Learn Different Accounting Terms On Your Own:

Accounts Receivable(AR):

The amount of money owed by clients to a firm against goods delivered or services extended. It is shown as a assets on the balance sheet.

Accounts Payable(AP):

Accounts payable is the amount of money a company owes to its creditors (suppliers, etc.) in return for goods and/or services they have delivered. It is shown as a liability on the balance sheet.

Assets (Fixed and Current):

Current assets are short-term assets that can be converted into cash is less than one, and fixed assets are long-term assets. Fixed assets (FA) are long-term and will likely provide benefits to a company for more than one year

Asset Classes:

An asset class is a group of investments that normally have similar characteristics, behave similarly and are subject to similar market forces, laws and regulations. The main asset classes are Fixed Income or bonds Money market or cash equivalents Real estate or other tangible assets

Balance Sheet:

A balance sheet is a snap shot of a company's financial position at a certain point in time and summarizes their assets, liabilities, and equity. It summarizes how much the investors have invested on us and how much we have paid back to the investors at a given point of time. It includes all assets and liabilities and is based on accounting equation Assets = Liabilities + Equity.

Capital (CAP):

The term “Capital” is referred to the resources expressed in terms of liquid cash (money) also the fixed assets like land, machinery, building etc raised or brought in by the promoter of a business or a project. It is that part of an amount of money borrowed or invested (less liabilities) and which does not include interest.

Cash Flow (CF):

Simply cash flow refers to the movement (in flow and out flow of cash) into or out of the business over a period of time.

In accounting terminology, it is the differential amount of cash available at the end of that period (closing balance).It is calculated by deducting opening balance of cash with the amount of closing balance end of that period. Normally the amount of closing balance if higher than the opening balance and is called positive balance or otherwise called negative balance.

Price-To-Cash Flow(P/CF):

The price to cash flow ratio shows price per share against cash flow per share. Price to cash flow ratio is that ratio which enables us to analyse cash flow per share or the net cash a firm produces per-share. It gives us an idea about how much value we would get against the kind of price we are going to pay per share.


Price to Cash Flow = Share Price / Cash Flow per Share

Equity (E):

Equity (Owner’s Capital) denotes the portion of profits that is left over after paying off liabilities. Referring to accounting equation that states that Assets = Liabilities + Equity. If Liabilities are subtracted from Assets, what we are left with is Equity- the value attributed to the company’s investors and owners.

In accounting, equity is always taken at its book value. It is the value that is determined by preparing financial statements and the balance sheet. The equation is rearranged to be Equity = Assets – Liabilities.

In finance, equity is typically expressed as a market value, which may be significantly higher or lower than the book value. This is because of the reason that accounting statements are prepared from past performances or results, on the contrary, financial analysts look forward into the future to predict or forecast what they believe the company’s financial performance will be.

Accrued Expense (AE):

The term accrued means accumulated. When a firm accrues expenses, it means that its portion of unpaid bills is increasing

Accrued Expenses refers to those expenditures that has been acknowledged in the books of accounts as expenses incurred for the accounting period whether actually paid in cash or not. These expenses are owed by the firm until they are actually paid off.

Under Double Entry System, in accrual accounting, a transaction is recorded in the books when it is incurred. As such accrued expenses must also be recognised and recorded into the books when it is incurred. The expenses so incurred is debited in the Income Statement treating it as expenditure and the corresponding amount payable must be credited to account treating is as liability in the Balancesheet.