Accounting & Finance Glossary

A practical glossary of accounting, bookkeeping, finance, tax, payroll, financial analysis, and business terminology.

For simplicity, we have arranged the glossary in three columns: Category, Terminology, and Meaning. The category provides a general accounting or business classification, while the terminology and meaning explain the concept in simple terms.

Category	Terminology	Meaning
Basic Accounting Terms	Accounting	The process of recording, categorizing, summarizing, analyzing, and reporting financial information.
	Bookkeeping	Recording and organizing a business’s financial transactions.
	Account	A record used to track a specific type of financial activity.
	Accounting Period	A specific period for which financial information is reported.
	Accounting Cycle	The complete process from recording transactions to preparing financial statements.
	Accounting Equation	Assets = Liabilities + Equity.
	Double-Entry Accounting	A system where every transaction affects at least two accounts.
	Single-Entry Accounting	A simpler system that records transactions primarily as income and expenses.
	Chart of Accounts	A structured list of accounts or categories used by a business to organize transactions.
	General Ledger	The main record containing all financial accounts and transactions.
	Subledger	A detailed record supporting a specific general ledger account.
	Trial Balance	A report showing account balances used to check whether debits and credits balance.
	Fiscal Year	A 12-month accounting period used by a business for financial reporting.
	Accounting Method	The method used to recognize income and expenses, such as cash or accrual accounting.
	Accrual Accounting	Recording revenue and expenses when earned or incurred, rather than when cash moves.
	Cash-Basis Accounting	Recording transactions generally when cash is received or paid.
Assets	Asset	Something of value owned or controlled by a business.
	Current Asset	An asset expected to be converted into cash or used within the short term.
	Cash	Money available to the business.
	Cash Equivalents	Highly liquid short-term investments that can be readily converted into cash.
	Accounts Receivable	Money customers owe the business.
	Inventory	Products or materials held for sale or use in production.
	Prepaid Expense	An expense paid in advance before the related benefit is received.
	Fixed Asset	A long-term asset used in business operations.
	Property, Plant & Equipment (PP&E)	Long-term physical assets used by a business.
	Intangible Asset	A non-physical asset such as a patent, trademark, or software right.
	Goodwill	An intangible asset generally arising from the acquisition of a business.
	Accumulated Depreciation	Total depreciation recorded against a fixed asset over time.
	Depreciation	Allocation of the cost of a tangible long-term asset over its useful life.
Liabilities	Liability	A financial obligation of a business.
	Current Liability	An obligation generally due within the short term.
	Accounts Payable	Money the business owes to vendors or suppliers.
	Accrued Expense	An expense incurred but not yet paid or invoiced.
	Short-Term Debt	Debt generally due within the short term.
	Long-Term Debt	Debt due beyond the short term.
	Loan Payable	Amount owed under a loan agreement.
	Interest Payable	Interest that has been incurred but not yet paid.
	Payroll Liabilities	Amounts owed related to payroll, such as employee deductions and applicable payroll taxes.
	Unearned Revenue	Money received before the business has delivered the related goods or services.
	Deferred Revenue	Revenue received or billed before it is recognized as earned under the applicable accounting rules.
	Working Capital	Current assets minus current liabilities.
Equity	Equity	Assets remaining after liabilities are deducted.
	Owner’s Equity	Owner’s interest in a business.
	Shareholders’ Equity	Owners’ residual interest in a corporation.
	Capital	Money or other resources invested in a business.
	Owner’s Draw	Money or assets taken from a business by its owner for personal use.
	Retained Earnings	Cumulative profits retained in a corporation after distributions, subject to applicable accounting rules.
	Dividends	Distributions of earnings to shareholders.
	Common Stock	Ownership interest represented by common shares in a corporation.
Revenue & Income	Revenue	Income generated from a business’s primary activities.
	Sales Revenue	Revenue generated from selling products or services.
	Gross Revenue	Revenue before applicable deductions.
	Net Revenue	Revenue after applicable returns, allowances, discounts, or similar deductions.
	Operating Income	Income generated from normal business operations after operating expenses.
	Other Income	Income from activities outside the company’s primary operations.
	Interest Income	Income earned from interest.
	Gross Sales	Total sales before applicable deductions.
	Net Sales	Sales after applicable returns, allowances, and discounts.
	Recurring Revenue	Revenue that repeats on a regular basis.
	Earned Revenue	Revenue recognized when the applicable performance or earning criteria are satisfied.
Expenses	Expense	Cost incurred to operate a business or generate revenue.
	Operating Expense	Expense associated with normal business operations.
	Cost of Goods Sold (COGS)	Direct costs associated with goods or services sold.
	Direct Expense	Expense directly associated with producing a product or delivering a service.
	Indirect Expense	Expense not directly attributable to a particular product or service.
	Administrative Expense	Costs related to general business administration.
	Selling Expense	Costs associated with selling products or services.
	Payroll Expense	Cost of employee compensation and applicable employer payroll costs.
	Rent Expense	Cost of renting business premises or other assets.
	Utilities Expense	Cost of services such as electricity, water, internet, or similar utilities.
	Depreciation Expense	Periodic depreciation recognized for an asset.
Accounts Receivable	Accounts Receivable (A/R)	Money owed by customers.
	Invoice	Document requesting payment from a customer.
	Outstanding Invoice	Invoice that has not yet been fully paid.
	Aging Report	Report showing how long receivables have been outstanding.
	Current Receivable	Amount not yet overdue according to payment terms.
	Overdue Invoice	Invoice that has passed its payment due date.
	Credit Memo	Document reducing the amount a customer owes.
	Customer Deposit	Money received from a customer before delivery of the related goods or services.
	Bad Debt	Receivable that is determined to be uncollectible.
	Collection	Process of obtaining payment from customers.
Accounts Payable	Accounts Payable (A/P)	Money a business owes vendors and suppliers.
	Vendor	Business or individual providing goods or services to a company.
	Bill	Document received from a vendor requesting payment.
	Purchase Order (PO)	Document authorizing a purchase from a vendor.
	Vendor Credit	Credit issued by a vendor that reduces the amount owed.
	Payment Terms	Conditions specifying when and how payment should be made.
	Aging Report	Report showing outstanding vendor balances by age.
	Accrued Payable	Amount owed for an expense incurred but not yet billed or paid.
	Three-Way Match	Comparison of a purchase order, receiving record, and vendor invoice.
Bank & Account Reconciliation	Bank Reconciliation	Comparing accounting records with bank records to identify differences.
	Credit Card Reconciliation	Comparing recorded credit card transactions with the card statement.
	Reconciliation	Process of comparing two sets of financial records.
	Bank Statement	Record issued by a bank showing account activity.
	Outstanding Check	Check issued but not yet cleared by the bank.
	Deposit in Transit	Deposit recorded by the business but not yet reflected by the bank.
	Bank Fee	Fee charged by a financial institution.
	NSF	Non-sufficient funds; a payment may be rejected because sufficient funds are unavailable.
	Unreconciled Transaction	Transaction that has not yet been matched or explained during reconciliation.
	Cleared Transaction	Transaction that has been processed by the bank or financial institution.
General Ledger & Journal Entries	General Ledger	Central record containing financial account activity.
	Journal Entry	Accounting entry used to record a financial transaction or adjustment.
	Debit	One side of an accounting entry.
	Credit	The other side of an accounting entry.
	Journal	Record where transactions are initially recorded.
	Adjusting Entry	Entry made to update accounts before financial statements are finalized.
	Reversing Entry	Entry that reverses a previous accounting entry, often used in accrual accounting.
	Recurring Entry	Entry automatically or routinely recorded for similar transactions.
	Accrual Entry	Entry recognizing income or expense before the related cash transaction occurs.
	Closing Entry	Entry used to close temporary accounts at the end of an accounting period.
	Suspense Account	Temporary account used when the correct classification of a transaction is not yet determined.
	Control Account	General ledger account that summarizes detailed activity recorded in a subsidiary ledger.
Financial Statements	Financial Statements	Formal reports showing a company’s financial performance and position.
	Profit & Loss Statement (P&L)	Report showing revenue, expenses, and profit or loss.
	Income Statement	Another name commonly used for the Profit & Loss Statement.
	Balance Sheet	Statement showing assets, liabilities, and equity.
	Cash Flow Statement	Report showing cash inflows and outflows.
	Statement of Changes in Equity	Report showing changes in equity during a period.
	Notes to Financial Statements	Additional information explaining financial statement items and accounting policies.
	Comparative Financial Statements	Financial statements showing results for multiple periods.
	Consolidated Financial Statements	Statements presenting a parent company and its subsidiaries as one economic entity, when applicable.
Financial Analysis	Financial Analysis	Examination of financial information to understand business performance.
	Financial Ratio	Metric used to evaluate financial performance or position.
	Gross Profit Margin	Gross profit as a percentage of revenue.
	Net Profit Margin	Net profit as a percentage of revenue.
	Operating Margin	Operating income as a percentage of revenue.
	Current Ratio	Current assets divided by current liabilities.
	Quick Ratio	Measure of short-term liquidity using relatively liquid assets.
	Return on Assets (ROA)	Measure of profitability relative to assets.
	Return on Equity (ROE)	Measure of profitability relative to equity.
	Debt-to-Equity Ratio	Measure comparing debt with equity.
Cash Flow & Cash Management	Cash Flow	Movement of cash into and out of a business.
	Cash Inflow	Cash coming into the business.
	Cash Outflow	Cash leaving the business.
	Operating Cash Flow	Cash generated or used by normal business operations.
	Investing Cash Flow	Cash related to investments and long-term assets.
	Financing Cash Flow	Cash related to borrowing, repayment of debt, equity, and distributions.
	Free Cash Flow	Cash remaining after certain operating needs and capital expenditures, depending on the definition used.
	Cash Position	Amount of cash available to the business.
	Cash Forecast	Projection of expected future cash inflows and outflows.
	Cash Burn	Rate at which a business uses cash over a period, commonly used for startups.
Budgeting & Forecasting	Budget	Financial plan for a future period.
	Forecast	Estimate of future financial performance based on available information.
	Budget vs. Actual	Comparison between planned and actual financial results.
	Variance	Difference between budgeted and actual results.
	Favorable Variance	Variance generally considered beneficial to financial performance.
	Unfavorable Variance	Variance generally considered unfavorable to financial performance.
	Financial Projection	Estimate of future financial results.
	Scenario Analysis	Analysis of possible outcomes under different assumptions.
	Financial Model	Structured model used to analyze financial performance and future scenarios.
	Rolling Forecast	Forecast that is continuously updated as new information becomes available.
Payroll Accounting	Payroll	Process of calculating and paying employee compensation.
	Gross Pay	Employee earnings before deductions.
	Net Pay	Amount paid to an employee after deductions.
	Payroll Tax	Tax associated with payroll under applicable laws.
	Employee Withholding	Amount withheld from employee pay for taxes and other authorized deductions.
	Employer Payroll Taxes	Payroll-related taxes paid by the employer.
	Wages	Compensation paid to employees.
	Salary	Fixed compensation generally paid on a regular basis.
	Benefits	Additional compensation or benefits provided to employees.
	Payroll Register	Detailed report of payroll information for employees.
Tax Accounting & Tax Preparation	Tax Return	Document filed with a tax authority reporting income, deductions, credits, and tax information.
	Taxable Income	Income subject to tax under applicable rules.
	Tax Deduction	Amount that reduces taxable income, subject to applicable rules.
	Tax Credit	Amount that directly reduces tax liability, subject to applicable rules.
	Tax Liability	Amount of tax owed.
	Estimated Tax	Tax estimated to be owed for a period and potentially paid in installments.
	Tax Basis	Amount used to determine certain tax consequences, such as gain or loss.
	Tax Depreciation	Depreciation calculated under applicable tax rules.
	Sales Tax	Tax imposed on certain taxable sales or services under applicable jurisdictional rules.
	Payroll Tax	Taxes associated with wages and payroll under applicable laws.
	Tax Compliance	Meeting applicable tax filing, payment, and reporting requirements.
Month-End & Year-End Accounting	Month-End Close	Process of finalizing accounting records for a month.
	Year-End Close	Process of finalizing accounting records for the fiscal year.
	Closing Checklist	List of tasks required to complete an accounting close.
	Cut-Off	Process of ensuring transactions are recorded in the correct accounting period.
	Accrual	Recognition of revenue or expense before the related cash transaction occurs.
	Prepayment	Payment made before the related goods or services are received.
	Adjusting Journal Entry	Entry made to update accounts before financial statements are finalized.
	Reconciliation	Comparison of records to verify accuracy.
	Review	Examination of accounting records for accuracy and unusual activity.
	Close Process	Set of procedures used to finalize financial records for a reporting period.
Accounting Cleanup	Bookkeeping Cleanup	Process of correcting and organizing incomplete or inaccurate accounting records.
	Historical Cleanup	Reviewing and correcting records from previous accounting periods.
	Uncategorized Transaction	Transaction that has not been assigned to an appropriate account.
	Duplicate Transaction	Transaction recorded more than once.
	Negative Balance	Balance below zero in an account where that may indicate an error or unusual activity.
	Old Outstanding Transaction	Transaction that remains unresolved for an extended period.
	Suspense Balance	Amount temporarily held because its proper classification is unclear.
	Data Correction	Process of fixing inaccurate accounting information.
	Account Reclassification	Moving an amount from one account to another appropriate account.
Audit & Internal Controls	Audit	Independent examination of financial information or records, depending on the engagement.
	Internal Audit	Review performed within or for an organization to evaluate controls, risks, and processes.
	Internal Control	Process designed to help safeguard assets, maintain reliable records, and support compliance.
	Segregation of Duties	Separating responsibilities among individuals to reduce the risk of errors or fraud.
	Audit Trail	Record showing the history of transactions and changes.
	Supporting Documentation	Documents supporting an accounting transaction.
	Materiality	Significance of an item or error in relation to financial information.
	Compliance	Following applicable laws, regulations, policies, and standards.
	Risk Assessment	Process of identifying and evaluating potential risks.
Accounting Software & Technology	Cloud Accounting	Accounting software accessed through the internet.
	Accounting Software	Software used to record, manage, and report financial information.
	Bank Feed	Automated connection importing transactions from a financial institution.
	Automation	Use of technology to perform repetitive tasks with limited manual intervention.
	Data Migration	Moving accounting data from one system to another.
	Integration	Connecting different software systems so they can exchange data.
	API	Technology that allows different software applications to communicate.
	OCR	Technology that converts text from images or documents into machine-readable data.
	Digital Accounting	Use of digital tools and technology to manage accounting processes.
Finance & Business Terms	Finance	Management of money, investments, funding, and financial resources.
	Financial Planning	Planning how financial resources will be managed to achieve business objectives.
	Capital	Financial resources available to a business.
	Working Capital	Current assets minus current liabilities.
	Liquidity	Ability to meet short-term financial obligations.
	Solvency	Ability to meet long-term financial obligations.
	Profitability	Ability of a business to generate profit.
	Leverage	Use of debt or other financial resources to potentially increase returns and risk.
	Return on Investment (ROI)	Measure of return relative to the investment made.
	Cost of Capital	Cost associated with obtaining funds for a business.
Business Analytics & KPIs	KPI	Key Performance Indicator used to measure performance against an objective.
	Dashboard	Visual display of important financial or operational information.
	Data Analytics	Process of examining data to identify patterns and insights.
	Financial Analytics	Analysis of financial information to support business decisions.
	Descriptive Analytics	Analysis explaining what happened.
	Diagnostic Analytics	Analysis examining why something happened.
	Predictive Analytics	Analysis estimating what may happen in the future.
	Prescriptive Analytics	Analysis suggesting potential actions based on data.
	Business Intelligence (BI)	Technology and processes used to analyze business data and support decisions.
	Data Visualization	Presenting data through charts, graphs, and other visual formats.
Understanding accounting terminology makes financial records, reports, and business decisions easier to interpret.

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Accounting & Finance Glossary

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