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 ...

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