Financial
Terminology for Drawing and
Disbursing
Officers
-Dr.Lalit
Kumar Setia*
Capacity:
The
highest output of a firm or industry at a given time with its available stock
of production factors. This capacity can be increased by introduced new
machinery or equipment and adding on more of the needed factors of production
e.g. labour, capital etc.
Capital:
The
total resources employed in a business, such as, shareholders’s Capital or
Partners Capital or Owners Capital. In simple words it is the networth of
a business firm, company or an individual. Net worth is the difference
between the total assets and liabilities. In a company, it is the sum
subscribed by the members of the company viz. the shareholders. There are
various categories of capital in a company such, as ‘Authorised Capital’,
Issued Capital,Paid-up Capital etc.
Capital expenditure:
An
expenditure that increases net fixed assets or on items that will be depreciated
or amortized during the subsequent years.
Capital Gain:
The
difference between the proceeds from the sale of a capital asset and the
purchase cost less any depreciation previously allowed.
Capital Markets:
The
market for medium term and long-term loans, in contrast to the money market
which is the market for very short-term loans. Money Markets serve the
needs of discount markets, whereas, Capital Markets serve the needs of discount
markets, whereas, Capital Markets serve the needs of Industry and Commerce,
Governments, and Local authorities. Limited Companies often borrow from
capital markets through the means of debentures, while the Government or a
local authority may issue new stock.
Capital Structure:
The
proportions of different types of finance used in a business such as equity and
different types of debts.
Cash:
Originating
from a French word Casse meaning box, in everyday use, the term now refers to
(1) ready money in bank notes or coins form or (2) the payment aspect of a
transaction which may be cash in the ready money sense or payment by cheque or
even credit card.
Cash Book:
A
book containing the cash transactions on the basis of receipts and payments of
a business. The book is called the book of Prime Entry also.
Cash Budget:
A
forecast of cash receipts and disbursements.
Cash Flow:
The
total of the retained profits of business after tax. If it includes the
amount set apart from depreciation it is called the Net Cash Flow.
Cash Flow Statement:
A
financial statement that accounts for the increase or decrease in a company’s
cash during a period showing where from the company got cash and the uses it
made of cash.
Clearing House:
An
institution or an organization where mutual indebtness can be settled. At
a clearing house debts between members may be largely cancelled out and
differences paid.
Commission:
A
sum or an amount paid to a person or an organization who is acting as an agent
or carrying out a business on behalf of somebody, for which he is paid.
This sum is called as commission. This is very common in the Insurance,
business, stock markets, high value products like computer sales etc.
Compensation:
An
amount or sum payable or paid to someone who has suffered injury.
Consolidated Accounts:
Accounts
of a holding company and its subsidiaries, treating them as one firm.
Consolidated Statements:
Financial
statements in which the assets and liabilities of all affiliated companies are
combined on a single balance sheet and their revenues and expenses are combined
on a single Income statement as though the business were a single company.
Contingent Liability:
A
potential liability that may become an actual liability if a certain event
occurs.
Controllable Costs:
Costs
that are within or subject to the influence of a given manager or authorized
person to whom responsibility has been given for a specific responsibility
centre for a given time span.
Copy right:
An
exclusive right granted by the Government to publish and sell a musical,
literary, or art work for a period of years. They continue even after a
person’s death.
Corporation:
A
body or society or a group of persons associated together, authorized by law to
act as a single individual and to perpetuate its existence by the admission of
new members.
Cost:
The
value in terms of money of the efforts, utilities, risks and abstinences which
form the real cost measured in resources. The cost of producing a certain
output of a commodity is the sum of all the payments to the factors of
production engaged on the production of the commodity. The term ‘cost of
production’ has meaning only when it is related to output. Costs can be
fixed or variable.
Cost Accountant:
A
person qualified in Cost accountancy, usually as a result of passing the
qualifying examinations of the Institute of Cost and Works Accountants (ICWA)
and becoming a member thereof.
Cost Accounting:
The
phase of accounting that deals with collecting and controlling the costs of
production a given product or service. The establishment of budgets and
standard costs and actual costs of operations, processes, departments or
products and the analysis of variances and profitability.
Cost Benefit Analysis:
A
form of analysis used for evaluating a project’s required investment of funds
vis-à-vis the benefits to be received for the expenditure incurred. A
method of appraising projects, especially public works, by using monetary
values for costs and benefits arising from them and then comparing the results.
Cost Centre
A
unit of business that incurs costs or expenses but does not directly generate
revenues. It is usually a particular department or process with a manager who
takes the responsibility of the operations. All costs are either
allocated or apportioned to a cost centre on some reasonable basis.
Cost of Capital
The
amount or sum to be paid by the business to retain capital funds. The
yield of all investments must be atleast equal to the cost of capital. It
is used as a hurdle rate to compute or evaluate the cost of capital. Different
types of capitals have different costs.
Cost-Volume-Profit Analysis
A
method of predicting the effects of changes in costs and sales level on the
income of a business. It is based on a distinct, distinction to be made
between fixed and variable costs. It forms the ground for constructing
break-even charts.
Credit
The
right hand side of a T-account. The lending of a sum or capital by one
person to another. A deposit of money into a bank account. A commercial
arrangement under which goods or services are sold to a buyer who undertakes to
pay partly or fully at a later date.
Credit Card
A
card issued by a financial organization or bank, enabling the holder to obtain
credit from a large number of suppliers, including travel, meals, hotels
accommodation etc. These cards are issued, after the applicant’s credit
worthiness has been considered. The banks issuing credit caards expect to
cover their administrative cost from the interest they charge on the credit
facilities they offer.
Creditor
A
person or enterprise to whom a debit is owed i.e. a person who has to be paid
for goods received, at some later date.
Currency
A
qualified medium of exchange or means of payment within a country. It
includes coins, bank rates, cheques and bills of exchange. A distinction
is sometimes drawn between ‘hard’ and ‘soft’ currencies. The former is
one which is strong, and in great demand i.e. widely accepted in international
transactions whereas, the latter i.e. ‘soft’ is one which is not so universally
accepted due to the economic system weakness of the country of ‘soft’ currency
e.g. U.S. Dollar is a ‘hard’ currency whereas, the India Rupee is a ‘soft’
currency.
Current Assets
Cash
plus those assets which are reasonably expected to be converted in to cash or
sold or consumed during the normal operating cycle of the business. Very
liquid or short-term assets.
Current Liabilities
A
debt or other obligation that must be paid or liquidated within one year or
within the normal operating cycle, if longer than one year. The payment
or liquidation of which will require the use of presently classified current
assets.
Current Ratio
The
relation of a company’s current assets to the current liabilities i.e. current
assets divided by current liabilities.
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*Copyright © 2018 Dr. Lalit Kumar. All rights reserved.
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*Copyright © 2018 Dr. Lalit Kumar. All rights reserved.
