Credit Policy

What are credit policies? – Definition A firm could adopt a very conservative credit policy and extend credit only to customers with excellent credit ratings. Although this type of policy virtually eliminates bad debts or uncollectible accounts, the firm can lose sales and profits by not extending credit to individuals or firms with less-than-perfect credit …

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Common Dollar Statements Definition

What is meant by the common dollar statement? The financial statement in which the appropriate total figure is set to 100%, and in which other items are expressed as a percentage of that figure.

Current method definition

What is the current method? A method of foreign currency translation under which all balance sheet items can be translated at a current exchange rate at the date of the financial statements; income statement items are translated at the average exchange rate for the period.  

Complex Capital Structure Definition

What is meant by the complex capital structure? A capital structure in which there are certain types of bonds, preferred stock or other securities that are convertible into common shares is called a complex capital structure.

Common Stock Equivalent Definition

What is meant by the common stock equivalent? Common stock equivalent is dilutive security that, because of the terms or circumstances at the time of its issue, is essentially equivalent to common stock, allowing the holder to become a common stockholder at some future date.

Change in accounting method

What is meant by the change in accounting method? A change that occurs when a firm switches from one generally accepted accounting principle or method to another generally accepted principle or method.

Capitalized Retained Earnings Definition

What do you mean by Capitalized Retained Earnings? Retained Earnings transferred to permanent capital, unavailable for future cash dividends is called capitalized retained earnings. Usually occurs when a stock dividend is issued.

Coupon Bonds Definition

How to define “Coupon Bonds”? Coupon bonds are those bonds that are not registered in the name of individual holders, but that are negotiable by whoever holds them.

Current Maturities of Long-term Debt

How to define Current maturities of Long-term Debt? It is those portion of long-term liabilities that are payable within one year of the balance sheet date, and as a result are classified as current.

Compensated Absences Definition

What is meant by the term “Compensated Absences”? A liability that arises as employees working accrue certain fringe benefits that allow them time off with full or partial pay, including such benefits as vacation and sick pay.  

Copyrights Definition

What is meant by Copyrights? Copyrights are the exclusive rights of the creator or his/her heirs to reproduce and/or sell an artistic or published work.

What is meant by Cash? – Definition

Define the term “Cash” Cash is a medium of exchange that a bank will accept for deposits, including coins, paper money, money order, checks, certified and cashier’s checks, and money on deposit in a bank.

Current Assets Definition

What is meant by the term “current assets”? Current assets are the cash or other assets reasonably expected to be realized in cash or sold within the normal operating cycle of a business or within one year (if the operating cycle is longer than one year).

Consistency Definition

What is meant by the term “Consistency”? Consistency is an accounting convention requiring that a firm uses the same accounting procedures and policies from one period to the next.

Conservatism Defintion

What is meant by the accounting term “Conservatism”? Conservatism is the prudence exercised in financial reporting as a result of the uncertainties surrounding business and economic activities. when faced with accounting alternatives accountants tend to choose those that are least likely to overstate assets or income.

Comparability Definition

What is meant by the term “Comparability”? Comparability is the qualitative characteristic of accounting information that presents information in such a way that the users can identify similarities and differences between two sets of economic events. It can be used to evaluate the financial position and performance of one firm over time or to compare …

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Closing Entries Definition

What are the closing entries? Closing entries are the journal entries made at the end of the period, used to update retained earnings to reflect the results of operations and to eliminate the balances in the revenue and expense accounts, so that they may be used again in a subsequent period.

Comparative Balance Sheet Definition

How to define term “Comparative Balance Sheet”? The comparative balance sheet may be defined as a balance sheet in which data for two or more periods is  shown in the adjacent columnar form.

Cash Basis Definition

What is meant by Cash Basis? Cash Basis is the accounting system in which revenues and expenses are not recognized until the cash is received or paid.

Credit definition

How to define the term credit? The term credit may be defined as an entry on the right side of the ledger account representing a decrease in an asset account and an increase in an equity account.

Chart of accounts definition

What is meant by the chart of accounts? Chat of accounts is a listing of all of the accounts used by a particular firm. Each account is assigned a unique number.  

Conceptual Framework Project – Definition

What is a Conceptual Framework Project? A theoretical framework for accounting used to develop objectives and concepts that the Financial Accounting Standards Board (FASB) used to decide upon the standards of external financial reporting.

Capital Stock Definition

What is Capital Stock? Capital stock may be defined as a component of stockholders’ equity that represents the amount invested by the owners of the business. A general term for common stock.

Credit Note

Definition If a buyer returns goods to the seller bought on credit, the buyer’s account will be credited by the seller and will be informed by the seller through a note. This note is called “Credit Note“.

Creditors or accounts payable

Definition The persons or company from whom the goods or services are purchased on credit and to whom the amount is payable are called creditors. Creditors are also termed as Accounts Payable. Example John Sold goods to Harry on credit for $500, John is a Creditor of Harry.

Credit Sales

Definition When goods are sold and cash is not received immediately but postponed to a future date then this is termed as credit sales. Explanation A major portion of wholesale and retail sales in the United States is on credit. As a result, some firms have a substantial portion of their current assets in the …

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Cash Sales

Definition When goods are sold & cash is received at the same time then this type of sales are called cash sales. Example If Mr. B has sold goods on January 1, 2019 and he received cash at the same time then this will be termed as cash sales.

Credit Purchases

Definition If goods are purchased but payment is postponed to a future date then this is called credit purchases. Example: If Mr. A purchases goods worth $3,000 on January 1, 2019 and promises to pay this amount one month later i.e. February 2019 then this will be termed as credit purchases.

Cash Purchases

Definition When goods are purchased for immediate cash payment these are called cash purchases. Example If Mr. A purchased goods worth $2,000 on January 1, 2019 and payment is made by him on the same day then this will be termed as cash purchases.


Definition The amount with which a business is started or the value of goods with which the owner starts or expands his business. Example: Mr. Ali started a business with cash $1,00,000; Furniture $20,000 and Building $3,000,000. Later on he invests further $1,00,000 in business. So the total capital of Ali is $5,20,000.

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