Lecture 6: Basic Financial and Accounting Terms (Part V)

First In, First Out (FIFO):

First In, First Out (FIFO) is an accounting method of valuing inventory through

which the costs of the first goods acquired are the first costs charged to expense

(Banerjee, 2010). 

Last In, First Out (LIFO):

Last In, First Out (LIFO) is an accounting method of valuing inventory through

which the costs of the last goods acquired are the first costs charged to expense

(Banerjee, 2010). 

Generally Accepted Accounting Principles (GAAP): are conventions, rules,

and procedures necessary to define accepted accounting practice at a particular

time. The highest level of such principles is set by the Financial Accounting

Standards Board (FASB) (Rampulla, 2018). 

Generally Accepted Auditing Standards (GAAS): are standards set by the

American Institute of Certified Public Accountants (AICPA) which concern the

auditor’s professional qualities and judgment in the performance of his/ her

audit and in the actual report (Rampulla, 2018). 

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Deductible: The deductible is an amount of money you are responsible for

paying on a claim before your insurance company will begin paying for it

(Morris and Morris, 2007).

Underwriting: Insurance underwriting is the way an insurance company

assesses the risk and profitability of offering a policy to someone (Morris and

Morris, 2007).

Wadiah

Wadiah corresponds to safekeeping, custody, deposit and trust. In Islamic

finance, wadiah refers to the deposit of funds or assets by a person in an Islamic

bank. In this arrangement, the depositor deposits his funds or assets in the bank

for safekeeping and in most of the agreements the bank charges a fee for the safe

custody of the depositor’s funds.

The term wadiah relates to the old concept of amanah where one person hands

over his or her assets to other person for the purpose of safekeeping. The

concept of Wadiah has been implemented in different Islamic countries such as

Malaysia and Bangladesh (Hassan et al., 2022).

Some features of Wadiah Bank Accounts

-The bank gives the guarantee to return the full amount on demand

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-The bank can invest this deposited fund with the permission of the depositor.

The bank may share the profit with the depositors as per management’s

decision.

-Accounts maintenance fees apply (Hassan et al., 2022).

References

Banerjee, B. K. (2010). Financial accounting: concepts, analyses, methods and uses.

Prentice-Hall.

Hassan, A., AlMaghaireh, A. I., & Islam, M. S. (2022). Islamic Financial Markets and
Institutions. Taylor & Francis.

Morris, V. B., & Morris, K. M. (2007). Dictionary of financial Terms. Lightbulb Press, Inc..

Rampulla, R. (2018). Common US GAAP Issues Facing CPAS. John Wiley & Sons.