CA Foundation Dictionary
The ultimate lexicon for future CAs. Definitions, examples, and formulas for all subjects.
Accrual BasisAccounts
A method of recording accounting transactions for revenue when earned and expenses when incurred, regardless of when cash is exchanged.
Example
"Recording a sale on credit as revenue immediately, even if cash is received next month."
AnnuityMaths
A sequence of equal periodic payments made at equal intervals of time.
Example
"A monthly EMI of ₹10,000 for a home loan."
Bank Reconciliation Statement (BRS)Accounts
A statement prepared to reconcile the difference between the bank balance shown in the Cash Book and the Bank Pass Book.
Example
"Identifying that a cheque issued but not yet presented for payment is causing a mismatch."
Business CycleEco
Fluctuations in economic activity (Expansion, Peak, Contraction, Trough).
Example
"Recession of 2008."
Capital PaperAccounts
Expenditure incurred to acquire a fixed asset or increase its earning capacity.
Example
"Spending ₹5 Lakhs to build a new floor in the factory."
Caveat EmptorLaw
Latin for 'Let the Buyer Beware'. The buyer is responsible for checking the quality and suitability of goods before purchase.
Example
"If you buy a shirt without checking the size, you cannot return it claiming the seller didn't warn you."
CombinationMaths
A selection of objects where order does not matter.
Example
"Selecting 3 players for a team from 10 players. Formula: nCr."
Compound InterestMaths
Interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods.
Example
"Investments growing faster because interest earns interest."
ConsiderationLaw
Something of value exchanged for a promise. 'Quid Pro Quo' (Something for something).
Example
"A pays ₹500 to B in exchange for a book. The money is consideration for the book."
ConsignmentAccounts
A specialized business arrangement where one person (Consignor) sends goods to another person (Consignee) to be sold on their behalf.
Example
"Samsung sending phones to a local dealer to sell on commission."
Consumer SurplusEco
Difference between what a consumer is willing to pay and what they actually pay.
Example
"Willing to pay ₹500, bought for ₹300. Surplus = ₹200."
Contingent LiabilityAccounts
A potential liability that may occur depending on the outcome of an uncertain future event.
Example
"A pending lawsuit against the company which may result in a fine."
CorrelationMaths
A statistical measure that expresses the extent to which two variables are linearly related.
Example
"Height and Weight often have a positive correlation."
DepreciationAccounts
Allocation of the cost of a tangible fixed asset over its useful life due to wear and tear, efflux of time, or obsolescence.
Example
"A machine bought for ₹1 Lakh reducing in book value by 10% every year."
Elasticity of DemandEco
A measure of responsiveness of quantity demanded to a change in price.
Example
"Petrol demand is inelastic; Luxury car demand is elastic."
Equilibrium PriceEco
Price where quantity supplied equals quantity demanded.
Example
"Market clearing price."
Fiscal PolicyEco
Government use of spending and taxation to influence economy.
Example
"Tax cuts."
Going Concern ConceptAccounts
The assumption that an enterprise will continue in operation for the foreseeable future and has no intention to liquidate or curtail materially the scale of its operations.
Example
"Assets are recorded at historical cost, not market value, because the business is not being sold today."
Gross Domestic ProductEco
Total value of goods and services produced within a country.
Example
"India's GDP."
Index NumberMaths
A statistical device for measuring changes in the magnitude of a group of related variables (like prices or production) over time.
Example
"Consumer Price Index (CPI) measuring inflation."
InflationEco
General increase in prices and fall in purchasing value of money.
Example
"Rising cost of vegetables."
Limited Liability Partnership (LLP)Law
A corporate business vehicle that provides the benefits of limited liability while allowing its members the flexibility of organizing their internal structure as a partnership.
Example
"A CA firm registered as an LLP protects partners' personal assets."
MinorLaw
A person who has not completed the age of 18 years. An agreement with a minor is 'Void Ab Initio' (void from the beginning).
Example
"A contract signed by a 17-year-old to sell land is invalid."
Monetary PolicyEco
Central bank policy controlling money supply and interest rates.
Example
"RBI changing Repo Rate."
Monopolistic CompetitionEco
Market with many sellers selling differentiated products.
Example
"Soap and Toothpaste brands."
MonopolyEco
Market structure with a single seller and no close substitutes.
Example
"Indian Railways."
OligopolyEco
Market structure dominated by a few large firms.
Example
"Telecom sector (Jio, Airtel)."
Opportunity CostEco
The cost of the next best alternative foregone when making a decision.
Example
"Choosing to study instead of working costs you the wages you could have earned."
Partnership DeedAccounts
A written agreement between partners detailing the terms and conditions of the partnership (profit sharing ratio, interest on capital, etc.).
Example
"A document specifying that Partner A gets 60% profit and Partner B gets 40%."
Perfect CompetitionEco
Market with many buyers and sellers of identical products.
Example
"Agricultural markets."
PermutationMaths
An arrangement of objects in a specific order.
Example
"Arranging 3 books on a shelf (Order matters). Formula: nPr."
Promissory NoteLaw
An instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money.
Example
"'I promise to pay B or order Rs. 500'."
RegressionMaths
A statistical method used for estimating the relationships between a dependent variable and one or more independent variables.
Example
"Predicting sales based on advertising spend."
SupplyEco
Total amount of a good available to consumers.
Example
"Wheat supply increases after harvest."
Ultr ViresLaw
Beyond the powers. Acts done by a company beyond the scope of its Memorandum of Association.
Example
"A software company investing in a coal mine if its MoA doesn't permit mining."
UtilityEco
Total satisfaction received from consuming a good.
Example
"Satisfaction from eating a pizza."
Void ContractLaw
A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
Example
"A contract to import goods from a country that subsequently declares war becomes void."