Accounting Terminology

Accounting: The systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information.

Account Payable: An accounting entry that represents an entity’s obligation to pay off a short-term debt to its creditors.

Account Receivable: is short-term amounts due from buyers to sellers who have purchased goods or services from the seller on credit.

Accountancy Firm: A firm of accountants who provide accounting and auditing services for a fee.

Accounting Period: It is generally a quarter or a year and reflects all of the financial activity that occurred during that time.

Accounting Equation: The relationship between assets, liabilities and ownership interest.

Accounting Policies: The specific policies and procedures used by a company to prepare its financial statements. These include any methods, measurement systems and procedures for presenting disclosures.

Acquiree: Company that becomes controlled by another.

Acquirer: Company that obtains control of another.

Acquisition: An acquisition takes place where one company – the acquirer – acquires control of another – the acquiree – usually through purchase of shares.

Allocation: To assign a whole item of cost, or of revenue, to a simple cost centre, account or time period.

Annual Report: A document produced each year by limited liability companies containing the accounting information required by law.

Assets: Any item of economic value owned by an individual or corporation, especially that which could be converted to cash.

Audit: The independent examination of, and expression of opinion on, financial statements of an entity.

Audit Manager: An employee of an accountancy firm, usually holding an accountancy qualification, given a significant level of responsibility in carrying out an audit assignment and responsible to the partner in charge of the audit.

Bad debt: Bad debt is usually a product of the debtor going into bankruptcy or where the additional cost of pursuing the debt is more than the amount the creditor could collect.

Balance sheet: A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.

Bond: A written and signed promise to pay a certain sum of money on a certain date, or on fulfillment of a specified condition.

Broker: One that acts as an agent for others, as in negotiating contracts, purchases, or sales in return for a fee or commission. 2. A stockbroker. 3. A power broker.

Business combination: A business combination is a transaction in which the acquirer obtains control of another business (the acquiree).

Business Cycle: It is the usual period of 12 months during which the peaks and troughs of activity of a business form a pattern which is repeated on a regular basis.

Business Entity: A business which exists independently of its owners.

Capital: An amount of finance provided to enable a business to acquire assets and sustain its operations.

Capital Expenditure: CapEx are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment.

Cash: Cash on hand (such as money held in a cash box or a safe) and deposits in a bank that may be withdrawn on demand.

Cash Flow: Statements of cash expected to flow into the business and cash expected to flow out over a particular period.

Commercial Paper: A method of borrowing money from commercial institutions such as banks.

Companies Act: The Companies Act 1956 was an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.

Cost: In business and accounting, cost is the monetary value that a company has spent in order to produce something.

Cost of Goods: Cost of goods sold is the accumulated total of all costs used to create a product or service, which has been sold.

Cost of Sales: The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold.

Coupon: Rate of interest payable on a loan.

Credit: In Bookkeeping entries in the credit column of a ledger account represent increases in liabilities, increases in ownership interest, revenue, or decreases in assets.

Credit Note: A document sent to a customer of a business cancelling the customer's debt to the business, usually because the customer has returned defective goods or has received inadequate service.

Credit Purchase: A business entity takes delivery of goods or services and is allowed to make payment at a later date.

Credit Sale: A business entity sells goods or services and allows the customer to make payment at a later date.

Creditor: A person or organization to whom money is owed by the entity.

Current Asset: An asset that is expected to be converted into cash within the trading cycle.

Current Liability: A current liability is an obligation that is 1) due within one year of the date of a company's balance sheet and 2) will require the use of a current asset or will create another current liability.

Current Value: A method of valuing assets and liabilities which takes account of changing prices, as an alternative to historical cost.

Debenture: A written acknowledgement of a debt – a name used for loan financing taken up by a company.

Debtor: A person or organization that owes money to the entity.

Deferred Asset: An asset whose benefit is delayed beyond the period expected for a current asset, but which does not meet the definition of a fixed asset.

Deferred Income: Deferred income (also known as deferred revenue, unearned revenue, or unearned income) is, in accrual accounting, money received for goods or services which have not yet been delivered.

Deferred Taxation: The obligation to pay tax is deferred (postponed) under tax law beyond the normal date of payment.

Depreciation: The monetary value of an asset decreases over time due to use, wear and tear or obsolescence.

Dividend: A dividend is a payment made to shareholders that is proportional to the number of shares owned. It is authorized by the board of directors.