Financial Statements & Accounting — 55 Terms Defined

Accrual Accounting Financial Statements & Accounting qualitative The convention of recording revenue when it is earned and expenses when they are incurred, regardless of when cash moves. Test: the transaction is recognised in the period in which the economic event occurs, not the period in which cash is received or paid

Amortisation Financial Statements & Accounting ₹ crore The systematic write-off of an intangible asset's cost over its useful life, the intangible equivalent of depreciation. Annual Amortisation = Cost of Intangible Asset / Useful Life in Years

Auditor's Report Financial Statements & Accounting qualitative The statutory auditor's formal opinion on whether the financial statements give a true and fair view in accordance with the applicable framework. Test: the report states an unmodified, qualified, adverse or disclaimer opinion, together with any key audit matters and emphasis of matter

Balance Sheet Financial Statements & Accounting ₹ crore A statement of what a company owns and owes at a single point in time, with the two sides always equal. Assets = Liabilities + Shareholders' Equity

Book Value Financial Statements & Accounting ₹ crore The accounting value of a company's equity, equal to total assets less total liabilities. Book Value = Total Assets - Total Liabilities; Tangible Book Value = Book Value - Goodwill - Intangible Assets

Capital Expenditure Financial Statements & Accounting ₹ crore Spending on acquiring or improving long-lived assets, recorded on the balance sheet and expensed over time through depreciation. Capital Expenditure = Increase in Gross Block + Increase in Capital Work in Progress

Capital Work in Progress Financial Statements & Accounting ₹ crore Expenditure on assets still under construction, held on the balance sheet until the asset is ready for use. Test: the asset is not yet ready for its intended use, so no depreciation is charged and costs accumulate on this line

Cash and Cash Equivalents Financial Statements & Accounting ₹ crore Cash on hand, bank balances and short-term highly liquid investments readily convertible to a known amount of cash. Test: the instrument matures within three months of acquisition and carries insignificant risk of change in value

Cash Flow Statement Financial Statements & Accounting ₹ crore A statement reconciling the change in a company's cash balance over a period, split into operating, investing and financing activities. Change in Cash = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow

Consolidated Financial Statements Financial Statements & Accounting qualitative Accounts that combine the parent company and all its subsidiaries as if they were a single economic entity. Test: subsidiaries are line-by-line consolidated with intra-group transactions eliminated and non-controlling interests shown separately

Contingent Liability Financial Statements & Accounting ₹ crore A possible obligation whose existence depends on an uncertain future event, disclosed in the notes rather than recognised on the balance sheet. Test: an outflow is possible but not probable, or the amount cannot be measured reliably; disclose rather than provide

Cost of Goods Sold Financial Statements & Accounting ₹ crore The direct cost of producing the goods or services actually sold during a period, principally materials and direct labour. COGS = Opening Inventory + Purchases - Closing Inventory

Current Assets Financial Statements & Accounting ₹ crore Assets expected to be converted to cash, sold or consumed within twelve months or one operating cycle. Current Assets = Inventory + Trade Receivables + Cash and Equivalents + Short-Term Investments + Other Current Assets

Current Liabilities Financial Statements & Accounting ₹ crore Obligations a company must settle within twelve months, including trade payables, short-term borrowings and accrued expenses. Current Liabilities = Trade Payables + Short-Term Borrowings + Current Maturities of Long-Term Debt + Provisions + Other Current Liabilities

Deferred Tax Financial Statements & Accounting ₹ crore The tax effect of timing differences between how items are treated in the accounts and how they are treated for tax purposes. Deferred Tax = Temporary Difference x Applicable Tax Rate

Depreciation Financial Statements & Accounting ₹ crore The systematic allocation of a tangible asset's cost over its useful life as an expense in each period. Straight-Line Depreciation = (Cost - Residual Value) / Useful Life in Years

EBITDA Financial Statements & Accounting ₹ crore Earnings before interest, tax, depreciation and amortisation — a measure of operating profit that ignores capital structure and asset charges. EBITDA = Revenue - Operating Expenses (excluding depreciation and amortisation)

Exceptional Item Financial Statements & Accounting ₹ crore A gain or loss that is material and outside the ordinary course of business, disclosed separately so that underlying performance stays visible. Test: the item is material in size and unusual in nature or frequency, and is therefore presented on its own line

Financing Cash Flow Financial Statements & Accounting ₹ crore The net cash raised from or returned to providers of capital through borrowing, share issues, dividends and buybacks. Financing Cash Flow = Borrowings Raised + Share Issues - Borrowings Repaid - Dividends Paid - Buybacks - Interest Paid

Free Cash Flow Financial Statements & Accounting ₹ crore The cash a business generates after funding the capital expenditure needed to maintain and grow its asset base. Free Cash Flow = Operating Cash Flow - Capital Expenditure

Goodwill Financial Statements & Accounting ₹ crore The excess of the price paid for a business over the fair value of its identifiable net assets, recorded as an asset on acquisition. Goodwill = Purchase Consideration - Fair Value of Identifiable Net Assets Acquired

Gross Profit Financial Statements & Accounting ₹ crore Revenue less the direct cost of the goods or services sold, before operating, financing and tax costs. Gross Profit = Revenue - Cost of Goods Sold

Intangible Assets Financial Statements & Accounting ₹ crore Identifiable non-physical assets such as software, patents, licences and trademarks that are expected to generate future benefits. Carrying Value = Cost - Accumulated Amortisation - Accumulated Impairment

Interest Expense Financial Statements & Accounting ₹ crore The cost of borrowed money charged to the profit and loss statement for a period. Interest Expense = Average Borrowings x Effective Interest Rate