Accounting

Definition: Underwriting refers to the process in which an underwriter accepts the financial risk for consideration, i.e. fee. It is the process of extending a guarantee to the company to make certain that the securities offered to the public get subscriptions within the specified time. Underwriting of shares and debentures is a contract between the company and underwriters. … [Read more...] about Underwriting of Shares and Debentures

Definition: Buy Back of Shares, or Share Repurchase is a corporate move wherein a company purchases its own outstanding shares from the current shareholders. This buyback takes place at a higher price than the actual market price. Further, the motive behind this is to reduce the number of shares present in the open market. When the company repurchases shares, cancellation of … [Read more...] about Buy Back of Shares

Definition: Discount implies a concession or deduction allowed at a specified rate from the price of the goods given by the seller to the buyer or by the creditor to the debtor. It is given to lure customers and promote sales. The amount of discount must be received or paid with regard to the terms of the sales agreement. Here, it is to be noted that discount is always … [Read more...] about Discount

Definition: Sinking fund refers to a specific reserve fund, in which money is earmarked and accumulated over time, for the purpose of redemption of debt, bond, and also for the replacement of a wasting asset. It is obligatory to invest these funds outside the business because when the maturity of the underlying debt becomes due, funds can be availed easily by selling the … [Read more...] about Sinking Fund

Definition: Double Entry System refers to the system of bookkeeping that is prevalent at present. According to this system, every transaction has equal and opposite effects, in a minimum number of two accounts. For Example: Suppose a firm purchased a laptop for cash Rs. 70,000. The two aspects of this transaction are that the amount of cash is reduced and assets, i.e. … [Read more...] about Double Entry System

Definition: Reserve, as the name suggests is a part of undistributed profit retained in the business so as to provide for specific future needs like growth and expansion, or to meet any known or unknown expenditure or contingency, liability, or reduce the value of the asset. This means that profit is kept in the business and not distributed otherwise, which helps in future … [Read more...] about Reserves

Definition: Provisions refer to the practice of retaining an estimated fund out of the profit by the firm so as to cover an uncertain anticipated loss or to reduce the value of the asset in the future. It is a liability whose time of occurrence and the amount is not known. Liability here means liability for expenses. The funds are set aside for a particular purpose only and it … [Read more...] about Provisions

Definition: Source Document is the root document that bears the essential information related to the business transaction. When a business transaction takes place, a piece of written, printed, typed or electronic trail is generated which stores data relating to the transaction and acts as a formal or official record. This document is the source document. Basically, these … [Read more...] about Source Document

Definition: Subsidiary books are special-purpose accounting books that record transactions belonging to the same category in a particular book in a sequential manner. Also, the transactions are recorded in their original form, i.e. as and when the transactions occur, they are entered in the subsidiary book before posting them anywhere that is why they are also known as the book … [Read more...] about Subsidiary Book

Definition: Contingent Liability refers to an anticipated financial obligation that springs from events that happened in the past and whose existence is validated by the happening or non-happening of the uncertain future event, which is not under the control of the enterprise. Also, it can be a present financial obligation, whose payment is not likely or whose amount cannot … [Read more...] about Contingent Liability