Accounting

Definition: Financial Analysis, as the name itself signifies, is a process of critically studying, reviewing and interpreting the information provided in the company's financial statements so as to understand the same and take better decisions regarding the firm's operations. Financial Analysis is used to evaluate the present and past financial position of the enterprise … [Read more...] about Financial Analysis

Definition: Overheads can be understood as the indirect expenditure which can't be appropriately charged to or economically identified with any specific cost centres, cost object or cost unit. The overheads are not related to individual jobs, work order or products rather they are incurred in connection to the output, or in providing certain incidental facilities or … [Read more...] about Overheads

Definition: Cash Book implies a subsidiary book, wherein all cash inflows and outflows made by the entity are recorded datewise, in chronological order. It is called the book of original entry, as the transactions are recorded as and when they occur, right from the source documents. Cash book is similar to the cash account in the sense that on the debit side of the book, … [Read more...] about Cash Book

Definition: The term 'inventory' implies the goods available with the business enterprise for the purpose of sale. It serves as the excess supply of goods, which is helpful in keeping the operations going, without any delays or shortage of stock. It has three stages: Raw Materials: It refers to the unprocessed supply of material, which serves as the main component for the … [Read more...] about Methods of Inventory Valuation

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