Definition: Cost centre can be understood as a site (sales area, or department), a person (salesman, or machine operator), an item of equipment (delivery vehicle, machinery) or a combination of these, for which cost is determined and used to control the costs. It implies that segment of the organization, that helps in making its appropriate division for the purpose of product … [Read more...] about Cost Centre
Double Entry System
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
Reserves
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
Provisions
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
Source Document
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
Overdraft
Definition: Overdraft refers to open-ended financial assistance which the bank offers to the current account holders, in which the individuals and entities are allowed to withdraw funds from their accounts more than the amount standing in the credit of his/her current account or when the account has zero balance or even when the account shows debit (negative) balance. Hence, … [Read more...] about Overdraft
Subsidiary Book
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
Quasi Contract
Definition: Quasi Contract is a retroactive agreement, determined by a judge with an aim of correcting a situation wherein one party obtains something at the cost of another party. It stops one party from getting an unfair advantage from the situation. It takes place when a dispute exists against the payment of goods and services. Thus such arrangements rely on the court's … [Read more...] about Quasi Contract
Contingent Liability
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
Contract of Guarantee
Definition: Contract of Guarantee refers to a contractual arrangement in which one party gives a guarantee for another regarding the fulfillment of a promise or repayment of the debt when the latter fails to discharge the liability or perform the undertaking. That is to say, guarantee means to stand for another person and in a contract of guarantee, the surety assures … [Read more...] about Contract of Guarantee