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Accrued Expenses

Definition of Accrued Expenses

An accrued expense is the cost that is incurred in the current accounting period but is due to be paid in the future.

More simply, an accrued expense is an unpaid bill due in the future for goods or services that have already been received by a company.

Accrued expenses show up as liabilities on a company’s books.

Related Terms

Indices

Indices are a collection of financial instruments that measure the performance of those very instruments.

For example, stock market indices like Nifty 50 and Sensex measure the top 50 and 30 stocks by market capitalization.

If indices go up, it generally means that the underlying stocks are performing well. The opposite is true when indices plummet.

By the way, there’s no limit to how many instruments an index can track. The Nifty Smallcap 250 tracks 250 stocks whereas Nifty Bank tracks 12 stocks.

Book Entry Securities

Book entry securities are financial instruments like stocks, bonds, ETFs, and others whose ownership is recorded and tracked electronically. Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.

Book entries have made ownership certificates obsolete as they track who owns what electronically.

The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.

Book To Bill Ratio

Book to Bill ratio is the value you get by dividing the total worth of new orders received by the total worth of orders sold. The formula to calculate Book to Bill ratio is:

Book to Bill ratio: Total worth of new orders received / Total worth of orders billed

Book to Bill ratio helps companies understand the demand and supply for their goods or services. A Book to Bill ratio of more than 1 means that there’s more demand and less supply.

Whereas, a Book to Bill ratio of less than 1 means that there’s less demand and more supply. Using these indicators, the company can work on increasing or limiting production.

Capped Style Option

Capital is the total amount of money that a trader can use to buy and sell securities. There are variations of the term, the most common one is “starting capital”. This is the amount of money a trader starts their journey with.

Equity Delivery

In equity delivery, shares are delivered to an investor’s Demat account after the settlement period. That’s why it is called equity delivery. However, equity delivery is also known as delivery trading and long term investing.

For example, let’s say you place an order for 10 HDFC shares on Tuesday with a view of holding onto them for the long term. The trade will be settled on Thursday shortly after which the shares will be delivered to your Demat account.

Iceberg Order

An Iceberg Order is used to slice and execute large orders into multiple “legs”. Large orders have the potential to drastically affect stock prices and subsequently investor behaviour.

That’s why institutional investors or traders with a relatively large buy or sell order place an Iceberg Order, thus masking their total transaction value and effectively going under the radar.

Brokers and trading platforms offer Iceberg Orders as a feature, which is activated after a certain quantity of scrips or contracts are selected, typically above 100.



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  1. Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.e.f September 01, 2020.
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