Balance of Trade

What is Balance of Trade? Definition: The balance of trade is the difference between the value of country’s exports and its imports. If exports exceed imports, the balance of trade is said to be favorable. Conversely, if a nation imports more than it exports, its balance of trade is unfavorable. A...

Balance Sheet Equation

What is Balance Sheet Equation? Definition: The balance sheet equation, which is also known as the accounting equation, is:Assets = Liabilities + Shareholder’s EquityThis equation can also be written as:Shareholder’s Equity = Assets – LiabilitiesOr:Liabilities = Assets – Shareholder’s Equity What does Balance Sheet Equation mean? The balance sheet equation forms...

Bank Reconciliation

What is a Bank Reconciliation? Definition: A bank reconciliation matches a company’s cash balance in its books of accounts with the balance in its bank statement. The exercise may reveal that it is necessary to make certain entries in the company’s accounting records. It is also possible that the bank could...

Bond Indenture

What is a Bond Indenture? Definition: A bond indenture is a legal document that lays down the terms and conditions associated with the issue of bonds by a company. It becomes a crucial document if the issuer faces financial difficulties and is unable to meet its commitment to pay interest or...

Book Value of Equity

What is Book Value of Equity? Definition: The book value of equity of a company is the difference between its total assets and its total liabilities. It’s the value derived from a company’s books or financial statements. What does Book Value of Equity mean? In a company, the book value of...

Break Even Point

What is Break Even Point? Definition: Break even point is the production level at which a company recovers all its costs. At this volume of output, revenues equal costs, both variable and fixed. If it is possible to increase the level of production beyond this point, the company will make a...

Budget Reporting

What is Budget Reporting? Definition: Budget reporting is the process by which a company measures its actual achievement against its targeted figures. This helps it to see if it is on track to meet its business objectives. It also enables the company to take corrective action where it is required. What...

Budgeted Balance Sheet

What is a Budgeted Balance Sheet? Definition: A budgeted balance sheet is an estimate of a company’s balance sheet at some future date. A projection is made for each account that appears in the balance sheet based on the company’s plans for the year. The accuracy of a budgeted balance sheet...

Canceled Checks

What are Canceled Checks? Definition: A canceled check is a check that has been paid into the payee’s account. It cannot be used to take out any more money from the payer’s account. What does a Canceled Check mean? A company that buys raw materials from a supplier may make payment...