Account: A record that represents a specific category of financial transactions in a financial statement. |
Accountant: A professional who is trained to handle financial records and provide financial advice. |
Accounting: The process of recording, summarizing, analyzing, and interpreting financial information to aid in decision-making. |
Accounts Payable Turnover: A financial ratio that measures how quickly a company pays its suppliers. |
Accounts Payable: The amount owed by a company to its creditors for goods and services received but not yet paid for. |
Accounts Receivable Turnover: A financial ratio that measures how quickly a company collects its accounts receivable. |
Accounts Receivable: The amount owed to a company by its customers for goods and services provided on credit. |
Accrual Accounting: A method of accounting where transactions are recorded when they occur, regardless of cash flow. |
Accrual Basis: A method of accounting that records transactions when they occur, regardless of cash flow. |
Accrued Expenses: Expenses that have been incurred but not yet paid or recorded in the accounts. |
Accrued Income: Income that has been earned but not yet received or recorded in the accounts. |
Accrued Interest: Interest that has been earned but not yet paid or received. |
Acquisition: The purchase of one company by another. |
Adjusting Entries: Journal entries made at the end of an accounting period to update accounts for items that have not been recorded. |
Aging of Accounts Receivable: The process of categorizing accounts receivable by the length of time they have been outstanding. |
Allowance for Doubtful Accounts: A contra-asset account used to estimate and adjust for uncollectible accounts receivable. |
Amortization Expense: The periodic expense recorded for the reduction in value of an intangible asset. |
Amortization: The process of spreading the cost of an intangible asset (like a patent) over its useful life. |
Arm’s Length Transaction: A transaction between two unrelated parties acting in their self-interest. |
Asset Turnover: A financial ratio that measures a company’s ability to generate revenue relative to its assets. |
Asset: A resource with economic value that is expected to provide future benefits to a company. |
Audit Trail: A documented history of accounting transactions used to verify the accuracy of financial records. |
Audit: An examination of a company’s financial records and statements to verify their accuracy and compliance. |
Authorized Shares: The maximum number of shares of stock that a company is allowed to issue. |
Authorized Shares: The maximum number of shares of stock that a company is allowed to issue. |
Bad Debt Expense: An expense recognized when it is unlikely that a debtor will pay a debt. |
Bad Debt: A debt that is unlikely to be collected and is written off as an expense. |
Balance Sheet: A financial statement that shows a company’s assets, liabilities, and equity at a specific point in time. |
Balanced Scorecard: A strategic management tool that translates an organization’s strategy into a comprehensive set of performance measures. |
Bank Reconciliation: The process of matching and comparing a company’s bank records with its accounting records. |
Bank Statement: A monthly statement provided by a bank to a company, showing its account activity and balances. |
Bankruptcy: A legal process that allows individuals or businesses to reorganize or discharge their debts. |
Basis of Accounting: The method used to recognize revenue and expenses in financial statements. |
Bond: A debt security that represents a loan made by an investor to a borrower (typically a company or government). |
Bookkeeping: The process of recording financial transactions and maintaining financial records. |
Bottom Line: The net income or profit of a company, often used to refer to the final figure on the income statement. |
Break-Even Analysis: A financial analysis technique used to determine the sales level at which a company’s total revenue equals its total cost. |
Break-Even Point: The level of sales at which total costs equal total revenue, resulting in no profit or loss. |
Budget: A financial plan that outlines expected revenues and expenses over a specific period. |
Budgetary Control: The process of monitoring and controlling expenses to align with a budget. |
Business Entity Concept: The principle that a business’s financial transactions should be kept separate from its owners’ personal transactions. |
Capital Budgeting: The process of evaluating and selecting long-term investments that align with a company’s strategic goals. |
Capital Expenditure: Money spent on acquiring or improving long-term assets. |
Capital Lease: A lease that transfers substantially all the risks and rewards of ownership to the lessee, treated as a purchase for accounting purposes. |
Capital: The financial resources used to start or operate a business. |
Cash Basis Accounting: A method of accounting where transactions are recorded when cash is received or paid. |
Cash Budget: A financial plan that projects the inflows and outflows of cash over a specific period. |
Cash Flow Statement: A financial statement that shows the inflows and outflows of cash during a specific period. |
Cash Flow: The movement of cash in and out of a business, typically measured over a specific period. |
Chart of Accounts: A list of all accounts used in a company’s accounting system. |
Common Stock: The most basic form of ownership in a corporation, representing a share of ownership. |
Comprehensive Income: The total change in a company’s equity from non-owner sources, including net income and other comprehensive items. |
Contra Account: An account linked to another account but with an opposite normal balance. |
Contribution Margin: The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit. |
Cost Accounting: The branch of accounting that focuses on allocating costs to products or activities for better cost control. |
Cost Allocation: The process of distributing indirect costs to specific cost objects, such as products or services. |
Cost Center: A department or division within a company that incurs costs but does not directly generate revenue. |
Cost of Goods Sold (COGS): The direct costs associated with producing goods sold by a company. |
Cost of Sales: The direct cost of producing or acquiring goods sold by a company. |
Cost Pool: A grouping of similar costs to simplify allocation and management. |
Cost Pool: A grouping of similar costs to simplify allocation and management. |
Credit Memorandum: A document issued by a seller to reduce a customer’s account balance for returned goods or other adjustments. |
Credit: An entry on the right side of an account, typically representing an increase in liability or equity accounts. |
Creditor: A person or entity to whom a company owes money. |
Current Assets: Assets that are expected to be converted into cash or used up within one year. |
Current Liabilities: Liabilities that are due to be paid within one year. |
Current Portion of Long-Term Debt: The amount of long-term debt due within the next year, classified as a current liability. |
Current Ratio: A financial ratio that measures a company’s ability to pay its short-term liabilities with its current assets. |
Days Sales Outstanding (DSO): The average number of days it takes for a company to collect its accounts receivable. |
Debit: An entry on the left side of an account, typically representing an increase in asset or expense accounts. |
Debt Ratio: A financial ratio that measures the proportion of a company’s assets financed with debt. |
Debt Service Coverage Ratio (DSCR): A financial ratio used to assess a company’s ability to service its debt obligations. |
Debt: An obligation to repay borrowed money. |
Debt-to-Equity Ratio: A financial ratio that compares a company’s total liabilities to its shareholder’s equity. |
Deferred Revenue: Money received in advance for goods or services that are yet to be provided. |
Deficit: The negative balance in a company’s retained earnings account. |
Depreciation Expense: The periodic expense recorded for the reduction in value of a tangible asset. |
Depreciation: The process of allocating the cost of tangible assets over their useful lives. |
Diluted Earnings per Share: A calculation of earnings per share that includes all potential shares that could be converted into common stock. |
Direct Cost: A cost that can be directly attributed to a specific cost object, such as a product or department. |
Direct Labor: The wages paid to employees directly involved in the production of goods or provision of services. |
Dividend Payout Ratio: A financial ratio that measures the proportion of earnings paid out as dividends to shareholders. |
Dividend: A distribution of a company’s earnings to its shareholders. |
Double Declining Balance (DDB) Depreciation: An accelerated depreciation method that writes off more of an asset’s value in the early years of its useful life. |
Double Declining Balance (DDB) Depreciation: An accelerated depreciation method that writes off more of an asset’s value in the early years of its useful life. |
Double Entry Accounting: A method of accounting where every transaction is recorded in at least two accounts. |
Due Diligence: The process of investigating and evaluating the financial and operational aspects of a potential investment. |
Earnings Before Interest and Taxes (EBIT): A measure of a company’s operating profitability before interest and tax expenses are deducted. |
Earnings Management: The manipulation of financial information to achieve desired financial results. |
Earnings Per Share (EPS): A financial ratio that measures a company’s profitability relative to the number of outstanding shares. |
Economic Order Quantity (EOQ): The optimal inventory order quantity that minimizes total holding and ordering costs. |
Employee Benefits: Non-wage compensation provided to employees, such as health insurance, retirement plans, and paid time off. |
Employee Stock Option (ESO): A financial incentive that allows employees to purchase company stock at a specified price. |
Employee Stock Option (ESO): A financial incentive that allows employees to purchase company stock at a specified price. |
Equity Method of Accounting: An accounting method used for investments in which the investor has significant influence over the investee. |
Equity Method: An accounting method used to account for investments in other companies when significant influence is exerted. |
Equity: The residual interest in the assets of a company after deducting liabilities. |
Expense Recognition Principle: The principle that expenses should be recognized in the same period as the related revenue. |
Expenses: The costs incurred to generate revenue during a specific period. |
Fiduciary: A person or entity legally responsible for managing assets or money for the benefit of another party. |
FIFO (First-In-First-Out): An inventory valuation method that assumes the first items purchased are the first ones sold. |
Financial Accounting Standards Board (FASB): The private organization that establishes accounting standards in the United States. |
Financial Analysis: The examination of financial statements to assess a company’s performance and financial health. |
Financial Statement: A formal record of a company’s financial activities, including the balance sheet, income statement, and cash flow statement. |
Fixed Assets: Assets that are long-term and expected to be used by a company for more than one year. |
Fixed Cost: A cost that remains constant regardless of production or sales volume. |
Floating Exchange Rate: An exchange rate that fluctuates based on supply and demand in the foreign exchange market. |
Forensic Accounting: The use of accounting skills to investigate fraud and financial misconduct. |
Fraud: Intentional deception to gain an unfair advantage, often involving financial misrepresentations. |
Full Disclosure Principle: The principle that requires financial statements to include all relevant information that may influence user decisions. |
Full-Time Equivalent (FTE): A measure of an employee’s workload in relation to a full-time employee. |
Fund Accounting: Accounting for specific pools of money, such as those held by nonprofit organizations or government agencies. |
GAAP (Generally Accepted Accounting Principles): The standard framework of accounting principles used in the United States. |
General Ledger: The central repository of a company’s financial transactions. |
Generally Accepted Auditing Standards (GAAS): The auditing standards used by auditors in conducting financial statement audits. |
Generally Accepted Auditing Standards (GAAS): The auditing standards used by auditors in conducting financial statement audits. |
Going Concern Concept: The assumption that a company will continue to operate indefinitely. |
Goodwill: The excess of the purchase price over the fair market value of net assets acquired in a business combination. |
Government Accounting Standards Board (GASB): The organization responsible for setting accounting standards for U.S. state and local governments. |
Gross Margin: The difference between sales revenue and the cost of goods sold, expressed as a percentage. |
Gross Profit: The difference between sales revenue and the cost of goods sold. |
Hedging: A risk management strategy used to offset potential losses by using financial instruments, such as derivatives. |
Historical Cost: The original cost of an asset recorded on the balance sheet. |
Horizontal Analysis: The comparison of financial data from multiple periods to identify trends and changes. |
IFRS (International Financial Reporting Standards): A set of accounting standards used in many countries outside the United States. |
IFRS Foundation: The organization responsible for the governance and oversight of the International Accounting Standards Board (IASB). |
IFRS Foundation: The organization responsible for the governance and oversight of the International Accounting Standards Board (IASB). |
Impairment: A reduction in the value of an asset due to events like obsolescence or decreased demand. |
Income Before Taxes: The profit earned by a company before accounting for income tax expenses. |
Income Statement: A financial statement that shows a company’s revenues, expenses, and profit or loss over a specific period. |
Income Tax Expense: The amount of tax payable based on a company’s taxable income. |
Indirect Cost: A cost that cannot be directly attributed to a specific cost object (e.g., a product or service). |
Inflation Accounting: Accounting methods used to adjust financial statements for the effects of inflation. |
Intangible Asset: An asset that lacks physical substance but has value, like patents or trademarks. |
Intercompany Transaction: A transaction that occurs between two entities within the same corporate group. |
Internal Control: Procedures and policies put in place to safeguard assets and ensure accurate financial reporting. |
Internal Rate of Return (IRR): The discount rate at which the net present value (NPV) of an investment equals zero. |
International Accounting Standards Board (IASB): The organization responsible for issuing International Financial Reporting Standards (IFRS). |
Inventory Turnover: A financial ratio that measures how many times a company’s inventory is sold and replaced within a specific period. |
Inventory: The goods and materials held by a company for sale. |
Job Costing: A cost allocation method used to track costs associated with specific jobs or projects. |
Job Order Costing: A cost allocation method used to track costs associated with specific jobs or orders. |
Joint Venture: A business arrangement in which two or more parties jointly undertake a specific project or enterprise. |
Journal: The chronological record of financial transactions before they are transferred to the general ledger. |
Leverage: The use of borrowed funds to finance a company’s operations, increasing the potential return but also the risk. |
Liabilities: A company’s financial obligations or debts. |
LIFO (Last-In-First-Out): An inventory valuation method that assumes the last items purchased are the first ones sold. |
Liquidity: The ability of a company to meet its short-term obligations with its current assets. |
Long-Term Debt: Debt that is due to be paid back over a period exceeding one year. |
Long-Term Investments: Investments in securities or other assets held for an extended period. |
Management Accounting: The process of providing financial information to managers for decision-making. |
Management Control System: The process used by managers to ensure that company activities are aligned with organizational goals. |
Marginal Cost: The additional cost incurred by producing one additional unit of a product or service. |
Marketable Securities: Short-term investments that can be easily converted to cash, such as treasury bills or commercial paper. |
Markup: The amount added to the cost of goods to arrive at the selling price. |
Matching Principle: The principle that requires expenses to be matched with the revenues they help generate. |
Materiality Concept: The principle that financial information should be presented if it could influence the decisions of users. |
Materiality: The threshold at which financial information becomes significant enough to influence the decisions of users. |
Merchandise Inventory: Goods held by a company for resale. |
Merger: The combination of two or more companies to form a new entity. |
Minority Interest: The portion of a subsidiary’s net income not owned by the parent company. |
Net Book Value: The value of an asset recorded on the balance sheet after subtracting accumulated depreciation. |
Net Income: The profit earned by a company after deducting all expenses from revenue. |
Net Loss: The excess of expenses over revenues in a specific period. |
Net Present Value (NPV): A method of evaluating the profitability of an investment by comparing its present value to its initial cost. |
Non-Controlling Interest: The portion of equity not owned by the parent company in a subsidiary. |
Non-Current Assets: Assets that are not expected to be converted into cash within one year. |
Non-Current Liabilities: Liabilities that are not due to be paid within one year. |
Non-Profit Organization: An organization that operates for purposes other than profit-making and reinvests any surplus back into the organization’s mission. |
Operating Expense: Costs incurred by a company in the regular course of its business operations. |
Operating Income Margin: The percentage of revenue remaining after deducting operating expenses. |
Operating Income: The profit earned by a company from its regular business operations. |
Operating Lease: A lease agreement in which the lessor retains ownership of the leased asset. |
Other Comprehensive Income: Items that impact a company’s equity but are not included in the net income calculation. |
Outsourcing: Contracting with an external provider to perform certain business functions or operations. |
Overhead Allocation: The process of distributing indirect costs to cost objects, such as products or departments. |
Overhead Costs: Indirect expenses incurred to support business operations. |
Participatory Budgeting: A budgeting approach that involves employees at all levels in the budgeting process. |
Partners’ Capital: The portion of a partnership’s equity representing the contributions of its partners. |
Payroll: The process of calculating and disbursing employee salaries and wages. |
Periodic Inventory System: An inventory accounting method that calculates the cost of goods sold periodically, not after each sale. |
Perpetual Inventory System: An inventory accounting method that continuously updates the cost of goods sold after each sale. |
Petty Cash: A small amount of cash kept on hand for minor expenses. |
Plant Assets: Long-term tangible assets used in the production of goods or services. |
Preferred Stock: A class of stock with preferential rights, often regarding dividends and liquidation. |
Prepaid Expenses: Expenses paid in advance but not yet consumed or used. |
Price-Earnings Ratio (P/E Ratio): A valuation ratio that compares a company’s stock price to its earnings per share. |
Principal: The initial amount of money invested or borrowed. |
Product Cost: The direct and indirect costs associated with producing a product. |
Profit and Loss Statement: Another term for the income statement, which shows a company’s revenue and expenses. |
Profit Margin: A financial ratio that measures a company’s profitability relative to its sales revenue. |
Proxy Statement: A document that provides shareholders with information needed for voting on corporate matters. |
Proxy: A document granting one person the authority to act on behalf of another. |
Purchases Journal: A book used to record credit purchases of goods for resale. |
Quick Assets: The most liquid assets, including cash and cash equivalents. |
Quick Ratio: A financial ratio that measures a company’s ability to meet its short-term obligations with its most liquid assets. |
Ratio Analysis: The examination of relationships between financial variables to assess a company’s performance. |
Ratio of Fixed Assets to Long-Term Liabilities: A financial ratio that compares a company’s fixed assets to its long-term liabilities. |
Real Accounts: Accounts on the balance sheet that represent assets, liabilities, and shareholders’ equity. |
Real Assets: Tangible assets used in the operations of a business. |
Realization Principle: The principle that revenue should be recognized when earned and realized, not necessarily when cash is received. |
Realized Gain or Loss: A gain or loss that results from the sale or disposition of an investment. |
Receivables Turnover Ratio: A financial ratio that measures how quickly a company collects its accounts receivable. |
Reconciliation: The process of ensuring that two sets of records (e.g., bank and book records) are in agreement. |
Residual Value: The estimated value of an asset at the end of its useful life. |
Retained Earnings: The accumulated earnings of a company that are not distributed to shareholders as dividends. |
Return on Assets (ROA): A financial ratio that measures a company’s ability to generate profit from its assets. |
Return on Equity (ROE): A financial ratio that measures a company’s profitability relative to shareholders’ equity. |
Revenue Recognition Principle: The principle that revenue should be recognized when it is earned, not necessarily when cash is received. |
Revenue Recognition: The process of recording revenue when it is earned, even if cash has not been received. |
Revenue: The income earned by a company from its primary business activities. |
Sales Invoice: A document issued to a customer detailing the sale of goods or services. |
Sales Returns and Allowances: Reductions in sales revenue due to returned merchandise or customer allowances. |
Shareholder: An individual or entity that owns shares in a corporation. |
Shareholder’s Equity: The residual interest in a company’s assets after deducting liabilities. |
Single-Entry Accounting: A basic accounting method that records only one side of a transaction. |
Solvency: A company’s ability to meet its long-term financial obligations. |
Statement of Cash Flows: A financial statement that shows the inflows and outflows of cash during a specific period. |
Statement of Changes in Equity: A financial statement that shows the changes in a company’s equity over a specific period. |
Stock Dividend: A dividend paid to shareholders in the form of additional shares of stock. |
Stock Split: The division of existing shares into multiple shares, often to reduce the market price per share. |
Stockholder’s Equity: The residual interest in a corporation’s assets after deducting liabilities. |
Straight-Line Depreciation: A method of allocating the cost of an asset evenly over its useful life. |
Subsidiary Ledger: A detailed ledger containing specific accounts that roll up into a general ledger account. |
Subsidiary: A company that is controlled by another company, known as the parent company. |
Tax Accounting: The specialized branch of accounting focused on tax-related matters. |
Time Series Analysis: The study of data points collected over time to identify patterns and trends. |
Time Value of Money: The concept that money available today is worth more than the same amount in the future due to its earning potential. |
Top-Line Growth: An increase in a company’s revenue or sales. |
Treasury Bills (T-Bills): Short-term debt securities issued by the U.S. government to raise funds. |
Treasury Stock: Shares of a company’s stock that have been repurchased and are held by the company. |
Trial Balance: A statement that lists all the general ledger accounts and their balances to check for accuracy. |
Turnover Ratio: A financial ratio that measures the efficiency of a company in managing its assets. |
Turnover: The number of times an asset or inventory is replaced or sold within a specific period. |
Underwriting: The process of evaluating and assuming the risk of insuring a person or entity. |
Unearned Revenue: Money received in advance for goods or services not yet provided. |
Unfavorable Variance: The difference between actual expenses and budgeted expenses, resulting in higher costs than expected. |
Unit Cost: The cost associated with producing one unit of a product. |
Unqualified Opinion: A clean audit opinion without any significant concerns or qualifications. |
Unrealized Gain or Loss: A change in the value of an investment that has not been sold or realized. |
Variable Cost: A cost that changes in direct proportion to changes in production or sales volume. |
Vertical Analysis: The comparison of financial data with a base figure, expressed as a percentage. |
Vertical Analysis: The comparison of financial data with a base figure, expressed as a percentage. |
Vertical Analysis: The comparison of financial data with a base figure, expressed as a percentage. |
Working Capital Management: The management of a company’s short-term assets and liabilities to ensure liquidity. |
Working Capital: The difference between a company’s current assets and current liabilities, representing its short-term liquidity. |
Zero Coupon Bond: A bond issued at a discount to its face value and does not pay periodic interest. |
Zero-Based Budgeting: A budgeting approach that requires justifying all expenses from scratch, without considering previous budgets. |
Z-Score: A statistical formula used to assess a company’s financial health and risk of bankruptcy. |
![CA Rakesh Agarwalla Founder , Agarwal coaching centre](https://agarwalcoaching.in/wp-content/uploads/2023/07/Untitled-design-modified-2-300x300.png)
CA Rakesh Agarwalla
Founder , Agarwal coaching centre
(CA, CS, CMA)