Glossary of Accounting Terms and Definitions

Accounting helps keep a track of the financial position of the business and forms the basis for good
financial planning. While studying accountancy, you may come across several terms that you may
not be familiar with. Most glossaries may help you with it, but some definitions may be too
elaborately worded for most people to understand, resulting in a confusion. The paragraphs below
conjure up a list of basic and advanced accounting terms in a simple language.
Glossary of Accounting Terms and Definitions
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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 indicates 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. Hence, they are 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 can be looked as 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, like 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.
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 can be 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.
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 for 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, 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 can owe money for providing goods or
services. They are assets.
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 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 charge against the intangible assets owned by the
business.
Accumulated Depreciation

Accumulated depreciation is the charge incurred for the wear and tear of a fixed asset that is
calculated periodically.
Acid Test Ratio

Acid test ratio is a ratio that analyzes 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.
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 are 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 are 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. For example, the 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 are amounts of money set aside by the business as a cover for possible
defaults on payments.
Alternate Payee Endorsement

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.

It is a series of payments that result in gradual reduction of a large debt.
It is writing off the value of an intangible asset over the useful life of the asset.
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, for instance,
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 the general reserve fund.
Arrears

Arrears are debt that have 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.
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 which are 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 are 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.
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.
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 means 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

Batch is a collection of items that needs 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 can be looked upon as 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.
Book Building

Book building is a type of share issue where the price of the shares are 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 can be 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.
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.
CA
CA may be short for either Chief Accountant or Chartered Accountant.
Call

A call may be
The process for redeeming a bond or preferred stock before its maturity date.
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

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 + Guarantee Fund + Guarantee 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

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

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

Capital profit is 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

The opposite of accrual basis is known as cash 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.
Cash Dividend

Cash dividend is the share of the company profits that is given to the shareholders as dividend.
Cash Earnings

Cash earnings are 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

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.
Certified Public Accountant

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

Refer Bad Debt

Chapter S

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

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.
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 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.
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 principal 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.
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

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 allotted 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 allotted 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 o 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.
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

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 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 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.

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

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, 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 depreciation will be on the reduced balance.
Deduction

Deduction means to subtract.

Deductive Accounting Theory

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.
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 https://www.fidelity.com/taxes/overview statement showing the details

of the amounts and timing of depreciation over its effective life.
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.

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.
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.
Doubtful Debts

Doubtful debt is a debt owed to the business the recovery of which, is not certain.
Down payment

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 & 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
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

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.
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

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.
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.
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

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.

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.

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.
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
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.

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 instrument.
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 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.
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.
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.

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

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 the 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.
IPO

IPO is the acronym for Initial Public Offering. It is the first time that a business goes public with the
issue of shares.
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.

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.

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.
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 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 a year.
Long Term Receivables

Long term receivables are those receivables, which will be received after a year.
Loss

Loss is the excess of expenses over incomes in any context.

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.
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 unavailable.
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 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.
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

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
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

NWC

NWC is the acronym for Net Working Capital.

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 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.
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 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 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.
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.

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.
Payroll

Payroll is the list of all the employees in the organization and their salaries.
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 total inventory present in the warehouses.

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.
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.
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

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.
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.
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

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

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

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.
Safety Stock
Safety stock is the amount of stock a company defines
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ness-expenses-by-j-1935557217.html 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.

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 and 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.
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 a 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

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.
Tainted Accounts Receivable
Tainted accounts receivable are those, which have some legal problems attached to them, related to
fraud, misuse, etc.
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 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.
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.

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.
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.
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.

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
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.

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.

Zero Coupon Bonds
Zero coupon bonds are those on which interest is not paid on a yearly basis.
So this was a comprehensive accounting terms and definitions glossary. I think this accounting
glossary will answer all your queries and doubts regarding accounting terminology.