How To Talk Finance

Glossary

Absorption costing The act of allocating all costs (variable and fixed) to each unit of output.

Accounting equation States that assets less liabilities is equal to the shareholders’ funds of a business.

Accounts payable See Creditor

Accounts receivable See Debtor

Accrual A cost that has been incurred but is not yet reflected in the accounts; an accrual is a liability.

Accrual accounting Recognising income when it is earned and costs when they are incurred.

Accrued income Income that has been earned but is not yet reflected in the accounts; accrued income is an asset.

Accumulated depreciation The total amount of depreciation already charged to the P&L account.

Acid test Similar to the liquidity ratio, but ignoring the need to sell ...