Latest Terms

Simple Interest

Simple interest is where interest is charged only on the principal balance of a loan or an investment excluding any interest previously accrued resulting in a constant interest expense or income for the whole duration of the loan or investment if there is no change in the rate of interest.

Theoretical Ex-rights Price

Theoretical ex-rights price (TERP) is the estimated price of a share of a company following a rights issue. It is essentially the weighted average price per share of existing shares and the new right shares issued.

Compound Interest

Compound interest is where the interest on a loan or investment is added to the principal balance such that the interest for future periods is calculated based on the amount including any previous interest.

Effective Annual Return

Effective annual return (EAR) is the annual rate that captures the magnifying effect of multiple compounding periods per year of an investment.

Revenue Expenditure

Revenue expenditure is expenditure which is expensed out in the period in which it is incurred. It is not recorded as an asset on balance sheet because it is expected to benefit the company only in the period in which it is incurred.

Accruals

Accruals are revenues and expenses that are recognized (usually referred to as “accrued”) prior to the due date for their receipt or payment as the case may be. This practice of accruing revenues and expenses before their due dates is based on the accrual principle of accounting.

Relevant Cost of Material

Relevant cost of raw material is the material cost that needs to be considered while taking a managerial decision. Relevant cost of material may be in the form of incremental cash flows or opportunity cost.

Accounting Errors

Accounting errors are unintentional mistakes in book-keeping of transactions. Accounting errors are different from accounting fraud because in fraud an intentional mistake is made to ...

Prepayments

Prepayments (also known as deferred expense) are assets that represents cash paid in advance for goods or services to be received later.

Joint Products

Joint products are two or more outputs having significant values that are generated from a single production process that uses common inputs.

Fixed Overhead Budget Variance

Fixed overhead budget variance (also known as FOH expenditure variance) is the difference between total fixed overhead budgeted for a given accounting period and actual fixed overheads incurred during the period.

Fixed Overhead Volume Variance

Fixed overhead volume variance is the difference between fixed overhead applied to good units produced during a given accounting period and the total fixed overheads budgeted for the period.