The accumulated fund, or capital fund, is a reserve held by non-profit organizations like clubs or societies, reflecting a surplus of income over expenditure, or a deficit when expenditures exceed income. Its value can be determined by valuing the net assets of the organization.
A ratio that provides a measure of the solvency of a company; it consists of its net assets divided by its debt. Those companies with high asset cover are considered more solvent.
The bringing together of separate economic entities as a result of one entity uniting with, or obtaining control over, the net assets and operations of another.
Understanding the financial and physical capital maintenance concepts helps ensure that a company's capital is preserved, facilitating accurate performance measurement over time.
Equity accounting refers to a method of accounting whereby a company reports a proportionate share of the undistributed profits and net assets of another company in which it holds a share of the equity.
The equity method is an accounting technique used to record investments in associated undertakings, reflecting the investor's share of the investee's net assets and performance.
Merger accounting is a method that treats two or more businesses as combining on an equal footing. It's favored in scenarios of group reconstruction where it's applied without restating net assets to fair value.
Net Assets represent the total assets of an organization minus its liabilities and are crucial for evaluating the financial position and stability of a company.
Owners' Equity refers to the beneficial interest in an organization held by its owners. It is the sum of its total assets less its total liabilities.
Real Terms Accounting (RTA) is a system of accounting where the effects of changing prices are measured by their impact on a company's financial capital, to ensure its value remains constant in real terms. This involves assessing assets at their current cost and defining profit as any surplus after maintaining shareholders' equity.
Residual income is the net income generated by a subsidiary or division after accounting for the costs associated with the capital it uses. This metric is particularly useful in determining the profitability and efficiency of investment projects within larger organizations.
