Key accounting definitions

FIGURING IT OUT

An expression indicating an out-of-the ordinary revenue or expense classification or an extraordinary or non-recurring item requiring a separate grouping on a balance sheet or income statement.

Budgetary control
Guiding and regulating activities with a view to attaining pre-determined objectives, effectively and efficiently. The control of revenue and expenditure as also physical performance including management of assets and liabilities through the use of budgetary methods. Control under a budgetary control system is exercised through a watch on variances, which is deviation in actuals from budget estimates, assignment of reasons therefore and taking corrective action to achieve the objectives, targets or policies expressed in the budget.

Budget Variance
Difference between budgets and actuals.

Collator
The process of bringing information from two different places together. The machine that performs the job of collating in electronic data processing.

Current Liability
Liabilities, which fall due for payment in a relatively short period, normally less than twelve months, such as creditors, bank overdrafts, current taxation and dividends payable, also that part of long-term loans due for repayment within one year. It is also the liability that fell due within the coming year or within the normal operating cycle if longer than a year.

Debit Note
A document prepared by the purchaser notifying the seller that his (the seller's) account has been reduced by a stated amount because of an allowance, return of goods or cancellation.

Delivery Note
A document which accompanies goods for delivery and may act as proof of delivery, sometimes referred to as consignment note or a carrier's note.

Fixed Asset
An asset that is used over a period of time, such as land, building, plant and machinery, tools and others held for use in business and not for sale or conversion into cash. Sometimes intangible assets such as goodwill and patents are also regarded as fixed assets. Fixed asset denotes capital assets.

Also, it is any asset acquired for retention in an entity for the purpose of providing goods or service and not held for resale in the normal course of trading.

Fringe benefit
A benefit received by an employer in addition to his regular pay. It could be in the form of bonus, provident fund, gratuity, superannuation, house rent allowance or housing accommodation, leave travel assistance, free lunch, medical assistance, conveyance among others.

Lease
A popular expression to summarise the problem of evaluation of the relative advantages of hiring equipment as compared with outright purchase.

A contract between a lessor and a lessee for the hire of a specific asset. The lessor retains ownership of the asset but conveys the right to the use of the asset to the lessee for an agreed period of time in return for the payment of specified rentals.

Source: ICWAI