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A
- Absorption costing
- Costing that allocates both fixed and variable production overheads to products.
- Accrual
- An expense or income recognised in the period it relates to, even if cash has not yet moved.
- Activity-based costing
- Allocating overheads using the activities that drive them rather than a single volume measure.
- AML
- Anti-money laundering: measures to detect and prevent money laundering.
- Articleship
- Practical training under a practising chartered accountant, required in some qualification routes.
- ATS
- Applicant tracking system: software employers use to receive and screen applications.
B
- BOM
- Bill of materials: the list of materials and quantities needed to make a product.
- Break-even point
- The sales level at which total revenue equals total cost.
- Budget
- A financial plan for a defined future period.
C
- Cash flow statement
- A statement showing cash inflows and outflows from operating, investing and financing activities.
- Consolidation
- Combining the financial statements of a parent and subsidiaries into group statements.
- Contribution margin
- Sales revenue minus variable costs.
- Controls testing
- Audit procedures that test whether internal controls operate effectively.
- Covenant
- A condition in a loan agreement that the borrower must satisfy.
- Cut-off
- Making sure transactions are recorded in the correct period.
D
- DCF
- Discounted cash flow: a valuation method based on discounting future cash flows.
- Deferred tax
- Tax effect of timing differences between accounting profit and taxable profit.
- Depreciation
- Systematic allocation of the cost of a tangible asset over its useful life.
- DPO
- Days payable outstanding: the average number of days taken to pay suppliers.
- DSO
- Days sales outstanding: the average number of days to collect receivables.
E
- EBITDA
- Earnings before interest, taxes, depreciation and amortisation.
F
- Fair value
- The price that would be received to sell an asset in an orderly transaction between market participants.
- FP&A
- Financial planning and analysis: budgeting, forecasting and decision support.
G
- General ledger
- The master record of all accounts from which financial statements are prepared.
- GST
- Goods and Services Tax: a consumption tax applied in India and several other countries.
H
- Hedging
- Using financial instruments to reduce exposure to price, currency or interest rate movements.
I
- ICFR
- Internal control over financial reporting.
- IFRS
- International Financial Reporting Standards, issued by the IASB.
- Impairment
- A reduction in the carrying amount of an asset when its recoverable amount falls below it.
- Ind AS
- Indian Accounting Standards, largely converged with IFRS.
- Input tax credit
- Credit for tax paid on purchases that can be set off against tax payable on sales.
- Intercompany
- Transactions or balances between entities within the same group.
- Internal audit
- An independent function that evaluates governance, risk management and controls inside an organisation.
- IRR
- Internal rate of return: the discount rate at which NPV equals zero.
J
- Journal entry
- A record of a transaction with equal debits and credits, posted to the ledger.
K
- KYC
- Know Your Customer: verification of customer identity and risk profile.
L
- Letter of credit
- A bank undertaking to pay a seller if specified documents are presented.
- Liquidity
- The ability to meet short-term obligations when they fall due.
M
- Management letter
- A letter from auditors to management listing control weaknesses and recommendations.
- Marginal costing
- Costing that treats only variable costs as product costs and fixed costs as period costs.
- Materiality
- The size of an error or omission that could influence users of financial statements.
- Month-end close
- The set of tasks that finalise the books for a month: cut-off, accruals, reconciliations and review.
N
- NAV
- Net asset value: the value of a fund's assets minus liabilities, per unit or share.
- NPA
- Non-performing asset: a loan on which payments are overdue beyond a defined period.
- NPV
- Net present value: the value today of future cash flows minus the initial investment.
P
- PBC list
- Prepared by client list: documents requested by auditors.
- Prepayment
- A payment made in advance for goods or services that will be received in a later period.
- Provision
- A liability of uncertain timing or amount that is recognised when specific criteria are met.
R
- Reconciliation
- Comparing two sets of records, such as a bank statement and the ledger, and explaining every difference.
- Revenue recognition
- The rules for deciding when and how much revenue to record.
- Rolling forecast
- A forecast updated regularly to always cover a fixed future horizon.
S
- Segregation of duties
- Dividing tasks among people so that no one can both commit and conceal an error or fraud.
- SOX
- Sarbanes-Oxley Act: US law requiring internal control over financial reporting for listed companies.
- Standard cost
- A predetermined cost per unit used for planning, control and valuation.
- STAR method
- Situation, Task, Action, Result: a structure for answering behavioural interview questions.
- Substantive testing
- Audit procedures that test amounts and disclosures directly, such as vouching and recalculation.
T
- TDS
- Tax deducted at source: tax withheld at the time of payment under Indian income tax law.
- Three-way match
- Matching a purchase order, goods receipt and supplier invoice before payment.
- Transfer pricing
- Pricing of transactions between related entities, which must follow the arm's length principle.
- Trial balance
- A list of all ledger balances used to check that total debits equal total credits.
U
- US GAAP
- Generally Accepted Accounting Principles used in the United States.
V
- VaR
- Value at Risk: an estimate of potential loss over a period at a given confidence level.
- Variance analysis
- Comparing actual results with budget or standard and explaining the differences.
- VAT
- Value Added Tax: a consumption tax collected at each stage of the supply chain.
W
- Walkthrough
- Tracing a single transaction through a process to understand and document controls.
- Working capital
- Current assets minus current liabilities; a measure of short-term liquidity.
- Working papers
- Documents prepared by an auditor to support audit evidence and conclusions.
Y
- Yield
- The ratio of good output to input in a production process.