Accounting Glossary

The fundamental formula that shows the relationship between a company's assets, liabilities, and owner's equity.

A liability account that records amounts a company owes to suppliers for goods or services received on credit.

Money owed by customers for goods or services that have been delivered but not yet paid for.

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

The process of gradually reducing a debt or intangible asset's value through scheduled payments over time.

A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and shareholders' equity.

A process of comparing and matching a company's financial records against its bank statement to ensure accuracy and identify discrepancies.

The process of recording and organizing financial transactions for a business.

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

The process of creating a plan to spend an entity's resources, thereby managing both future income and expenditures.

Funds used by an organization to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.

A financial statement that shows a company's inflows and outflows of cash over a specific period.

A systematic listing of all accounts used by an organization in its general ledger, organized to facilitate easy reporting and management of finances.

The direct costs attributable to the production of goods sold by a company within a specific period.

An entry on the right side of a double-entry bookkeeping system that typically increases liabilities, revenues, and equity, and decreases assets and expenses.

The foundational components used in accounting to record transactions in the double-entry bookkeeping system.

The process of allocating the cost of a tangible asset over its useful life.

Expenses directly attributable to the production of specific goods or services.

Payments made by a corporation to its shareholders, typically in the form of cash or additional stock.

A bookkeeping system ensuring that each transaction impacts at least two ledger accounts, maintaining balance within the accounting equation.

An indicator of a company's profitability that calculates earnings generated before subtracting interest and taxes.

A formula used to determine the optimal order quantity that minimizes the total costs of inventory management.

A tax advisor who is a federally-authorized tax practitioner empowered by the U.S. Department of the Treasury.

Equity represents the ownership interest held by shareholders in a company, calculated as the difference between total assets and total liabilities.

Costs incurred by a business in the process of earning revenue, impacting the company's financial results.

Financial statements are official records that outline the financial activities and position of a company.

A one-year period used by governments and businesses for financial reporting and budgeting, which may not coincide with the calendar year.

Long-term tangible assets used in business operations to generate income, not meant for sale.

The process of predicting future financial outcomes based on historical data and analysis.

A specialized accounting practice that investigates financial frauds and analyzes financial data for legal proceedings.

The central repository for a company’s financial data, which summarizes all transactions and serves as the basis for the creation of financial statements.

A set of standardized guidelines for financial accounting and reporting, aimed at ensuring consistency and transparency across companies.

An accounting principle that assumes a company will continue its operations into the foreseeable future without the intention or need to liquidate.

An intangible asset representing the excess value paid over the fair market value of a company's net identifiable assets during an acquisition.

The financial metric indicating the difference between revenue and the cost of goods sold (COGS), showing a company's efficiency in managing production costs.

An accounting method that matches the timing of gain and loss recognition on a hedging instrument with the gain or loss recognition of the underlying hedged item.

An accounting principle where assets are recorded at their original purchase price.

A measure of the total return received from holding an asset over a specific period.

A technique in financial analysis used to evaluate changes in financial statement items over a period of time.

An accounting approach that combines elements of both cash and accrual accounting methods to better match income and expenses.

A financial statement that summarizes a company's revenues, expenses, and profits over a specific period.

Non-physical assets that have value, such as intellectual property and brand recognition.

The percentage at which interest is charged or paid in financial transactions, reflecting the cost of borrowing or the gain from lending.

An independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

Assets that are ready for sale or will be produced into finished goods and sold to generate revenue.

An accounting method used to track expenses associated with specific jobs or orders, typically in customized production environments.

A business arrangement where two or more parties collaborate for a specific project or business activity, sharing profits and losses.

A record of a business transaction in an accounting system, showing the accounts affected and the corresponding debits and credits.

The process of recording business transactions in the journal as the initial step in the accounting cycle.

An inventory strategy that aligns raw-material orders from suppliers directly with production schedules to reduce inventory and increase efficiency.

Metrics used to evaluate an organization's success in achieving its objectives.

The process of determining the cost associated with a collection of items or components sold as a single unit.

A fraudulent scheme involving the manipulation of funds between bank accounts to create artificial float and inflate account balances.

An arrangement where each party to an incident claims their own insurance, regardless of who is at fault.

A problem that has been identified and documented with a known cause and solution in the field of accounting error management.

An inventory valuation method where the most recently purchased items are assumed to be sold first.

A book or collection of accounts in which account transactions are recorded and summarized, providing the final trail for financial data.

An obligation that a company owes to external parties, representing debts that must be settled in the future.

The ability of an asset to be quickly converted into cash without significantly affecting its market price.

Financial obligations that a company is required to pay back after more than one year.

A type of accounting focused on providing financial data and analysis to managers for decision-making purposes within an organization.

A cost accounting technique used to evaluate the impact of variable costs on the overall production cost and profit.

An accounting concept requiring that expenses be recorded in the same period as the revenues they help to generate, ensuring accurate financial reporting.

A concept in accounting that dictates the significance of financial information to influence the decision-making process of users.

The process where two companies combine (merger) or one company takes over another (acquisition) to achieve growth objectives.

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.

A financial metric used to evaluate the profitability of an investment by calculating the present value of expected future cash flows minus initial investment costs.

An account that records income, expenses, profits, and losses, which are closed at the end of each accounting period.

Long-term resources owned by a company, expected to provide future economic benefits beyond one year.

A liability account detailing the amounts a company owes due to written promissory notes.

A liability or duty that a business or individual is legally or contractually bound to fulfill.

The reduction in value or utility of an asset due to technological advancement or changes in market demands.

The profit realized from a business's core operations, excluding deductions of interest and taxes.

Expenses that are not directly tied to specific business activities but are necessary for maintaining operations.

The value remaining for the owner after all liabilities have been subtracted from assets.

A business structure where two or more individuals manage and operate a business in accordance with agreed terms and share profits, losses, and liabilities.

A small amount of cash kept on hand for minor or incidental expenses.

Assets representing expenses paid in advance which are accounted over time as they are incurred.

A financial statement that summarizes the revenues, costs, and expenses incurred during a specific period to show the net profit or loss.

An accounting allowance for accounts receivable that may not be collected.

An auditor's statement indicating that the company's financial statements are mostly accurate but contain specific exceptions that require attention.

A method of evaluating financial data using mathematical and statistical modeling, measurement, and research.

The process of finalizing a company's financial statements after the end of a fiscal quarter.

A legal construct that treats parties as though a contract exists to prevent unjust enrichment.

A liquidity indicator that measures a company's ability to pay its short-term liabilities with its most liquid assets.

The process of ensuring that two sets of records are in agreement.

The portion of a company's profits that are kept in the company rather than distributed to shareholders as dividends.

A performance measure used to evaluate the efficiency or profitability of an investment compared to its cost.

The total income generated from the sale of goods or services before any expenses are deducted.

The process of identifying, assessing, and controlling threats to an organization's capital and earnings.

The residual interest in the assets of a company after deducting liabilities, representing the ownership interest of shareholders.

The residual interest in the assets of a company after deducting liabilities, representing ownership interest.

A detailed ledger that provides individual account details, complementing the control account in the general ledger.

A cost that has already been incurred and cannot be recovered.

A type of accounting focused on taxes rather than the appearance of public financial statements.

An organization-wide approach focused on improving quality across all operations and creating a culture aimed at continuous improvement.

A reduction in the listed price offered by a seller to a buyer, usually in bulk purchases, to encourage sales.

Shares that were once part of the outstanding shares of a corporation but have been repurchased by the company.

A financial statement that lists all ledger account balances to ensure that total debits equal total credits.

Accounts receivable not yet deposited into a bank account.

Revenue received by an entity for goods or services that have not yet been delivered or performed.

The total expense incurred to produce, store, and sell one unit of a product or service.

An auditor's judgment that financial statements give a true and fair view without any reservations.

A type of loan that does not require the borrower to provide collateral.

A consumption tax levied on the value added to goods and services at each stage of production or distribution.

A cost that varies with changes in the level of production or sales volume.

A tool used for performance measurement by comparing actual results with budgeted or expected outcomes.

A financing arrangement where a vendor provides a loan to its buyer to help purchase its products or services.

A method of financial statement analysis where each item is presented as a percentage of a base figure, such as total sales or total assets.

An inventory valuation method that averages out costs, attributing equal cost to each item in inventory.

A tax retained from employee wages or other payments by the payer and forwarded to the tax authorities on behalf of the recipient.

The measure of a company's short-term financial health and its operational efficiency, calculated as current assets minus current liabilities.

An accounting action to acknowledge that an asset's value is uncollectible or has decreased significantly.

A global framework for exchanging business information, primarily used for electronic communication of financial data.

A rarely used term referring to the hidden or indirect costs associated with foreign business operations or transactions.

A term in accounting describing over-reliance on paper documentation, especially in bureaucratic systems.

The process of finalizing a company's financial records at the end of an accounting year to prepare annual financial statements.

The total return anticipated on a bond if held until it matures, expressed as an annual rate.

A financial term used to describe the period beginning the first day of the current calendar or fiscal year up to the current date.

A type of bond that is issued at a discount and repaid at face value at maturity, paying no periodic interest.

Old debt that a collector attempts to revive, even though the statute of limitations has expired.