Key accounting definitions

FIGURING IT OUT

A method whereby the cost is determined so as to include the appropriate share of both variable and fixed assets.

Acceptance
The drawee's signed assent on bill of exchange, to order of the drawer. This term is also used to describe bill of exchange that has been accepted.

Accrued assets
A developing but not yet enforceable claim against another person which accumulates with the passage of time or the rendering of service or otherwise. It may arise from rendering of service (including the use of money) which at the date of accounting have been partly performed and are not yet billable.

Accrued expenses
An expense, which has been incurred an accounting period but for which no enforceable claim has become due, in that period against the enterprise. It may also arise from the purchase of services (including the use of money) which at the date of accounting have been only partly performed and are not yet billable.

Accrued liability
A developing but not yet enforceable claim by another person which accumulates with the passage of time or the receipt of services or otherwise.

Unpaid dividend
Dividend which has been declared by a corporate enterprise but has not been paid, or the warrant or cheque in respect whereof has not been despatched within the prescribed period.

Useful life
Life which is either the period over which a depreciable asset is expected to be used by the enterprise or the number of production or similar units expected to be obtained from the use of the asset by the enterprise.

Cost of sales
Cost of goods sold plus selling and administrative expenses.

Dividend
A distribution to shareholders out of profits or reserves available for this purpose.

Pledge
Deposit of goods by one person (pledger or pawnor) to another person (pledgee or pawnee) as a security for payment of a debt or performance of a promise. The pledgee has a special lien or right on the property in the pledged goods with a right to sell the same, after notice if the pledgor fails to discharge the debt or perform his promise on the stipulated date.

Preferential payment
Payment which in a winding up or insolvency has to be made in priority to all other debts as per statute.

Pre-paid expense
Payment for expense in an accounting period, the benefit for which will accrue in the subsequent accounting period(s).

Prime cost
The total cost of direct materials, direct wages and other direct production expenses.

Unexpired cost

That portion of an expenditure whose benefit has not yet been exhausted.

Source: ICWAI