A TO C

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. Hence, they are called absorption.

Absorbed Costs

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

Absorption Costing

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

Absorption Pricing

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

Absorption Variance

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

Accelerated Depreciation

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

Account

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

Accounts Analysis

Accounts analysis can be looked as a method of cost behavior analysis by classifying records under two heads: fixed or variable.

Accounts Group

Accounts group is a combination of similar accounts. 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.

Accounting Concepts

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

Accounting Cycle

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

Accounting Entity Assumption

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

Accounting Equation

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

Accounting Event

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

Accounting Income

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

Accounting Measurement and Disclosure

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

Accounting Periods

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

Accounting Principles

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

Accounting Ratios

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

Accounting System

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

Accounting Theory

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

Accounting Timing Difference

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

Accounting Treatment

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

Accounts Payable

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

Accounts Payable to Sales

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

Accounts Receivable

Accounts receivable are those accounts where the business can owe money for providing goods or services. 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 analyzes the liquidity position of the business. It is calculated by Acid Test Ratio = Total Liquid Assets / Current Liabilities.

Acquisition

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

Activity Based Costing

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

Activity Ratio

Activity ratio is the ability of a business to convert their balance sheet assets into cash or sales.

Actual Cash Value

Actual cash value is a method for determining the actual loss incurred by the business expressed in monetary terms. It is normally used in context of depreciation.

Actual Cost

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

Additional Paid-in Capital

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

Adequate Disclosure

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

Adjusted Book Value

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

Adjusting Entries

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

Administrative Costs

Administrative costs are those which are not directly required for the process of production, but are included in the final price of the product as they are incurred. 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 are amounts of money set aside by the business as a cover for possible defaults on payments.

Alternate Payee Endorsement

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

Amalgamation

Amalgamation is the merger of two or more business entities.

Amortization

Amortization can mean three things.

1. It is a series of payments that result in gradual reduction of a large debt.
2. It is writing off the value of an intangible asset over the useful life of the asset.
3. It can also mean periodic deduction in the value of a fixed asset by means of depreciation.

Amount Due

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

Ancillary

Ancillary refers to something that has lesser importance.

Annualized

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

Annual Report

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

Annuity

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

Appreciation

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

Appropriation

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

Arrears

Arrears are debt that have not been paid yet.

Assessed Value

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

Assessment

Assessment is the total amount of tax or levy payable.

Asset

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

Asset Earning Power

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

Asset Turnover Ratio

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

Asset Valuation

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

Audit

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

Audit Committee

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

Audit Report

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

Authorized Capital

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

Average Cost

Average cost = Total Cost / Number of Units.

Average Inventory

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

Average Net Receivables

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

Average Settlement Period

Average Settlement Period is calculated

for debtors Average Settlement Period = (Trade Debtors * 365) / Credit Sales

for creditors Average Settlement Period = (Trade Debtors * 365) / Credit Purchases

Average Tax Rate

Average tax rate = Total Taxes Paid / Tax Base.

Avoidable Cost

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

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.

Base Capital

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

Basic Earning Power

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

Basis

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

Batch

Batch is a collection of items that 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 can be looked upon as the remuneration given to an employee in excess of the stipulated salary.

Books

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

Book Building

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

Book Costs

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

Book Income

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

Book Inventory

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

Book Keeping

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

Books of Accounts

Refer Ledger

Book to Market Ratio

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

Branch Accounting

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

Break Even Analysis

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

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

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

Callable Bond

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

Capital

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

Capital Account

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

Capital Asset

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

Capital Budget

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

Capital Charge

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

Capital Commitment

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

Capital Contribution

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

Capital Employed

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

Capital Expenditure

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

Capital Expenditure Ratio

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

Capital Fund

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

Capital Gain

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

Capital Improvement

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

Capital Intensive

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

Capital Investment

Refer Capital Expenditure.

Capitalization

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

Capitalization Rate

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

Capitalized Cost

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

Capital Loss

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

Capital Market

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

Capital Profit

Capital profit is 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

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

Cash Book

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

Cash Budget

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

Cash Deficit

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

Cash Discount

Cash discount is the discount allowed to the debtor to induce him to pay earlier.

Cash Dividend

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

Cash Earnings

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

Cash Flow

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

Cash Flow Analysis

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

Cash Flow Statement

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

Cash Inflow

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

Cash Outflow

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

Cash Management

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

Cash Profit

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

Cash Ratio

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

Certified Financial Planner

A certified financial planner is a financial planner qualified as per the requirements of the Institute of Certified Financial Planners.

Certified Public Accountant

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

Chapter S

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

Charter

A charter is a document of a corporation.

Chart of Accounts

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

Check

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

Checking Account

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

Claims

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

Claims Outstanding

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

Close

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

Closing Accounts

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

Closing Date

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

Closing Entry

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

Closing Stock

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

Coding

Coding means assigning the proper code to the accounts.

Collateral

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

Collateral Note

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

Collection Period

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

Combined Financial Statement

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

Commercial Loan

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

Commercial Paper

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

Committed Costs

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

Commodity

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

Common Size Analysis

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

Common Size Statement

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

Company

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

Comparative Statement

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

Compensating Errors

Compensating errors are those errors that cancel a previous error.

Compliance Audit

Compliance audit is a watchdog procedure to ensure that the business is complying with the set of rules and procedures that are set for it. It can be compared to the accounts audit which ensures that the true accounting details are disclosed.

Compliance Panel

A compliance panel is a committee of people in charge of a compliance audit. This can be compared to the financial audit committee.

Composite Depreciation

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

Composite Financial Statement

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

Compound Annual Growth Rate

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

Compound Interest

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

Compound Journal Entry

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

Comprehensive Annual Financial Report

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

Compulsory Liquidation

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

Concessionary Loans

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

Conglomerate

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

Conservatism Principle

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

Consistency Principle

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

Consolidated Capital

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

Consolidated Financial Statement

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

Constraint

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

Contingency Budget

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

Contingency Plan

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

Contingent

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

Continuity Assumption

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

Contra Entry

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

Contributed Assets

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

Contributed Surplus

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

Contributed Margin

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

Contribution to sales ratio

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

Controllable Expense

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

Conversion Costs

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

Convertible

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

Corporate Governance

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

Corporation

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

Corporation Tax

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

Correcting Entry

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

Cost

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

Cost Accounting

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

Cost Allocation

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

Cost Assignment

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

Cost Benefit Analysis

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

Cost Ceiling

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

Cost Center

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

Cost Control

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

Cost Driver

Cost driver is an event 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 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.