GLOSSARY/Accounting Dictionary-Alphabet A



A resource controlled by an entity as a result of past events; and

from which future economic benefits are expected to flow to the entity

Abnormal item

Abnormal items are transactions or other events that are both “unusual in nature” and “infrequent in occurrence”.

Absorption costing

A costing technique which allocates all factory indirect/fixed costs into the product.


The method used to accumulate related accounting information (e.g. Salaries and Wages Expense – an account used to collect the payroll costs).

Account Codes

Is the identification process so as to identify the individual accounts in the ledger. Ultimately, the account codes are grouped and classified to be used to generate the information for financial statements.


Refer to the activities and theories of accounting including the practice, research and teaching. Includes guidelines, principles and procedures that accountants follow in conducting their tasks.


A person who performs accounting services. He or she prepares financial statements, conduct audits, provide consultancy services in accounting, financial, taxation and others


Accounting is the process of identifying, recording, classifying and reporting information on economic events in a logical manner for the purpose of providing financial information for decision making.

Accounting policies

The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Accounting Concepts

Rules and principles applied when recording economic events and in the preparation of financial statements. Some of the fundamental accounting concepts are going concern, materiality and prudence

Accounting cycle

Is the sequence in which the data is recorded and processed until it becomes part of the financial statements at the end of the period.

Accounting Equation

Also known as the Balance Sheet Equation. Uses the dual aspect concept or double entry.


Accounting profit

Profit or loss for a period before deducting tax expense

Accounting Records

Includes various journals like general journal, cash book, ledgers(general ledger, subsidiary ledger) and source documents

Accounting Standards

Pronouncements of Accounting Standard Setting Bodies

Accounting System

Methods, procedures and standards followed in accumulating, classifying, recording and reporting economic events and transactions.

Accounts Payable and Accrued Liabilities

A short-term liability account reflecting amounts due to individuals or organizations for goods and services purchased.

Accounts Receivable

An asset account reflecting amounts due from individuals or organizations for goods and services rendered.

Accrual basis of accounting

The effects of transactions and other events are recognised when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. Or it is a method of accounting whereby revenue is recorded when earned (regardless of when received) and expenses are recorded when incurred.

Accumulated Depreciation

The sum of depreciation charge on a fixed asset TODATE. This accumulated depreciation is set off/netted off or contra account to the Gross Fixed Asset.

Acid Test Ratio

Also known as the quick ratio /liquid ratio. This measurement ratio is a test for liquidity of a company.


Liquid assets(current assets less inventory/stock /Current Liabilities)

Acquisition Cost

Costs incurred to acquire and asset. Includes all costs like purchase price and all incidental costs including transportation, taxes, preparation and installation.

Adjusting Entries

Entries made to either correct errors or to include information initially omitted.

Adjusting Events

These are events that occur after the balance sheet date and provide additional evidence of conditions existing at the time of the balance sheet date.

Aging of Account Receivables/Debtors

Classification of debtors by time elapsed after the billing date or due date.


Used for the gradual reduction over time of the cost or some other value of an intangible asset


Is the process of writing off a regular portion of the cost(or some other value) of an intangible asset over a period of time. Also used to provide for extractive or wasting assets like timber tracts, oil fields and tin mines.


To evaluate the condition of an accounting-related item and discover possible reasons for discrepancies

Annual Report

A financial report prepared annually that includes financial statements.


To extend the cost of an item to an annual basis. For example, if an expense is $3,000 for 6 months then for a year it is $3,000×2=$6,000


Increase in the value of an asset


Distribution of net income after tax to various reserves and persons such as the shareholders in the form of dividends.

Arm’s length transaction

Transactions entered into by willing, knowledgeable and unrelated parties, each acting in its own interest. Normally, prices transacted will be at fair market prices.

Asset Turnover

A financial accounting ration to measure a company’s efficiency in using its assets to generate sales. This ratio can be computed for specific assets like sales to fixed assets/sales to account receivables/sales to inventory,etc. A high ratio reflects favorably on a company’s ability to effectively utilize/deploy assets.

Associated Company

A company over which an investor is able to exercise influence and not control. Generally an investee company is considered an associated company if the investor holds/controls at least 20% but less than 50% of its voting rights.


Is the systematic examination of a client’s accounting and other records by an independent accountant to express an audit opinion.He or she conducts various examinations, investigations and other audit tests to reach an opinion. Note that as for Internal audit it is the investigation of a company’s procedures and operations by an internal auditor(whether outsourced or staff employed by the company). A Management/Operational Audit is a review or evaluation of management efficiency

Authorised Share Capital

The maximum amount of shares that can be issued by the company. If need to increase further need to register with the Registrar Of Companies

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