Glossary

  Absorption Costing Absorption costing is a costing method in which all costs of manufacturing a particular item/ product including both fixed and variable are made part of the product cost of the said item/ product. In other words, the cost incurred to produce a single unit of a specific product will include costs of: […]

Accelerated Depreciation Accelerated depreciation can be defined as a depreciation method in which the cost of an asset is allocated over its useful life at a much faster rate when compared with the traditional straight-line method. The accelerated depreciation method allows more depreciation to be charged in the earlier years of an asset’s life and

  Account An account can be defined as an individual record in the general ledger of an asset, equity, liability, income, and expenditure in an organized manner. For example, a business entity will have a bank account in its chart of accounts in which every transaction involving a bank is recorded. A company purchasing goods

  Accounting Cycle An accounting cycle is often described as a process of identifying, analyzing, and recording business transactions of a company. An accounting cycle includes the following steps: Identifying and analyzing business transactions Recording business transactions in journals Posting journal entries to accounts in the company’s general ledger Preparing a trial balance before adjustments

  Accounting Department Section of a company that deals with the accounting side of the company. The accounting department of a company is responsible for recording transactions, maintaining the general ledger, billing customers, paying bills, cost accounting, payroll, preparing financial statements, performing financial analysis, and more. The head of the accounting department is often given

Accounting Equation  Accounting equation also known as balance sheet equation is considered to be the foundation of double entry system of bookkeeping and accounting being used by sole proprietors, partnerships and multinational corporations. As per the accounting equation, the total value of assets of the business equals to the sum of its liabilities and owner’s

  Accounting Net Income Flows Accounting net income flows can be described as the revenues recognized during a specific financial period, less the expenditure recorded in the same period. The said amount is normally calculated using accrual accounting under which revenue and expenses are recorded in the period to which they relate. This is the

  Accounting Principles Accounting principles are the common rules and guidelines that businesses must follow when reporting financial data/ information. Some of the accounting concepts and principles are as follows: Matching principle The cost principle Rules for recognizing Revenue Industry-specific regulations Full disclosure principle Going concern Accrual Materiality Consistency Conservatism and others Matching Principle As

  Accounting Rate of Return The accounting rate of return (ARR) also known as the average rate of return is a capital budgeting method used for determining whether it would be beneficial to proceed with a specific project/ investment. In other words, it helps you in calculating the return you would make on your investment.

  Accounts Payable Accounts payable represents the amount that a business owes to its suppliers against goods purchased/ services rendered on credit. It appears on the balance sheet under the head of the current liability. Recording Accounts Payable In order to record accounts payable, the accounts department must credit accounts payable when an invoice or