Stapled Shares
Stapled securities are where two or more separate securities are traded as a single entity. Typically they’re things like listed trusts where one security might be the units in the trust and the other security shares in the management company.
It could be after 12months of listing the stapled security might split into an ordinary share + an option to buy an ordinary share at the original issue price.
From http://www.aussiestockforums.com/forums/showthread.php?t=7980&page=1
Claiming Low Value Pool Depreciation
You can see what your tax refund will be using this tool: Free Online Income Tax Calculator
See also ==> Deductions Q & A’s Work related tools and equipment costing between $300 and $1000 can be allocated to a Low Value Pool depreciated under. Tools and equipment that have declined in value from other depreciation methods can also be allocated to the Low Value Pool. Working out Depreciation You work out your deduction for the decline in value of depreciating assets in a low-value pool using a diminishing value rate of 37.5%. For the income year in which you first allocate one or more low-cost assets to a low-value pool, you work out your deduction at a rate of 18.75%, or half the normal pool rate. Halving the rate recognises that assets may be allocated to the pool throughout the income year and eliminates the need for separate calculations for each asset based on the date it is allocated to the pool. Once you choose to allocate a low-cost asset to a low-value pool, all low-cost assets you start to hold in that and any subsequent income year must also be allocated to the pool. Why use Low Value Pool Low Value Pool method of depreciating tools and equipment will almost always result in a larger deduction for two reasons: The Low Value Pool rate is higher than most depreciation rates – even in the first year; Under other depreciation methods the claim amount is based on an apportionment for the number of days through the year it was held, often resulting in a relatively low small deduction. Assets that can not be allocated to a Low Value Pool
You cannot allocate the following depreciating assets to a low-value pool:
assets for which you have previously claimed deductions worked out using the prime cost method
assets that cost $300 or less for which you can claim an immediate deduction
assets for which you deduct amounts under the simplified depreciation rules for small business entities (see note below), and
horticultural plants.
Accrued Expense
An accounting expense recognized in the books before it is paid for. It is a liability, and is usually current. These expenses are typically periodic and documented on a company’s balance sheet due to the high probability that they will be collected.
Accrued expenses are the opposite of prepaid expenses. Firms will typically incur periodic expenses such as wages, interest and taxes. Even though they are to be paid at some future date, they are indicated on the firm’s balance sheet from when the firm can reasonably expect their payment, until the time they are paid. (investopedia.com)
An example would be accruing interest that is building up on a bank loan.
Accrued Income
Income that is earned in a fund or by company by providing a service or selling a product, but has yet to be received. Mutual funds or other pooled assets that accumulate income over a period of time but only pay it out to shareholders once a year are, by definition, accruing their income. Individual companies can also accrue income without actually receiving it, which is the basis of the accrual accounting system.
For example, assume that a company is expected to complete services for another company once per month for six consecutive months, but that under the terms of the contract, it will not receive monetary payment for these services until the end of the six-month period. The company performing the services can accrue a percentage of the income earned after each month, even though physical payment will not take place until after the six-month period. (investopedia.com)
Amount earned in the current accounting period, but which will be received in a subsequent period.
Decommissioning costs
in the nuclear power industry, when the the reactor comes to the end of its life, it is very dangerous and expensive to get rid of the radio-active remains. this is where there are decomissioning costs
Accounting Terms and Definitions Glossary
A
Above the Line
Above the line items are those revenue and expense items that directly affect the calculation of periodic net income.
Absolute Change
Absolute change is the numeric change in the value of a commodity, expense etc.
Absorb/Absorption
Absorb means that one account or group of accounts combines the amounts from similar or related accounts or groups of accounts. Thus, the combined account is a new entity while the old ones are removed. For instance, if you have 3 creditors, John, George and Paul, you can combine them into one ‘creditors’ account. This is called absorption.
Absorbed Costs
Absorbed Costs are a combination of both variable and fixed costs.
Absorption Costing
Absorption costing absorbs all costs under two head product costs (manufacturing costs) and period costs (non-manufacturing costs).
Absorption Pricing
Absorption pricing is setting a price which is the sum of the absorbed cost plus a marked-up percentage of profit.
Absorption Variance
Absorption variance is the difference between the predicted and actual absorption costs.
Accelerated Depreciation
Accelerated depreciation is a form of depreciation where larger amounts of depreciation are calculated in the first few years.
Account
An account is the physical record of the transactions incurred related to an asset, liability, revenue, expense etc.
Accounts Analysis
Accounts analysis is a method of cost behavior analysis by classifying records under two heads: fixed or variable.
Accounts Group
Accounts group is a combination of similar accounts. e.g. fixed assets group, long-term liability group etc.
Accounting
Accounting is the process of recording all the economic events that affect the business/individual over an accounting period. Accounting is done based on the various accounting principles, concepts and the Golden Rules. Read on for An Introduction to Financial Accouting and What is Forensic Accounting?
Accounting Concepts
There are certain assumptions that are taken for granted while recording the accounts. These assumptions are called accounting concepts. The 4 accounting concepts are Going Concern Concept, Accrual Basis Concept, Consistency Concept and Prudence Concept. Read on for more about Basic Accounting Concepts and Principles.
Accounting Cycle
An accounting cycle is the series of steps to be followed while preparing financial statements. The steps in the accounting cycle are budgeting, journal entries, adjusting entries, ledger posting, preparing financial reports and closing of accounts.
Accounting Entity Assumption
For legal and tax purposes, a business is treated as a different entity from the owners. Thus, only the transactions related to the business are recorded and not the ones related to owners.
Accounting Equation
The accounting equation lays down the relationship between total assets, liabilities and owner’s equity. The accounting equation is Total Assets = Total Liabilities + Owner’s Equity
Accounting Event
An accounting event is any event where there is a change (increase/decrease) in value of the assets, liabilities or owner equity.
Accounting Income
Accounting income is the income earned by the business over the accounting year on an accrual basis.
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 an 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 is owed money for providing goods or services. It is an asset.
Accounts Receivable Reserve
An accounts receivable reserve is a pool of money kept aside by the business to protect itself from default on the accounts receivables.
Accounts Receivable Turnover
Accounts receivable turnover lets the business measure how quickly the customers are paying out the money receivable. It is calculated by Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable.
Accrual Concept
Accrual concept is one of the core accounting concepts. Accrual concept states that a economic event should be recorded in the period in which it is incurred rather than when it is paid for or when cash is received in return.
Accrued Assets
Accrued assets are those assets from which the revenues are earned but not received.
Accrued Expenses
Accrued expenses are those expenses which have been incurred but not paid.
Accrued Income
Accrued income is income that is earned but not yet received.
Accrued Interest
Accrued interest is interest that an asset has earned, but not received.
Accrued Inventory
Accrued inventory is that which has arrived in the warehouse of the business but hasn’t yet been paid for.
Accrued Liability
Accrued liabilities are those liabilities that have been incurred by the business and haven’t been paid off.
Accrued Payroll
Accrued payroll is employee salaries that remain unpaid at the end of the year.
Accrued Revenue
Accrued revenue is revenue that has been earned but not yet received.
Accumulated Amortization
Accumulated amortization is the accumulated charges against the intangible assets owned by the business.
Accumulated Depreciation
Accumulated depreciation is the charges incurred for the wear and tear of a fixed asset that is calculated periodically.
Acid Test Ratio
Acid test ratio is a ratio that analyses the liquidity position of the business. It is calculated by Acid Test Ratio = Total Liquid Assets / Current Liabilities.
Acquisition
Acquisition is a situation where one company takes over the controlling stake of another company.
Activity Based Costing
Activity based costing is a form of costing that analyzes the cost of a product based on the cost of the various activities performed for it.
Activity Ratio
Activity ratio is the ability of a business to convert their balance sheet assets into cash or sales.
Actual Cash Value
Actual cash value is a method for determining the actual loss incurred by the business expressed in monetary terms. It is normally used in context of depreciation.
Actual Cost
Actual cost is the exact amount you pay to buy a fixed asset as opposed to the market value or production cost.
Additional Paid-in Capital
Additional paid-in capital is the amount paid by the shareholders over and above the par value of the asset.
Adequate Disclosure
Adequate disclosure is giving the required amount of information in the form of footnotes to indicate the financial status of the business
Adjusted Book Value
Adjusted Book Value may be tangible book value or an economic book value. In a tangible book value, the value of intangible assets is deducted from the total assets. In the economic book value, the assets are adjusted to their market value as opposed to the cost of purchase.
Adjusting Entries
Adjusting entries are the entries done at the end of the accounting period to update certain items that are not recorded as daily transactions. The process of recording adjusting entries is known as adjustment.
Administrative Costs
Administrative costs are those which are not directly required for the process of production, but are included in the final price of the product as they are incurred. e.g sales office rent is an administrative cost as it is not required in the process of production.
Advance
Advance is an amount of money paid before the business earns it.
Agency
An Agency is the contractual relationship between the principal and his agent where the agent is empowered by the principal to take certain decisions on his behalf.
Aggregate
Aggregate means total.
Allocation
Allocations are amounts distributed to each department for their working expenses.
Allowance
Allowance is a discount given to customers in the event of provision of unsatisfactory goods or services.
Allowance for Bad/Doubtful Debts
Allowance for bad debts is an amount of money set aside by the business as a cover for possible defaults on payments.
Alternate Payee Endorsement
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. e.g. insurance premium. Read on for Fixed Annuities Explained and the Annuities Pros and Cons.
Appreciation
Appreciation is the increase in the value of the asset due to economic conditions or improvements to the asset.
Appropriation
Appropriation is the allocation of amounts, that are part of the total net profit, under various heads such as general reserve fund etc.
Arrears
Arrears is a debt that has not been paid yet.
Assessed Value
Assessed value is the estimated value that is taken for calculation of tax.
Assessment
Assessment is the total amount of tax or levy payable.
Asset
Asset is something that is owned by a business that has commercial value or exchange value.
Asset Earning Power
Asset earning power is one of the profitability ratios that determine the earning power of assets. It is calculated by Asset Earning Power = Earnings before Taxes / Total Assets.
Asset Turnover Ratio
Asset turnover ratio helps establish the relationship between the sales and the total assets. It is calculated by Asset Turnover Ratio = Total Revenue / Average Assets.
Asset Valuation
Asset valuation is the process by which the value of an asset or an asset portfolio is determined.
Audit
Audit is the process of checking and validating the business records.
Audit Committee
Audit committee is a special committee appointed in an organization to carry out the audit oversight responsibility of the board of directors.
Audit Report
Audit report is an official, signed document that provides the details regarding the purpose, scope and findings of the audit.
Authorized Capital
Authorized capital is the total money that the company has made by selling the issue of authorized shares. It is calculated by Authorized Capital = Number of Shares Issued * Par Value of Shares
Average Cost
Average cost = Total Cost / Number of Units.
Average Inventory
Average inventory is the average amount of inventory held over the accounting period. It is calculated by Average Inventory = (Opening Inventory + Closing Inventory) / 2
Average Net Receivables
Average net receivables is the average of the accounts receivable over the accounting period. It is calculated by Average Net Receivables = (Opening Net Receivables + Closing Net Receivables) / 2
Average Settlement Period
Average Settlement Period is calculated
for debtors Average Settlement Period = (Trade Debtors * 365) / Credit Sales
for creditors Average Settlement Period = (Trade Debtors * 365) / Credit Purchases
Average Tax Rate
Average tax rate = Total Taxes Paid / Tax Base.
Avoidable Cost
Avoidable cost is the cost that can be avoided by taking a particular decision.
B
Bad Debt
Bad Debt is the amount owed to us but which cannot be recovered. It is a loss.
Balance
Balance is the difference between the credit and the debit sides of an account.
Balance Sheet
A balance sheet is the list of all the assets and liabilities of the business.
Balloon payment
Balloon payment is the final payment on a loan. It is called so as it is considerably higher than the regular payments.
Bank Balance
Bank balance is the amount of money present in the bank account of the business.
Bank Overdraft
Bank overdraft represents negative balance in the bank account of the company.
Bank Reconciliation
Bank reconciliation is the verification of all the entries in the bank statement with the bank book of the business. Read on for the Purpose of Bank Reconciliation Process and Steps to Accounts Reconciliation.
Bank Statement
A bank statement is the financial statement showing the details of all the transactions that the business had made through the particular bank account.
Bankruptcy
Bankruptcy is a situation where a business/individual does not have enough assets to pay off his liabilities. A person who is bankrupt is called an insolvent.
Barter System
Barter system is a non-monetary system of exchange where commodities are traded for commodities rather than for money. Read on for History of Barter System.
Base Capital
Base capital = Issued and Paid-up Share Capital + Contributed Surplus + Retained Earnings.
Basic Earning Power
Basic earning power measures the profitability of the assets. It is calculated by the formula Basic Earning Power = EBIT / Total Assets.
Basis
Basis is the starting point for calculating a variety of variables such as profit, loss, depreciation, amortization etc. It can also mean the book value of investments.
Batch
Batch is a collection of items that need to be handled together for production.
B/D
Brought Down. It is the balance from the previous accounting period that is carried forward.
Below the Line
Below the line items are those that directly affect the balance sheet and not the income statements.
Benchmarks
A benchmark is a high standard that is set for performance.
Big 4
Big 4 refers to the 4 biggest accounting firms: PriceWaterhouseCoopers, KPMG, Delloite and Touche and Ernst and Young.
Billings
A billing is a request sent to the debtor asking for payment for a debt.
Bill of Exchange
Refer: Draft
Bills Payable
Bills payable is a promise made by the receiver of a benefit to the giver of a benefit, to pay an amount of money in the future.
Bills Receivable
Bills receivable is a record of all the bills that are receivable by a firm.
Bond
A bond is a certificate of debt issued either by a corporation or the government to raise money.
Bond Discount
A bond discount is the difference between the face value of the bond and the issued price. The face value in this case is higher than the issued price.
Bond Premium
Bond Premium is the difference between the issued price and the face value of the bond. In this case, the issued price is higher.
Bond Sinking Fund
Bond sinking fund is a provision made by the bond issuing body to pay off the face value of the bond at maturity.
Bonus
A bonus is the remuneration given to an employee in excess of the stipulated salary.
Books
Books refers to the journals, ledgers and other subsidiary books such as sales books and purchase books, as maintained by the business.
Book Building
Book building is a type of share issue where the price of the shares is not fixed, but is determined by investor bidding.
Book Costs
The book cost is the cost of an asset when it was purchased. It may be a historical cost.
Book Income
Book income is the revenue earned by a business as reported in the financial statement.
Book Inventory
Book Inventory = Cost of Acquiring the Inventory – All the Liabilities associated with the Inventory.
Book Keeping
Book keeping is the process of recording all the economic events and transactions of the business.
Books of Accounts
Refer Ledger
Book to Market Ratio
Book to market ratio is a ratio that calculates the book value of the equity of a firm to the market value of the equity.
Branch Accounting
Branch Accounting is keeping the books of accounts for geographically separated departments or units of the same business.
Break Even Analysis
Break even analysis is basically ascertaining how many units of a product sold will cover the costs. The point of the sales volume where the costs are equal to the volume is called break even point. Read on for Break Even Analysis Formulas
Brought Forward
Refer B/D
Budget
A budget gives the list of expense heads and the amounts allotted to expense heads. For example, a sales budget lays down the amount to be spent on sales, etc.
Budgetary Deficit
When there is an excess of expenditure over revenue in a budget, it is known as a budgetary deficit.
Budgetary Control
Budgetary control is a process where the actual amount incurred and the budgeted amount for each expense head is compared.
Budgeting
Budgeting is estimating the expenditure needs of the department or each expense head based on historical data and trend analysis.
Budget Performance Report
Budget performance report represents the comparison between the actual expenditure and the budgeted expenditure.
Buffer
A buffer is a safety measure over the budgeted amount, in case of contingency.
Business Entity
A business entity may be a proprietorship, partnership, corporation, or LLC. Every entity has to follow a separate set of rules.
Business Valuation
Business valuation is the amount that would be realized if the business was sold to a hypothetical buyer.
Bylaws
Bylaws are the different provisions that govern the corporate policies.
C
CA
CA may be short for either Chief Accountant or Chartered Accountant.
Call
A call may be
- 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 + Guaranty Fund + Guaranty Fund Surplus
Capital Gain
Capital gain is the positive difference between sale value and the purchase value for an asset.
Capital Improvement
Capital improvement is any value adding activity to an asset that increases its value.
Capital Intensive
Capital intensive is a type of industry that relies more on capital to purchase high end machinery for its production as opposed to labor intensive that relies more on human resources.
Capital Investment
Refer Capital Expenditure.
Capitalization
Capitalization refers to the statement of the total capital available with the firm.
Capitalization Rate
It is the rate of interest that is required to convert the series of future receivable payments into their present value equivalent.
Capitalized Cost
Capitalized costs are those that are deducted over several accounting periods on account of depreciation or amortization.
Capital Loss
Capital loss is a situation where there is a negative difference between the purchased price of an asset and selling price of an asset. It is the exact opposite of capital gain.
Capital Market
Capital market is the market where shares and securities of the listed companies are traded.
Capital Profit
Capital profit is when the distribution of cash due to tax savings on account of depreciation, sale of a fixed asset or any other sources that are not related to retained earnings.
Capital Rationing
Capital rationing is to put a restriction or a cap on capital expenditures.
Capital Receipts
Capital receipt is the amount received on account of the sale of a capital asset.
Capital Redemption Reserve
A capital redemption reserve is an undistributed reserve created out of the profits of a company.
Capital Reduction
Capital reduction means to reduce the total capital available with the company.
Capital Reserve
A capital reserve is one of the reserves that a business creates, out of the yearly profits, for any specific purpose.
Capitation
Capitation is a fixed charge, tax or payment that is levied as a fixed amount per person.
Carried Down
Carried down is the year’s closing balance for an account that is carried to the next accounting period.
Cash
Cash refers to the liquid money available with the business in the form of notes and coins for the purpose of payment.
Cash Basis
Cash basis is the opposite of accrual basis. It is a type of accounting where the transactions are recorded only when there is an exchange of cash, irrespective of when the transactions occurred. Cash basis accounting is different from the GAAP.
Cash Book
Cash book is the record of all the cash transactions – receipts and payments, that are made by the business. It may also be expanded to include the bank transactions if the business does not wish to keep a separate bank book.
Cash Budget
Cash budget is the allocation towards the cash receipts and payments that the business might incur over an accounting period.
Cash Deficit
Cash deficit means the excess of cash payment obligations over the total cash available.
Cash Discount
Cash discount is the discount allowed to the debtor to induce him to pay earlier.
Cash Dividend
Cash dividend is the share of the company profits that is given to the shareholders as dividend.
Cash Earnings
Cash earnings is defined as the excess of cash revenue over cash expenses in an accounting period.
Cash Flow
Cash flow is the difference between the cash inflow and the cash outflow in the business. It does not deal with accrued payments and only deals with the inflow and outflow of cash.
Cash Flow Analysis
Cash flow analysis is a financial management and analysis technique that is used to compare the amount and timing of the inflow and outflow of cash into the business.
Cash Flow Statement
Cash flow statement is a financial statement that provides details of the inflow and outflow of cash for the business. It is divided into three parts: cash flows from financing, cash flows from investing and cash flows from operations.
Cash Inflow
Cash Inflow is the measure of the total cash coming into the business as a result of various financing, investment and operational activities.
Cash Outflow
Cash outflow is the measure of the total cash going out of the business as a result of the various financing, investment and operational activities.
Cash Management
Cash management is a financial management technique that aims to maximize the availability of cash in the business without changing the levels of fixed assets. It aims to secure faster debtor payments to improve the liquidity position of the business.
Cash Profit
Cash profit is calculated as Cash Profit = Profit after tax + Depreciation.
Cash Ratio
Cash ratio is calculated by Cash Ratio = (Cash + Marketable Securities) / Current Liabilities.
Cash Receipt
Refer Receipts
Certified Financial Planner
A certified financial planner is a financial planner qualified as per the requirements of the Institute of Certified Financial Planners. Read on to know more about Becoming a Certified Financial Planner
Certified Public Accountant
Certified Public Accountant is a certification that gives an individual the license to practice public accounting.
Charge Off
Refer Bad Debt
Chapter S
Chapter S is a special form of incorporated business entity in the United States and is governed by a certain set of rules and is allowed to avoid payment of corporate taxes.
Charter
A charter is a document of a corporation.
Chart of Accounts
A chart of accounts is a serial listing of all the ledger accounts of a business.
Check
A check is a form of payment, through the bank and can be made payable to a specific person or an unspecified bearer at large.
Checking Account
A checking account is a form of bank account where the amount can be withdrawn by a check, an ATM card or a debit card.
Claims
A claim is a legally backed demand for money from a debtor, which if not paid, results in a law suit.
Claims Outstanding
Claims outstanding can be calculated by Claims Outstanding = Claims Against Assets – Claims Settled.
Close
To close an account is to carry forward the balance to the next year at the end of the accounting period.
Closing Accounts
Closing an account is passing the closing entry on the last day of the accounting period.
Closing Date
Closing date is the date where one gets possession of or title to an asset.
Closing Entry
The closing entry is an accounting entry that is passed to carry forward the balance of an unbalanced account to the next accounting period.
Closing Stock
Closing stock is the stock of inventory available with the business at the end of the accounting period.
Coding
Coding means assigning the proper code to the accounts.
Collateral
Collateral/Security/Mortgage are assets that are given as security for obtaining a loan. In case of a default on the loan, the lender has the right to take up the ownership of the collateral.
Collateral Note
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 aboutCommodity Price Index and Commodity Trading
Common Size Analysis
Common Size analysis is a type of financial analysis where one item/account is taken as the base value and all the others are compared to it.
Common Size Statement
A common size statement is the financial statement that shows detailed common size analysis.
Company
A company is an association of persons who bring in capital and undertake a legal business activity. A company may be limited by guarantee or shares.
Company Tax
Refer Corporation Tax
Comparative Statement
A comparative statement is a financial statement that compares the results of two or more previous years with the current results.
Compensating Errors
Compensating errors are those errors that cancel out a previous error.
Compliance Audit
Compliance audit is a watchdog procedure to ensure that the business is complying with the set of rules and procedures that are set for it. It can be compared to the accounts audit which ensures that the true accounting details are disclosed.
Compliance Panel
A compliance panel is a committee of people in charge of a compliance audit. This can be compared to the financial audit committee.
Composite Depreciation
Composite depreciation is to combine similar assets in a same class and apply depreciation to all of them at flat rate.
Composite Financial Statement
A composite financial statement is an average of financial statements of either two or more companies or two or more periods.
Compound Annual Growth Rate
Compound annual growth rate is the yearly rate applied to an investment over multiple years.
Compound Interest
Compound interest is the interest calculated on the principle over which the interest continues to accrue over time.
Compound Journal Entry
Compound general entry is an entry of an economic event that simultaneously affects either two or more debits or two or more credits or both.
Comprehensive Annual Financial Report
A comprehensive annual financial report is the complete annual financial report of the business.
Compulsory Liquidation
A compulsory liquidation is the liquidation of the assets of the company by a court order when the company is unable to pay off its outstanding debts.
Concessionary Loans
Concessionary loans are sanctioned by the government to the companies to fund a particular activity as prescribed by the issuing authority.
Conglomerate
A conglomerate is a group of different companies run under the same umbrella ownership and run as a single entity.
Conservatism Principle
Conservatism principle of accounting says that the estimates of the company should be conservative and not understated or overstated.
Consistency Principle
Consistency principle of accounting says that the same accounting policies and procedures should be followed in every accounting period.
Consolidated Capital
Consolidated capital includes all the assets and money that is used in day-to-day business operations.
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 alloted to the various cost centers in the business.
Cost Assignment
Cost Assignment is the assigning of costs of an account to the various accounts that are responsible for incurring the cost.
Cost Benefit Analysis
Cost benefit analysis is the analysis of the costs and benefits associated with any business decision by first estimating the costs and then the expected return.
Cost Ceiling
Cost ceiling is the maximum budget that will be alloted for a project. It is calculated as Cost Ceiling = Target Cost + Contingency Cost
Cost Center
A cost center of an organization is one that does not directly add value to the product, but are indirect costs. For instance, sales and marketing costs are cost centers.
Cost Control
Cost control is an exercise to control the costs incurred under any head in a business.
Cost Driver
Cost driver is an event or a series of events and activities that results in costs being incurred
Cost/Income Ratio
Cost income ratio is a reasonably simple ratio to understand and is calculated as Cost/Income Ratio = Total Expense / Total Income.
Cost of Capital
Cost of Capital is the rate of return that a business can earn with different investments. It is calculated so that the best investment decision can be taken by the business.
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 Record
Refer Credit Entry
Credit Risk
Credit risk is the chance of loss that a business faces from nonpayment by the borrowers.
Credit Sales
Credit sales are sales for which cash is not paid immediately, but the customer promises to pay it on a future date.
Cumulative Earnings
Cumulative Earnings is the sum total of all the earnings over a period of time.
Cumulative Preferred Stock
Cumulative preferred stock is a type of preferred stock on which if the dividend is not paid in one year, then the dividend will accumulate to the future years.
Current Asset
Current Assets are those assets in the hands of the company that are usually sold or converted into cash within a year.
Current Cost
Current cost is the cost that would be incurred if the business decided to replace an asset.
Current Cost Accounting
Current cost accounting is a type of accounting that records the updated amounts according to the current cost as opposed to the historical cost.
Current Debt to Total Debt Ratio
Current debt to total debt ratio shows the current liabilities of the company as a percentage of the total liabilities of the business. It is calculated by Current Debt to Total Debt Ratio = Current Debt * 100 / Total Debt
Current Liabilities
Current liabilities are the liability obligations of the business which it is expected to pay off within a year.
Current Ratio
Current ratio is the ratio that compares the current assets to the current liabilities in the company. It is calculated by the formula: Current Ratio = Current Assets / Current Liabilities.
Custodian
A custodian is the business entity that is in charge of maintaining records or is the caretaker for a property.
Customs
Customs is the authority who is in charge of collecting duty on the merchandise that comes into the country. The duty that is paid for importing goods into the country is called custom duty.
D
Day Book
A day book is a daily written record of transactions.
Day’s Cash on hand
Days cash on hand is the average cash available with the business.
Day’s Inventory
Day’s inventory shows the average amount of time that the items are in the inventory.
Days Payable Outstanding
Days payable outstanding shows the amount of time it takes for the business to pay off its creditors on receipt of inventory from them.
Days Sales Outstanding
Days sales outstanding is the amount of time it takes for converting debtors/receivables to cash.
Dead Assets
Dead assets are those assets whose life is restricted to their immediate use.
Debentures
Debentures are instruments used by the business to raise money. A debenture may be backed by security or unsecured.
Debit
A debit is an entry on the left side of a ledger account which eventually increases the amount of assets or expenses or decreases the liabilities, revenue or the net worth.
Debit Note
A debit note is a document that informs/reminds a debtor of his outstanding debt.
Debit Record
Refer Debit
Debt
A debt is money or goods or services which one business owes another business. A business that owes money to another is said to have a debt over the other.
Debt Coverage ratio
Debt coverage ratio is the comparison between the net income of an investment and the amount required to service the debt.
Debt Financing
Debt financing means to finance the activities of the business by issuing debt instruments like bonds and debentures or getting loans.
Debt Instrument
A debt instrument is a written document that acknowledges debt.
Debtor
A person or persons who owe money to the business are collectively known as debtors.
Debtor Days
Debtor days is the average number of days required to convert receivables to sales.
Debt ratio
Debt ratio measures how much of the total funds of the business are provided by outsiders. It is calculated by: Debt Ratio = Total Liabilities / (Total Liabilities + Shareholder Equity)
Debt Security
Debt security is the security for debt capital i.e debentures, bonds
Debt Service Ratio
Debt service ratio is the amount of total revenue that is spent on paying for debts. It is calculated by Debt Service Ratio = (Debt Payment * 100) / Total Income
Debt to Equity Ratio
Debt to equity ratio measures the part of the total capital that is financed by debt and the part financed by equity. It is calculated by Debt to Equity Ratio = Total Liabilities / Stockholder Equity
Debt to Total Assets Ratio
Debt to total assets ratio measures the percentage of assets financed by debt.
Declining Balance Depreciation Method
Declining balance depreciation method is a method of calculation of depreciation at a fixed rate. Under this method, an asset will continuously be depreciated a fixed rate of percentage and the subsequent depreciations will be on the reduced balance.
Deduction
Deduction means to subtract.
Deductive Accounting Theory
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 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.
Downpayment
Down payment is a lump sum payment made at the time of purchase.
Draft
A draft is a note that signifies a contract between a buyer and seller, saying that the buyer will pay the specified sum of money at the end of the specified period.
Draw
Refer Proprietor’s Draw
Drawdown
Drawdown shows the quantity of value lost, either as a percentage or in currency terms
Drawee
Drawee is the person in whose favor a check/bill etc. is drawn.
Duality Concept
Duality concept is an accounting concept which says that every accounting entry will have two effects, debit and credit.
Due Diligence
Due diligence is the level of diligence that the internal audit committee is expected to maintain.
Duty
Duty is the tax which is imposed on imported goods.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is a balance sheet account that reduces the reported amount of accounts receivable. (A change to the balance in the allowance for doubtful accounts also affects bad debt expense on the income statement.) Providing an allowance for doubtful accounts presents a more realistic picture of how much of the accounts receivable will be turning to cash. After all, a company selling products (or services) on credit to thousands of customers will likely have a few customers who will not be able to pay the full amount they owe to the company.
By recording an amount in the allowance for doubtful accounts it will also mean that the bad debt expense will be reported closer to the time of the sales–instead of waiting until the account is determined to be uncollectible. Hence, the matching principle is carried out more effectively.
The allowance account and the related bad debt expense is encouraged for financial reporting; however, it is not acceptable for income tax reporting. The Internal Revenue Service prefers that any expense for bad debts be deducted later–when an account is actually written off as uncollectible.
Prospective application
(IAS 8 )
Retrospective restatement
it is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior perioderror had never occurred.
Retrospective application
it is applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied.
（IAS 8 )
