.

Funds Employed
Funds employed is the average of the Net Working Capital and the Fixed Assets

Funds Flow
Funds flow is the total funds generated from operations over the course of business activity.

Future Value
Future value is the value of a commodity or an asset at a future period of time.

FYE
FYE is the acronym for Fiscal Year Ended.

G
GAAP
GAAP is the acronym for Generally Accepted Accounting Principles, which is an accepted set of accounting
procedures, policies and rules. Read on for more about the U.S. GAAP – Generally Accepted Accounting
Principles

G&A
G & A is the acronym for General and Administrative Overheads.

Gain
Gain is the excess of total revenue over total expenses. Gain may also be used to refer to a rise in value, rate or
prices.

Garnish
Garnish is to claim the debtor's wages/salary under a court order for previously defaulted debts.

Gearing Ratio
Gearing ratio is the ratio that measures the percentage of the total capital employed financed by long term debt.
36
Generally Accepted Auditing Standards
Generally Accepted Auditing Standards are the standards, rules and guidelines set by the Auditing Standards
Board of the American Institute of Certified Public Accountants.

Gilt
Gilt, in general use, is a bond issued by the government.

Global Bond
Global bond is a bond which can be traded outside the country of its issue.

Global Funds
Global Fund is a type of mutual fund where the fund company can invest in companies located anywhere in the
world

GMROI
GMROI is the acronym for Gross Margin Return on Investment.

Going Concern Concept

Going Concern Concept of Accounting assumes that the business will remain in existence for all the foreseeable
future.

Going Public
Going public is used to indicate that a certain business is going to issue publicly traded share capital.

Going Rate
Going rate is the average cost of the products or services.

Golden Rules of Accounting

The Golden Rules of Accounting govern the treatment of various types of accounts in case of an economic
event.

 For personal accounts, the rule is Debit the receiver; credit the giver.
 For real accounts the rule is Debit what comes in; Credit what goes out.
 For Nominal Accounts the rule is Debit all expenses or losses; Credit all incomes and gains.

Goods
The commodity in which a business trades, is collectively known as goods.

Goodwill
Goodwill is an intangible benefit one business enjoys over its competitor as the market is ready to absorb the
goods of the former company even at a higher price.

Governance
Governance is the act of exercising authority or simply governing which is performed by the Board of
Directors.

GP Ratio
GP Ratio is the acronym for Gross Profit Ratio. The Gross Profit ratio measures the relationship between the
gross profit and sales. GP Ratio = (Gross Profit * 100) / Sales
37
Gross
Gross is an amount before any deductions or additions are made to it.

Gross Debt
Gross debt is the total of all the debt obligations of the business.

Gross Margin
Gross Margin is used synonymously with Gross Profit or Gross Profit Ratio.

Gross Profit
Gross profit is the excess of sales over production costs.

Gross Profit Margin on Sales

Refer GP Ratio

Gross Profit Method

Gross Profit Method is the inventory estimated that is based on gross margin.

Gross Revenue
Gross revenue is the money earned from sales of goods.

Gross Sales
Gross sales is the total value of sales prior to any discounts, deductions or returns.

H
Hard Assets
Hard Assets include physical assets and financial assets and do not include intangible assets.

Hard Costs
Hard costs are the total costs incurred on the purchase of assets.

Hidden Assets
Hidden assets are any value generating assets in the business that are not included in the balance sheet of the
company.

High Credit
High Credit is the highest that a debtor has ever taken from any one creditor.

High Low Method

High-Low method is a method of approximating cost method is one which considers only the highest and
lowest points of the given data and the activity in the given range.

High Yield Debt

High Yield Debt is a debt instrument that gives a higher yield/return as it is a higher risk intrument.

Hire and Purchase Agreement

Hire and Purchase agreement is an agreement where the buyer hires an asset/goods at a rate of rent and at the
38
end of the renting period and after paying all the installments, receives ownership of the asset or goods.

Holding Company
A holding company is one that holds more than 50% stake in another company (known as subsidiary company).

Horizontal Financial Analysis

Horizontal Financial Analysis is the analysis of the ratios of one company with those of the competitors and
with those of the industry.

Hostile Takeover
A hostile takeover is when one company buys out the other company whether the board approves of it or not. It
is usually done by buying the majority stake of the company from the publicly traded share, thus becoming the
majority stakeholder, bypassing the board of directors.

Human Capital
Human capital is the intellectual capital of the employees which the company enjoys.

Hybrid Instrument
Hybrid instrument is a bundled instrument containing two or more different types of risk management
instruments.

I
Identifiable Assets and Liabilities
Identifiable assets and liabilities include both tangible and intangible items in the balance sheet.

Idle Time
Idle time is the time for which production activity gets suspended.

Immovable
Immovable is generally used in the context of assets which are permanent and stationary, like land and
buildings.

Impairment of Value
Impairment of value is the permanent loss of value of an asset.

Implicit Rate of Interest

The rate of interest is said to be implicit when the stated interest rate is different from the market rate.

Implied Costs
Implied costs are the hidden costs incurred on the assets that have already been paid for.

Imprest Basis
Imprest basis means that the cash balance for expenditure in the cash account is replaced at the end of every
period.

Income
Income is the amount of money received during a period of time on account of anything.

39
Income Gearing Ratio
Income Gearing Ratio = Interest Expense / Operating Profit.

Income Tax
Income tax is the tax paid as a percentage of business or personal income.

Income Taxes Payable

Income taxes payable is the amount of money payable as income tax, but is not paid yet.

Incorporated
Incorporated is a type of business entity that has been allowed to operate as a corporation by the approval of the
state government.

Incremental
Incremental means additional.

Incremental Budget
Incremental budget is the budget for the fixed overhead costs.

Incremental Cost
Incremental cost is the cost incurred for producing one additional unit of output.

Incremental Cost of Capital

Incremental cost of capital is the weighted cost of the additional capital raised.

Indirect Cost
Indirect costs are those costs which are not directly related to the process of production.

Indirect Shareholding
Indirect shareholding is when a company A holds a direct shareholding in company B and company B holds a
direct shareholding in company C, company A is said to have an indirect shareholding in company C.

Industry Analysis
Industry analysis is the analysis of the financial performance of an industry as a whole.

Inflation Accounting
Inflation accounting is a form of accounting where the amounts are adjusted to the changing prices.

Inflation Adjustment
Inflation adjustment is to adjust the figure on an amount for increase or decrease in inflation.

Inherent Risk
Inherent risk is the risk that is intrinsic to any activity, investment etc.

Insolvency
Insolvency is a situation where an entity's liabilities exceed its assets and cannot be paid off.

Installation
Installation is the cost incurred to put an asset into use.

40
Installment Sale
Installment sale is selling a commodity and receiving the payments for it over successive periods instead of a
lump sum.

Insurance Claim
Insurance claim is the written notification which the insured gives to the insurer to ask for the amount due under
the policy.

Intangible Asset
An Intangible asset is an asset that cannot be physically seen or felt, but its presence benefits the company, e.g
goodwill.

Intellectual Capital
Intellectual capital is the resource of specialized knowledge that a company has and is recognized as an asset to
the company.

Interest
Interest is a fixed charge that is given as compensation for parting with immediate liquidity.

Interest-Bearing
Interest bearing is used to describe something that gives interest.

Interest Coverage
Interest Coverage Ratio = Net Interest Expense / EBIT

Interest Earnings
Interest earning is the total interest received by the company on various investments.

Interest Expense
Interest expense is the total interest paid by the company for various debts.

Interest Rate
Interest rate is a percentage of the total investment/debt at which the interest amount is given/paid.

Interim Audit
Interim audit is an audit that is conducted at some time during the year.

Interim Dividend
Interim Dividend is the dividend that is paid at some time during the year

Interim Statement
Interim statement gives the financial position of the business at some time during the year.

Internal Audit
Internal audit is the audit carried out by the audit committee in the company itself.

Internal Rate of Return

Internal rate of return is the rate of return, expressed as a percentage, the net present value for which is zero.

Intrinsic Value
41
Intrinsic value is the value of something by itself, irrespective of its use and whether it is used.

Inventory
Inventory is the stock of raw materials, work in progress or finished goods

Inventory Accumulation
Inventory accumulation is the extra inventory that was stored on account of unplanned events.

Inventory and Purchases Budget

Inventory and purchases budget is the budget set by the company for purchasing and storing inventory.

Inventory Control
Inventory Control is to maintain th optimum amount of inventory in the stores of the company.

Inventory Obsolescence
Inventory is said to be obsolete when it is no longer usable or salable.

Inventory Profits
Inventory profit is the profit that the company earns due to the rise in the prices of inventory.

Inventory Transfer
Inventory transfer is a process that physically tracks the transfer of inventory from one place to another.

Inventory Turnover Ratio

Inventory turnover ratio gives the number of times the inventory is purchased and used up for production or
sold in a given period.

Inventory Valuation
Inventory valuation is the process of assigning monetary value to inventory.

Investment
Investment is purchasing something with an intention to gain a profit from its sale or getting income for it at
regular intervals. Read on for Types of Investments

Investment Capital
Investment capital is the capital raised by the issue of shares or long term debt instruments like debentures.

Investment Expense
Investment expense is the expenses incurred on the inventory other than those expenses which are incurred for
purchasing the inventory, like installation costs, brokerage etc.

Investment Tax Credit

Investment tax credit is a tax credit that is given to the businesses to write off a portion of the cost of purchasing
equipment.

Investment Turnover
Investment turnover is the ratio used to measure the number of times an asset or investment revolves.

Invoice
An invoice is an itemized bill which gives the details of the items purchased or sold.
42
IPO
IPO is the acronym for Initial Public Offering. It is the first time that a business goes public with the issue of
shares.

J
JIT
JIT is the acronym for Just-in-Time.

Job Costing
Job Costing is the allocation of time, material and expenses to an individual job or project.

Joint Account
Joint Account is the financial account that is used and run by two or more account holders.

Joint Payee Endorsement

Joint Payee endorsement is when a bank draft is made out to two parties, and both parties are required to
endorse the back of the bank draft before it is honored by the bank.

Joint Stock Company

Joint Stock Company is a type of company that enjoys some features of a partnership and some features of a
corporation.

Joint Venture
Joint Venture is a business activity started by two or more people, who invest capital for that business activity.
Read on for more about Venture Capital

Joint Ventures and Investments

Joint Ventures and Investments is the total investments and equity in a joint venture.

Journal
Journal is the first record of transactions of the business as they occur.

Journal Entry
Journal entry is a record of the transactions made by the business.

K
Kaizen Budgeting
Kaizen Budgeting is the budgeting approach which takes into consideration projected future costs rather than
current practices.

Kaizen Costing
Kaizen costing is reducing the cost of production in small steps.

43
L
Lag Time
Lag time is the time between two closely related phenomena such as stimulus and response.

Land
Land is the asset account in which the details and the costs of land holding for the business are given.

Leasehold Improvements
Leasehold improvements are repairs and improvements made to leasehold land by the lessee.

Ledger
Ledger is the book which consists of various individual accounts to which the journal entries are posted.

Ledger Group
Ledger group is a group of ledgers that consist of a primary ledger and a number of secondary ledgers.

Legal Entity Assumption

Refer Entity Concept

Leverage
Leverage is the property rising or falling at a greater proportion than the comparable investments.

Leverage Ratios
Leverage ratios measure the impact of equity and debt capital on profitability.

Levied
Levied is a charge that is imposed or collected.

Liability
Liability is a loan or a debt for the business that needs to be discharged.

LIFO
LIFO is the acronym for Last In First Out. It means that the inventory which is purchased last is used or sold
first.

LIFO Liquidation
LIFO Liquidation is the process of reducing the reported value of the inventory.

LIFO Reserve
LIFO reserve is the difference between the LIFO level of inventory and the FIFO level of inventory.

Lifting and Operating expenses

Lifting and Operating expenses are generally incurred in the oil and energy industry, in the running and
maintenance of oil wells.

Limited Company
Limited Company is a legal entity that is owned by shareholders. Read more on Corporation Types.

44
Limited Liability
Limited liability is when the owner's liability for the business is restricted to his share in the business. Read on
for An Explanation of LLC (Limited Liability Company).

Line of Credit
Line of Credit is an agreement between a financial institution and a business where the financial institution
agrees an upper limit on the amount sanctioned without having to take another loan.

Liquid Assets
Liquid assets are cash and those assets that are easily convertible to cash.

Liquidating Dividends
Liquidating dividends are those dividends that are paid by the company at the time of liquidation/bankruptcy

Liquidation
Liquidation is selling off all the assets of the business to pay off the debts of the business.

Liquidity
Liquidity is the ability of the business to meet all current debt obligations.

Liquidity Ratio
Liquidity Ratio = (Cash + Marketable Securities) / Current Liabilities

Loaded Labor Rate

Loaded labor rate is the total of the employee remuneration, benefits, capital expenses and other overheads on
labor.

Loan
Loan is when a lender allows the borrower to take some of the assets owned by the lender for a specified
amount of time, that will be returned at the end of the specified period along with interest. Read on to know
about Payday Loans and Mortgage Loan Underwriting

LOC
LOC is the acronym for Letter of Credit.

Long Lived Assets

Long lived assets are those which are not consumed in the normal course of business.

Long Term Debt

Long term debt is a type of financing that is taken by a business and the maturity of which is several years
hence.

Long Term Debt-to-Equity

Long term Debt-to-Equity Ratio = Long Term Liabilities / Shareholder Equity

Long Term Liabilities

Long term liabilities are those which are due for over an year.

Long Term Receivables

Long term receivables are those receivables which will be received after a year.
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Loss
Loss is the excess of expenses over incomes in any context.

M
Maintenance
Maintenance is the cost incurred for keeping an asset in working condition.

Managed Receivables
Managed receivables are those receivables on which the company performs billing and collection.

Management Accounting
Management accounting deals with the entire spectrum of collection, recording, examining and managing the
financial activities of the company by the management.

Manufacturing Account
Manufacturing account gives the total of the prime and overhead costs of manufacturing finished goods.

Manufacturing Overhead
Manufacturing overheads include all the indirect labor costs, indirect material costs and indirect expenses used
for manufacturing.

Marginal Benefit
Marginal benefit is the extra amount of benefit derived by an increase or decrease in a unit of an activity.

Marginal Cost
Refer Incremental Costs

Marginal Profit
Marginal profit is the incremental profit derived by an increase in production by one unit of the goods.

Margin of Safety
Margin of Safety shows how far the sales level can fall, till the business starts incurring a loss.

Marketable Capacity
Marketable capacity is the difference between the total capacity absorbed by the market and the predicted
capacity.

Marketable Security
Marketable security is an equity or debt security that can be easily traded.

Market Capitalization
Market capitalization is the total value of the issued shares in the market. Market Capitalization = Number of
Shares * Current Market Price

Marketing Expense
Marketing expense is the money that the company spends on marketing their goods during the accounting
period.
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Market to Book Value
Market to Book Value = Market Capitalization / Tangible Assets

Master Budget
Master Budget is the main budget prepared by the business which includes several budgets that relate to each
head for which the budget is prepared.

MAT
MAT is the acronym for Management, Administrative and Technological.

Matching Concept
Matching concept is the concept in accounting that says that the costs and revenues should be matched in the
income statement.

Material Control
Material control is proactively controlling the materials that are used in the manufacturing activity.

Materiality Principle
Materiality principle says that accountants should use the Generally Accepted Accounting Principles, except
when their use is difficult or financially unviable.

Materials Requisition Planning

Materials Requisition planning is the process of planning for materials that are required regularly in the process
of production.

Materials
Materials is generally used to refer to the raw materials that are used in the process of production.

Maturity Value
Maturity value is the value that an investment will realize at the end of the maturity period.

Merger
Merger is the union of two or more businesses where one is not absorbed by the other, but instead, they both
maintain their separate identities.

Minimum Wage
Minimum wage is the legally fixed lowest per hour wage that can be paid to an employee.

Miscellaneous Income
Miscellaneous income is the income which is derived from sources other than the usual sale of goods.

Mixed Costs
Mixed costs are those costs which have both, a fixed and variable component.

Modified Accrual Basis

Modified accrual basis is a combination of both the cash and accrual bases of accounting.

Modified Internal Rate of Return

Modified internal rate of return is the rate of return which is modified to match up with the required rate of
47
return.

Monetary Assets
Monetary assets are the assets that are measured in their present collectible amounts, as opposed to their
historical costs.

Money Measurement Concept

Money measurement concept is one of the most fundamental concepts in accounting which says that all the
transactions should be measured in money terms.

N
Natural Accounts
Natural accounts are user-defined accounts for the various activities which are associated with the accounting
entity that capture data at the transaction level.

Natural Classification
Natural classification of costs classifies the cost based on the nature of the cost item.

NEBT
NEBT is the acronym for Net Earnings Before Taxes.

Negative Amortization
Negative Amortization is when the outstanding principal balance of the loan increases rather than decreasing, as
is the case with normal amortization.

Negative Cash Flow

Negative Cash flow is when the cash outflow exceeds the cash inflow.

Negative Goodwill
Negative goodwill is said to arise when the net assets exceed the cost of acquisition.

Negative Working Capital

Working Capital is said to be negative when the current assets exceed the current liabilities.

Negligence
Negligence is defined as an omission to do something that a reasonable man would have not forgotten to do.

Negotiable Instrument
Negotiable instrument is a document which represents a debt or money payable by one person to another.

Net
Net is the final amount calculated after all the necessary deductions are made to the gross amount.

Net Accounts Receivable

Net accounts receivable is the total accounts receivable minus a deduction for those accounts which, the
company assumes, won't be collected.

Net Assets
48
Net assets is the difference between total assets and non-capital liabilities.

Net Book Value

Net book value is the current book value of an asset or a liability.

Net Cash Flow

Net cash flow is the difference between the cash inflows and the cash outflows for a business.

Net Contribution
Net contribution is the remaining amount after all the deductions are made to the gross amount.

Net Debt
Net Debt = (Debt + Short Term Loans) – Current Assets.

Net Earnings
Refer Net Income

Net Income
Net income is the excess of the total revenue generated by the business over the expenses.

Net Interest Margin

Net interest margin is the excess of interest received on investment over interest paid for debt.

Net of Taxes
Net of taxes usually indicates the effect of applicable taxes, which has been considered in determining the
overall effect of an item on the financial statements.

Net Operating Income

Net operating income is the excess of sales revenue over operating costs.

Net Operating Loss

Net operating loss is the excess of operating costs over sales revenue.

Net Operating Profit after Taxes (NOPAT)

NOPAT = Operating Income x (1 - Tax Rate).

Net Present Value

Net Present Value (NPV) is the difference between the present value of the full stream of future inflows of cash
from an investment and the present value of cash outflow for purchasing the investment.

Net Profit
Net profit is the excess of income from all sources over the expenses.

Net Purchase
Net purchases is the amount of purchases after deducting the purchase returns, allowances and discounts.

Net Receivables
Refer Net Accounts Receivables

Net Revenue
49
Net revenue = Gross revenue – (Discounts + Allowances + Sales Returns + Freight)

Net Sales
Net sales is the amount of sales attained after deducting the sales returns, allowances, discounts etc.

Net Worth
Net Worth of a Business = Total Assets – Total Liabilities

Nominal Accounts
Nominal accounts are account items for incomes and expenses of the business.

Nominal Capital
Nominal capital is the total face value of the authorized share capital.

Nominal Interest Rate

Nominal interest rate is the rate of interest that is specified in the contract document for a bond, loan etc.

Non-cash Expense
Non cash expenses are those which appear on the debit side of an income statement, but there is no actual
outflow of cash for the same, for e.g. depreciation

Non Current Assets

Non current assets are those assets in the balance sheet that are not current assets.

Non Equity Share

Non equity share is a type of share which shows the indebtedness of company to the shareholder, but isn't part
of the equity interest in the entity.

Non Fixed Asset

Non fixed assets are those assets in the balance sheet that are not fixed.

Non Performing Asset

Non performing asset is the asset that does not provide a return or is not effectual in generating income.

Non Profit Organization

Non-profit organizations are those organizations running for social benefit and not for making profit.

NOPLAT
NOPLAT is the acronym for Net Operating Profit Less Adjusted Taxes.

Not for Profit Accounting

Not for profit accounting is the practice of accounting for non profit organizations.

NPPE
NPPE is the acronym for Net Property, Plant and Equipment.

NPV
NPV is the acronym for Net Present Value

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NWC
NWC is the acronym for Net Working Capital.

O
O&M
O & M is the acronym for Operations and Management.

Objectivity Principle
Objectivity principle of accounting states that transactions will be recorded on the basis of objective evidence
available.

Off Balance Sheet Asset

An off balance sheet asset is one that represents a resource of the entity or something that is projected to have a
future economic value.

Off Balance Sheet Financing

Off the balance sheet financing is a borrowing the details of which are not given in the balance sheet

Off the Books

Off the books is something which is not recorded in the books of accounts.

On Account
On account is a payment made to discharge the debt in full or in part.

Open Account
Open account is an arrangement where the payment may not be guaranteed.

Open Book Credit

Open book credit is a form of credit where the payment may not be assured.

Opening Balance
Opening balance is the balance carried forward of the account to the next accounting period.

Opening Stock
Opening stock is the opening balance of raw or processed inventory.

Operating Allowance
Operating Allowance is an advance/reimbursement which is made against certain costs/expenses and/or a
reduction in amount payable to cover those certain costs/expenses.

Operating Assets
Operating assets are those long term assets that the business intends to use rather than sell.

Operating Budget
Operating budget is a combination of the various budgets that are set for operations. The various budgets
included in operating budget are sales and collection budget, cost of goods sold budget, inventory and purchases
budget and operating expenses budget.

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Operating Cash Flow
Operating cash flow is the inflow and outflow of cash from the business for operational activities.

Operating Cash Flow Ratio

Operating cash flow ratio is calculated by cash flow from operations/current liabilities.

Operating Cost
Operating costs are those costs which are incurred for maintaining property.

Operating Cycle
Operating cycle is the time difference between purchasing raw materials and realizing the cash from the sales of
finished goods.

Operating Expenditure
Operating Expenditure is the expenditure incurred on day-to-day items of expense in the business.

Operating Expenses
Operating expenses are the general and administrative and selling expenses of the business.

Operating Expenses to Sales

Operating expenses to sales ratio gives the percentage of the total sales revenue that is used to pay for operating
expenses.

Operating Income
Operating income is the excess of revenues from operations over the operating expenses.

Operating Leverage
Operating Leverage is the ratio of fixed operating costs to the total operating costs.

Operating Margin
Operating margin is the ratio which compares operating income to sales revenue.

Operating Profit
Operating profit is the excess of gross profit over over operating expenses.

Operating Profit to Sales

Operating profit to sales ratio is the ratio which compares the operating profit to the sales and shows how much
percentage of sales constitutes the operating profit.

Operating Ratio
Operating Ratio = Operating Expenses / Operating Revenues

Operating Revenue
Operating revenue is the revenue earned on the basis of day-to-day operations like sales.

Operating Risk
Operating risk is the risk inherent to the operations of any specific business.

Operating Transfer
Operating transfer is where a transfer of funds or resources is made from one account to another to fund the
52
operations of that account.

Opportunity Cost
Opportunity cost is the cost of choosing or not choosing one investment plan or an operation over another.

Order of Liquidity
Order of liquidity is a format for preparing the balance sheet where all items on the asset side of the balance
sheet are listed in descending order of liquidity.

Order of Permanence
Order of permanence is format for preparing the balance sheet where all the fixed assets are arranged in the
descending order of their permanence.

Ordinary Asset
Ordinary asset is a non-capital asset that is used for business purposes.

Ordinary Income
Ordinary income is the income earned through the ordinary course of business and not from any capital gains or
extraordinary windfall gains.

Organization Cost
Organization cost is the expenses incurred to begin a business entity. These costs are also known as startup
costs and include the money spent on legal fees etc.

Other Income
Other income is the income derived from sources other than the main activity of the business.

Out of the Pocket

Out of the pocket expenses are those that require an outlay of cash in a given time period.

Outstanding
Outstanding is an unpaid amount owed to someone.

Outstanding Shares
Outstanding shares is the number of shares that are currently issued by the company and held by the
shareholders.

Overdraft
Overdraft is a facility given by a bank to an account holder that allows the account holder to have a negative
balance.

Overhead
Overhead is the cost which is not directly incurred on production, but indirectly incurred for other reasons.

Overhead Budget
Overhead budget gives all the expected production costs other than direct materials and direct labor.

Overhead Rate
Overhead rate is calculated by totaling all the expenses for one year, excluding labor and materials, and then
divided by the total cost of labor and materials.
53
Overtime
Overtime is the work done in excess of the regular working hours.

Overstated
Something is said to be overstated when it is quoted to be more than it actually is.

P
PA
PA is the acronym for per annum.

Paid Up Capital
Paid up capital is the total amount paid by the shareholders for acquiring the stock of the company.

P&L
P & L is the acronym for profit and loss statement. It gives the details regarding the incomes and expenses of
the business over the accounting period.

Parent Company
Parent company is the company which has a lot of subsidiaries under it.

Partnership
Partnership is a business type which has not been incorporated but has more than one owner.

Par Value
Par value is the face value. It is usually used while referring to bonds or other financial instruments.

Payable
Payable is some amount which is not paid by the business. It is a liability.

Payables Turnover
Payables Turnover = Purchases / Payables

Payable to Shareholders
Payable to shareholders generally refers to the payments that are to be made to shareholders.

Payback Period
Payback period is the period of time required to recover the amount spent for capital investment.

Pay Cycle
Pay cycle is a set of rules that define the criteria for selection of scheduled payments for payment creation.

Payment Due Date

Payment due date specifies the last date till which the payment must be made.

Payout Ratio
Payout ratio is the dividend paid by the company to the shareholders out of earnings expressed as a percentage.

54
Payroll
Payroll is the list of all the employees in the organization and their salaries. Read on for more about Payroll
Taxes

PBT
PBT is the acronym for Profit Before Taxes.

Per Annum
Per annum means each year

P/E Ratio
Price to Earnings ratio compares the current price of the share to the earnings per share. P/E Ratio = Market
Price of the Share / Earnings per Share.

Performance Budget
Performance budget is a budget format that individually relates the input of resources and the output of services
for each unit in an organization.

Performing Asset
Performing asset is an asset which has been giving a good steady return over its functional life.

Period Cost
Period costs are those which cannot be accumulated and need to be paid off by charging them against the
revenue in that year itself.

Periodicity Concept
Periodicity Concept is the accounting concept which states that each accounting period has an economic activity
associated with it, and that this activity can be measured, accounted for, and reported.

Periodic Valuation
Periodic valuation of the assets deals with determining the future value of assets and investment portfolios.

Perpetuity
Perpetuity is an annuity which is payable forever.

Persistent Earnings
Persistent earnings are continually recurring level of earnings from one accounting period to the other.

Personal Accounts
Personal account is a type of account that keeps the record of transactions of different people associated with
the business, such as debtors and creditors.

Personal Equity
Personal equity is that portion of the owned equity that is invested in the asset.

Petty Cash
Petty cash is a cash allowance made for small, day-to-day cash expenses.

Physical Inventory
Physical inventory is the the total inventory present in the warehouses.
55
Piecemeal
Piecemeal is either one thing at a time or a little bit at a time.

PITI
PITI is the acronym for Principle, Interest, Taxes and Insurance.

Plant Asset
Plant asset is the physical asset of the company where all the production activity takes place.

Pledged Accounts Receivable

Pledged accounts receivable is a short term loan arrangement where the accounts receivable of the business are
kept as security with the lender.

Pledged Assets
Pledged asset is the asset given to the lender of a loan as security. In case the person who has taken the loan
defaults on the payment, then the assets will be taken by the lender.

Pledged Revenue
Pledged revenue is that part of the revenue that has to be obligatorily used to service a debt.

PLS
PLS is the acronym for Profit and Loss Sharing.

Portfolio
A portfolio is the details and summary of all the investments as purchased by a business entity or an individual.

Posting
Posting is to record all the transactions from the journal in the individual ledger accounts.

Preference Shares
Preference shares are a type of capital stock, the holders of which enjoy the first right on the dividends of the
company, which may be at a fixed rate and may even be cumulative.

Preferred Creditor
Preferred creditor is the creditor whose debt is to be paid off before paying off the debts of other creditors.

Premium On Capital Stock

Premium on capital stock is the excess of paid value for the shares over the face value.

Pre-Operating Costs
Pre-operating costs are costs which are deferred till the related assets are ready for the revenue service at which
time the costs are charged to operations.

Prepaid Expenses
Prepaid expenses are those expenses which have been paid for in advance

Present Value
Present value is the discounted value of the amount of money receivable in the future as a lump sum or an
annuity.
56
Price to Book Ratio
Price to Book Ratio = Stock Capitalization / Book Value of Shares

Price to Cash Flow Ratio

Price to Cash Flow Ratio = Price per Share / Cash Flow per Share

Price to Revenue Ratio

Price to revenue = Market Value per Share / Revenue per Share

Prime Cost
Prime Cost is the total of direct materials and direct labor used for production

Proceeds
Proceeds is the money that comes into the business on account of sales etc.

Process Costing
Process costing is the costing which is done on the various process of the business to find out the cost of each
process.

Product
Product or goods is the main commodity which is sold by the business to generate its revenues.

Product Cost
Product cost is the cost of inventory in the warehouses of the business.

Product Invoice
Product invoice is the invoice for the sale of products.

Production Budget
Production budget is the budget set for all the activities related to production.

Productive Activity
Productive activity is any such activity which will produce economic value for the business.

Productivity Ratio
Productivity Ratio is the ratio of the output produced by the business to the input used by the business for
production.

Professional Fees
Professional fees are the fees charged by service professionals for the service delivered by them.

Profit
Profit is the excess of income over expenses.

Profitability Ratios
Profitability ratios is the set of ratios which help measure the profitability of the business.

Profit after Tax

Profit after tax is the excess of revenue over all the expenses and after payment of tax.
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Profit Before Taxes
Profit before tax is the profit earned by the business before making the deduction for tax.

Promissory Note
A promissory note is a financial instrument made by the debtor stating that the debtor intends to pay the money
he owes to the creditor in the specified period and is signed by the debtor to that effect.

Proprietary Asset
Proprietary asset is the asset which is considered as intellectual property and should not be disclosed.

Proprietary Theory
Proprietary theory assumes no difference between the business and its owners and considers them as one and
the same.

Proprietor's Draw
Proprietor's draw is the cash withdrawal made by the proprietor from the business for his personal use.

Proprietor's Fund
Proprietor's fund = Owners Capital + Net Profit – Proprietor's Draw

Public Offering
Public issue is the decision made by the company to raise more capital by the public issue of share capital.

Purchase Account
Purchase account is the ledger account in which all the purchases of the raw materials or inventory are recorded.

Purchase Discount
Purchase discount is the discount given by the seller to the business for purchases.

Purchase Method
Purchases method is an accounting method for an acquisition using market value for the consolidation of the net
assets of the two entities on the balance sheet.

Purchase Order
Purchase order is to place a requisition to purchase goods with the supplier of raw materials.

Purchase Returns
Purchase returns is the part of inventory which is returned to the seller due to bad quality, unusable nature of the
goods supplied etc.

Purchases
Purchases are all the goods purchased by the company for production or resale.

Purchases Budget
Each company sets a purchase budget where the total expense on purchases is fixed.

Purchases Ledger
Refer Purchase Account

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Q
Quarterly Report
Refer Interim Statement

Quick Assets
Quick assets is the sum of the current assets minus inventory.

Quick Ratio
Refer Acid test Ratio

Quotation
Quotation is a declaration of price at which the seller is willing to sell his goods.

R
RAB
RAB is the acronym for Regulatory Asset Base.

Rate of Return
Rate of return is the gain or loss made by an investment or a business as a whole, expressed as a percentage.

Ratio
Ratio is a mathematical instrument which helps compare the performance of two accounting results.

Ratio Analysis
Ratio analysis is to use the various ratios that help compare the performance of the company with other
companies, or with its previous results or for checking internal efficiency.

Real Accounts
Real accounts are those accounts which deal with the transactions for an asset or a liability account.

Realizable Value
Realizable value is the value that is expected on converting the assets held by the company to cash.

Realization Principle
Realization principle of accounting states that the revenue should be recognized when the goods are sold or the
service is delivered.

Rebate
Rebate is the payment made to the customer to induce him into a sale or to induce early payment for the sale.

Recast Earnings
Recast earnings are those earnings which can be made if some costs can be eliminated.

Receipt
Receipt can be either an act of receiving money or a document made by the receiver of cash acknowledging that
the money has been received.
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Receivable
Receivable is the money which is due to the business and has not yet been received.

Receivables Turnover
Refer Accounts Receivable turnover

Receiver
Receiver is someone who receives something, which may be cash, assets etc.

Reconciliation
Reconciliation is the process of cross-checking and correcting/adjusting the balance of two statements so that
the figures of both these statements match for the single item.

Recording Principle
Recording principle in accounting governs the time of recording a particular entry. It says that the entry should
be recorded when the cash is earned or pledged rather than when the actual inflow or outflow of cash takes
place.

Recourse Note
Recourse note is the right of the payee to demand payment from the maker or endorser of a negotiable
instrument.

Recovery
Recovery is the collection of amounts receivable that had previously been written of as bad debts.

Recurring Entry
A recurring entry is the entry that occurs regularly on the same date (of different months) and has the same
amount.

Redeemable
Redeemable is something that can be converted to cash.

Redemption
Redemption is to pay off the principal amount on a redeemable debt or security.

Register
Register is to record the entries for the transactions in the official books or registers.

Registered Bonds
Registered Bonds are those for which the names and contact details of the bond holders are maintained by the
issuing company.

Regulation
Regulation is the control or direction according to the rules set by the government.

Reimbursement
Reimbursement is to repay the amount to a person who had previously borne the expense on our behalf.

Related Party Transaction

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Related party transaction is a transaction between two parties where one party has a significant control or
influence over the other.

Relevance Concept
Relevance concept is the accounting concept which refers to the capacity of accounting information to make an
impact on the decision makers.

Reliability Concept
Reliability concept is the accounting concept which says that the financial reporting by the company should be
reliable and trustworthy.

Remittance Advice
Remittance advice is the notification sent to a debtor to remind him of the payment due.

Remuneration
Remuneration is the act of paying for the goods purchased or services received.

Replacement Cost
Replacement cost is the total cost at current prices of an asset which may not necessarily be an exact duplicate
of the subject asset but serves the same purpose or performs the same function as the original.

Replacement Value
Replacement value is the cost spent to replace an item or an asset.

Reported Earnings Per Share

Reported earnings per share is the part of the total profit actually payable to the shareholders divided by the
number of shares available.

Representation Expenses
Representation expenses are those which are incurred for representational purposes such as business parties.

Reserve
Reserve is a pool of money created out of profits for a specific purpose or as a security for contingencies

Residual
Residual is what is left when the rest of the entity is taken away.

Residual Claim
Residual claim is the claim made on the earnings after all the other debt obligations have been satisfied.

Residual Equity Theory

Residual equity theory states that the owners of common stock are the actual owners of the company.

Residual Income
Residual income is the income which will be earned without any additional effort or expense.

Residual Value
Residual value is defined as the book value of a fixed asset after it has been fully depreciated.

Resource Absorption
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Resource absorption is when all the limited resources of the company are absorbed.

Restricted Assets
Restricted assets are those whose use or working is restricted by law.

Results from Operations

Results for operations is the commonly used synonym for financial statement.

Retained Earnings
Retained earnings are that part of the distributable profit which have not been given to the owners, but retained
in the business for future use.

Retained Earnings Statement;

Retained earnings statement is the statement that gives the details regarding the earnings retained by the
company in the business.

Return on Assets
Return on asset is the ratio which compares the net profit after tax to the total assets in the company. Return on
Assets = Earnings after Tax / Total Assets

Return on Capital Employed

Return on Capital employed is a measure of how effectively a business is using its capital. Return on Capital
Employed = Profit Before Income and Taxes / (Total Assets – Current Liabilities)

Return on Equity
Return on Equity = Net Income / Shareholders Equity

Return on Investment
Return on investment measures the total cash coming into the business on account of an investment.

Return on Net Worth

Refer Return on Shareholder Equity

Return on Sales
Return on Sales = Earning before Taxes / Total Sales.

Return on Shareholder Equity

Return on Shareholder Equity = Profit after Tax / Shareholder Equity

Returns Inward
Refer Sales Returns

Returns Outward
Refer Purchase Return

Revaluation
Revaluation is an activity conducted by the company to review the value of the assets of the company to make
sure that they are not undervalued or overvalued.

Revenue
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Revenue is the money that comes in on account of sales of goods or provision of services.

Revenue Adjustment
Revenue adjustment is an entry that adjusts the revenue based on received data.

Revenue Expenditure
Revenue expenditure is the total cost that is incurred on revenue generating activities.

Revenue Principle
Refer Realization Principle

Reversing Entry
Reversing entry is a rectifying entry which is made to correct an original mistake in recording the entry.

Risk
Risk is a chance of losing or not gaining value from an economic activity.

Risk Adjusted Return

Risk adjusted return is subtracting the rate of return of one asset from the rate of return of another asset, both
asset having similar risks.

ROACE
ROACE is the acronym for Return on Average Capital Employed

ROI
ROI is the acronym for Return on Investment. Read on to know How to Calculate Return on Investment.

S
Safety Stock
Safety stock is the amount of stock a company defines as the lowest the inventory level of the company can go.

Salary
Salary is the remuneration paid to the employees of the organization.

Sales
Sales is the money generated by selling the goods of the company. Sales = Number of Units * Cost per Unit

Sales Account
The sales account is the ledger account which gives the details regarding the sales of the business.

Sales and Collection Budget

Sales and collection budget is the amount of sales that the company expects to make in the year and the
revenues that it expects to collect.

Sales and Marketing Expense

Sales and marketing expenses are the total expenses spent on creating awareness for the company and the
products in the market and selling them.

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Sales Discount
The discount allowed by the company on sales to induce early cash payment is called sales discount.

Sales Invoice
Sales invoice is the record of the transaction between the buyer and the seller, made by the seller.

Sales Journal
Sales Journal is where the entry for sales of goods is chronologically made.

Sales Order
Sales order is the contract in which the buyer and the seller of the goods agree on the terms of a contract.

Sales Proceeds
Sales proceeds is the money realized from sales.

Sales Returns
Sales return is the goods returned by the customer to the business due to poor quality, unsuitability etc.

Sales Revenue
Sales revenue is the revenue realized from the sale of goods.

Sales Tax
Sales tax is the tax levied on the sale of a product by the government.

Salvage Value
Salvage value is the scrap value realized on the sale of a fully depreciated asset or a asset which cannot be used
for production.

Scrap Value
Refer Salvage Value

Selling and Administrative Expense Budget

Selling and administrative expenses budget gives the amount that is allocated for selling and administrative
expenses of the business.

Semi Fixed Costs

Semi fixed costs are those costs where one component of the cost is fixed and the other is variable. They are
also known as semi variable costs.

Sensitive Assets
Sensitive assets are those assets, the return or usability of which can be affected by external uncontrollable
factors.

Sensitive Liabilities
Sensitive liabilities are those which have a floating interest rate which can be affected by external
uncontrollable factors.

Sensitivity Analysis
Sensitivity analysis helps the company check the sensitivity of an item in relation to the various external or
internal changes.
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Separate Determination Concept
Separate determination concept in accounting says that each component of every category of assets or liabilities
should be valued separately.

Separate Valuation Concept

Separate valuation concept in accounting says that in order to determine the aggregate amount of an asset or a
liability, each individual asset or liability comprising the aggregate must be determined separately.

Service Charge
Service charge is the charge which is paid over and above the basic fee for delivering a service.

Setoff
Setoff is a way of discharging a debt by creating a debt of the same amount against the creditor, by the sale of
goods etc.

Share
A share is a part of the business. It is the total capital divided into small individual parts.

Share Capital
Share capital is the capital raised by the company by a public issue of shares in favor of cash.

Shareholder Loan
Shareholder loan is any loan given to a shareholder by the company.

Share Premium
Share premium is the additional price paid for purchasing the stock, over and above the par value of the share at
the time of issue.

Short Term Asset

Short term asset is an asset which is expected to be converted into cash within a year.

Short Term Liability

Short term liability is the liability that is expected to be paid off within an year.

Simple Journal Entry

Simple journal entry is one which has only one debit effect and one credit effect.

Single Entry Bookkeeping

Single entry book keeping is the opposite of double entry bookkeeping and only one effect of a transaction is
recorded.

Sinking Fund
Sinking fund is a fund created by depositing the profits of each year with the objective of ultimately paying off
a debt.

Solvency
Solvency is a situation where the assets of the entity are sufficiently more than the liabilities.

Split Payment
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Split payment is a mode of payment which allows you to pay partly in cash and partly on credit.

Spoilage
Spoilage includes all the materials wasted or spoiled in the process of production.

Spontaneous Assets
Spontaneous assets are those that arise from the day-to-day operations of the business.

Spontaneous Liabilities
Spontaneous liabilities are those that arise from the day-to-day liabilities of the business

Spot Cash
Spot cash is the immediate payment of cash.

Standard Cost System

Standard cost system is the cost system that is specifically designed to allocate various costs under their
respective heads.

Startup Costs
Startup costs are the various costs incurred in starting the business. Legal fees and registration fees are included
in the startup costs.

Stated Capital
Stated capital is the amount of cash declared by the business as capital in the financial statements of the
company.

Statement of Accounts
Statement of account is the details of all the transactions between a debtor and creditor.

Statement of Cash Flows

Statement of cash flows shows the inflow and outflow of the cash from the business.

Statement of Retained Earnings

Statement of retained earnings gives the details of how the retained earnings of the company are being utilized.

Statement of stockholders equity

Statement of stockholders equity is the summary of the changes in shareholder equity for the accounting period.

Statutory Account
Statutory account is an account created by the operation of law, rather than as a business need.

Statutory Deductions
Statutory deductions are those which are made in compliance of some law or regulation.

T
Tainted Accounts Receivable
Tainted accounts receivable are those which have some legal problems attached to them, related to fraud,
misuse etc.
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Takeover
Takeover is when one company buys a controlling stake in or entirely purchases another.

Tangible Assets
Tangible assets are those which can be seen or touched.

Tangible Book Value

Tangible book value is the summation of all the tangible assets of the business.

Tangible Capital
Tangible capital is the total of outstanding stocks and retained earnings.

Target Costing
Target costing involves setting a price for the product and then getting the production costs in line with the
target price, so that the business can earn profit too.

Target Margin
Target margin is the desired profit on a product.

Tariff
Tariff is the tax paid by the importing country on the import of goods.

Tax
Tax is the amount charged against the profits of a business by the government for allowing the activity of the
business in the country.

Taxable Benefits
Taxable benefits are those non-cash benefits provided by the employer to the employee on which tax is to be
paid.

Taxable Income
Taxable income is the income earned by an individual or a business entity on which the tax liability is decided.

Tax Accounting
Tax accounting means taking into consideration the effect of taxes while planning business strategies.

Tax Base
Tax base is the value of the taxable assets, income and property.

Tax Effect Method

Tax effect method says that the effect on tax to be paid, must be shown in the books of accounts in the year in
which the income is recorded, irrespective of when the tax is actually paid.

Technically Bankrupt
Technically bankrupt is a situation where the company's liabilities have exceeded its assets, currently, but the
creditors haven't yet asked for their money.

Term Bonds
Term bonds are bonds which are held for a certain predefined amount of time whose principal amount is
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payable at maturity.

Term Debt
Term debt is a debt that will mature at a certain predefined date in the future.

Terminal Value
Terminal value is the total discounted amount realizable in the future.

Term Loans
Term loan is a loan taken from a lender for a specified period of time.

Time Value of Money

Time value of money is a concept that states that money in hand today is more valuable than money receivable
tomorrow.

Total Assets
Total assets is the sum of all the fixed and current assets.

Total Asset Turnover

Total asset turnover gives the efficiency of the business in managing their assets.

Trade Debtors
Trade debtors are those who owe the business money, on account of goods sold to them on credit.

Trade Discount
Trade discount is reducing the selling price of goods to boost sales.

Trading Concern
Trading concern is one that derives its products for sale by purchasing products from other producers for resale
to their customer base, thereby generating revenue.

Transportation Costs
Transportation costs are those which are incurred in transporting the goods from one place to another.

Trial Balance
Trial balance is listing all the ledger accounts and their balances.

Turnover
Turnover is sales.

U
Unabsorbed Costs
Unabsorbed costs are those which occur when the cost structure does not fully reflect all variable and/or fixed
costs.

Unallocated Costs
Unallocated costs are those which are not included in the cost of goods sold.

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Unappropriated Profits
Unappropriated profits are those which have been withdrawn from the business by the proprietors or not
appropriated.

Uncollectible Accounts Expense

Uncollectible accounts expense is the expense incurred in trying to realize payment from a debtor, but the
debtor does not make the payment.

Uncontrollable Expense
Uncontrollable expense is that expense incurred in the usual course of business which cannot be controlled.

Underabsorbed Overhead
Underabsorbed overhead is the total overhead that is not allocated to the product sold.

Under-Billing
Under-billing is not receiving the full amount payable or billing for a lower amount than what is receivable.

Under-Stated
Understated is to state less than what it actually is.

Underwriting
Underwriting is to protect by insuring and to guarantee financial support.

Unearned Rent
Unearned rent is the rent received in advance before it is actually earned.

Unearned Revenue
Unearned revenue is the revenue received before it is actually earned.

Unfavorable Variance
Unfavorable variance is when the actual costs incurred are greater than the standard costs.

Unliquidated
Unliquidated is an asset which has not been converted to cash.

Unrealized Accounts Receivables

Unrealized accounts receivable are bad debts.

Unrealized Income
Unrealized income is that income which is earned but not yet received.

Unresolved Equity
Unresolved equity is the difference between the total assets and the total liabilities in the balance sheet.

Unrestricted Assets
Unrestricted assets are those on which there is no government regulation regarding their use.

Unsecured debt
Unsecured debt is one where the borrower provides no collateral against the debt to the lender.

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Usage Variance
Usage variance is the difference between the budgeted and actual use of materials.
Useful Life
Useful life is the approximate amount of time for which the asset is assumed to be useful before it is fully
depreciated.

V
Valuation Allowance
Valuation allowance is an allowance which provides for changes in the value of the assets of the company.
Valuation Date
Valuation date is the date on which the valuation is made.
Variable Costs
Variable costs are those which vary with an increase or decrease in the production.
Variable Expenses
Refer Variable Costs

Variable Interest Rate

Variable interest rate is the interest rate which changes depending on the changes in an underlying interest rate
index.

Variances
Variance is a difference between something projected and actual.
Variance Analysis
Variance analysis is the use of the various types of variances to analyze the overall performance.

W
WACC
WACC is the acronym for Weighted Average Cost of Capital.

Wage
Wage is the remuneration paid to a worker for production of goods and services.

Warehouse
Warehouse is a store where all the unsold finished goods or the unused raw materials are kept.

Wholly Owned Subsidiary

Wholly owned subsidiary is one whose 100% of the stock is owned by the parent company

Windfall gains
Windfall gain is a profit which the company gets as a result of an uncontrollable event

WIP
WIP is the acronym for Work in Progress.

Working Capital
Working Capital = Current Assets – Current Liabilities

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Working Capital Turnover
Working capital turnover shows how efficiently the working capital of the business is employed.

Write Off
Write off is to decrease the value of an item.

Y
Yield
Yield is the annual return on investment which is expressed as a percentage.

YTM
YTM is the acronym for Yield to Maturity.
YTD
YTD is the acronym for years to date.

Z
Zero Coupon Bonds
Zero coupon bonds are those on which interest is not paid on a yearly basis.

Biplob Kumar Sannyasi

ICMAB

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