Plain-English definitions of the accounting and finance terms students and salaried readers look up most. Each entry gives a one-line meaning; click the term for the full explanation with examples.
Last reviewed: November 2026
A · B · C · D · E · F · I · L · M · N · P · Q · R · S · T · U · W
A
- Accounting: Accounting is a systematic process of recording, summarizing, analyzing and reporting all business transactions of a firm.
- Accounts Receivable (AR): Accounts receivable refers to the amount of money which a company has to collect from its debtors.
- Accrued Expense: Accrued expense is an expense that has been incurred but has not yet been paid.
- Accrued Income: Accrued income is the income which has been earned but has not yet been received.
- Article of association: Article of association refers to a document which specifies regulations for the operations of a firm.
- Authorized share capital: Authorized share capital refers to the total share capital which a joint stock company is authorized to accept from its investors.
B
- Balance sheet: A balance sheet is a statement of a business's assets, liabilities and capital on a particular date.
- Bond: A bond is a debt instrument: the issuer (a company or a government) borrows money from the holder and pays interest until repayment.
- Book keeping: Book keeping is an art of recording all the business transactions.
C
- Call in arrears: When a company calls for an unpaid amount of shares it has issued and an investor fails to pay the amount fully or partially, then it is known as call in arrears.
- Called up share capital: Called up share capital is that part of share capital which has been called by the company for payment.
- Capital gearing ratio: Capital gearing ratio represents the relationship between equity share capital of a firm and its fixed interest bearing funds.
- Capital turnover ratio: One of the important sales ratios, Capital turnover ratio shows the relationship between net sales and capital employed.
- Chattel mortgage: Chattel mortgage is debt instrument in which loan is extended to borrower on movable property.
- Compound annual growth rate: Compound annual growth rate (CAGR) is a measure of growth rate of an investment over a specified period of time.
- Consumer price index: Consumer price index is a comprehensive measure of change in price of goods and services that represent consumer expenditure.
- Coupon: Coupon refers to the rate of interest which is paid to the bond holder by the bond issuer as interest on their principal.
- Credit: An accounting entry that either increases one’s liability or decreases one’s assets is known as credit.
- Creditor: A creditor is a person or business to whom money is owed, such as a supplier who has sold goods on credit.
- Current liabilities: Current liabilities are short term debt obligations that a company has to pay within a year.
D
- Debenture: A debenture is a debt instrument a company issues to borrow money, usually paying a fixed rate of interest.
- Debit: An accounting entry that either increases one’s assets or decreases one’s liabilities, is known as debit.
- Debt to equity ratio: Debt to equity ratio is one of the important ratios, indicating the solvency of a firm.
- Debtor: A debtor is a person or business that owes money to another, such as a customer who has bought goods on credit.
- Deductions: Deduction refers to the amount of money which is deducted from salary of an employee.
- Deferred Expense: Deferred expense (also known as prepaid expense) is the cost which has been incurred but the product or service has not yet been received or consumed.
- Deferred Revenue: Deferred revenue (also known as unearned revenue) is the income which has been received but the product/ service is yet to be delivered to customer.
- Depreciation: Depreciation refers to the reduction in value of a tangible asset due to its wear and tear or obsolescence over time.
- Derivative: Derivative is a financial instrument whose value is derived from an underlying asset.
- Discounted bill: Discounted bill is a bill (Bill of exchange or promissory notes) sold by corporate to banks or credit institutions to raise fund.
- Dividend: Dividend refers to the amount of return on shares held by an investor.
E
- Employee Stock Option Plan (ESOP): An Employee Stock Option Plan (ESOP) gives employees the option to buy their company's shares at a set price, usually after a vesting period.
F
- Financial statement: A financial statement is a summarized report of a company’s financial activities over a period of time.
- Fiscal deficit: Fiscal deficit is the amount by which a government's total expenditure exceeds its total receipts excluding borrowings; it shows how much the government needs to borrow.
- Fixed liabilities: Fixed liabilities are those long term liabilities which a company has to pay after more than one year.
- Forward contract: Forward contract is a customized agreement between two parties (buyer and seller) to buy or sell an underlying asset.
- Free float market capitalization: Free float market capitalisation is the market value of only those shares that are available for trading, leaving out promoter and other locked-in holdings.
- Future contract: A futures contract is a standardised, exchange-traded agreement to buy or sell an asset at a fixed price on a set future date.
I
- Index divisor: An index divisor is a mathematical number, used in the calculation of a stock index like Sensex & Nifty.
- Issued share capital: Issued share capital is that part of authorized share capital which has been issued by the company for subscription.
L
- Liability: An obligation to pay a debt is called liability.
- Liquid assets: Liquid (quick) assets are current assets that can be turned into cash quickly: current assets minus inventory and prepaid expenses.
- Liquid liabilities: Liquid (quick) liabilities are current liabilities excluding bank overdraft and cash credit; they are used in the quick ratio.
- Liquidity: Liquidity refers to the ability of a company to convert its assets into cash within a very short period of time.
M
- Market capitalization: Market capitalisation is the total market value of a company's shares: share price multiplied by the number of shares outstanding.
- Memorandum of association: Memorandum of association is a legal document that regulates a company’s external activities.
- Mortgage: A mortgage is a loan secured against property; the lender holds a charge on the property until the loan is repaid.
N
- Net Asset Value: Net asset value (NAV) refers to the market value of single unit and is calculated by dividing the net assets by total number of outstanding units.
- Net Assets: Net assets is the difference of total assets and total liabilities of a firm.
- Nominal value: The stated value of an asset or a security is called nominal value.
P
- Paid up share capital: Paid up share capital is that part of called up share capital which has been fully paid up by investors.
- Par value: Par value also known as nominal value or face value refers to the stated or printed value of an asset or security.
- Preference share: Preference shares are shares that get priority over equity shares for dividend payments and for repayment of capital if the company is wound up.
- Proprietor's fund: Proprietor’s fund refers to total investment made by owner(s) of a business enterprise.
Q
- Qualified institutional placement: A qualified institutional placement (QIP) lets a listed Indian company raise funds by issuing shares or convertible securities to qualified institutional buyers.
- Quick ratio: One of the important liquidity ratios, quick ratio is used to gauge the short term liquid position of a firm.
R
- Return on equity (ROE): Return on equity (ROE) is one of the profitability ratios used to measure the efficiency of a company to generate profit for its equity shareholders.
S
- Share: A share refers to a portion of total share capital issued by a company.
- Shareholder's equity: Shareholder’s equity represents the amount which is obtained from deducting all liabilities from company’s total assets.
- Stock: Stock refers to the security which gives the ownership right to its holder and also a claim on the assets and earnings of a company at the time of liquidation.
- Stock split: Stock split is a technique used to infuse liquidity and make share’s prices more affordable for investors.
- Strike Price: Strike price is the fixed price at which the holder of an option can buy (call option) or sell (put option) the underlying asset.
- Subscribed share capital: Subscribed share capital is that part of issued share capital for which a company has positively received subscription from the investors.
T
- Treasury bills: Treasury bills are short-term debt instruments issued by the Government of India, through the RBI, for 91, 182 or 364 days. They are sold at a discount and repaid at face value.
U
- Uncalled share capital: Uncalled share capital is that part of subscribed share capital which has not been called for payment by a company.
- Underlying Asset: An underlying asset is the financial asset upon which a derivative’s price is based.
- Unissued share capital: Unissued share capital is that part of authorized share capital which has not been issued by a company for subscription.
W
- Wholesale price index: The wholesale price index (WPI) measures changes in the prices of goods traded in bulk; in India it is published by the Office of the Economic Adviser, DPIIT.
- Working capital: Working capital refers to the amount of capital used by a company to perform its daily operations.
- Working capital turnover ratio: Working capital turnover ratio shows the relationship between net sales and working capital of a company.
This glossary is for general learning. For exams, follow your syllabus and textbook.