100 Most Important Accounting Terms

1. Account Balance ⇒ The total amount of money in an account at a given time.
2. Accounts Payable ⇒ Money owed by a business to its creditors for goods or services.
3. Accounts Receivable ⇒ Money owed to a business by its customers for goods or services provided.
4. Accrual Basis Accounting ⇒ A method of accounting that records transactions when they are earned or incurred, not when cash changes hands.
5. Amortization ⇒The gradual reduction of an intangible asset’s value over time.
6. Asset ⇒ Anything of value owned by a business, such as cash, inventory, or property.
7. Audit ⇒ A systematic examination of a company’s financial records and processes.
8. Balance Sheet ⇒A financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.
9. Bank Reconciliation ⇒ The process of matching a company’s records with those of its bank to ensure accuracy.
10. Bookkeeping ⇒ The process of recording financial transactions.
11. Capital Expenditure ⇒ Money spent on acquiring or improving long-term assets.
12. Cash Flow Statement ⇒A financial statement that shows the movement of cash in and out of a business.
13. Cost of Goods Sold (COGS) ⇒ The direct costs associated with producing goods or services.
14. Credit ⇒An entry that increases liability or equity accounts and decreases asset accounts.
15. Debit ⇒ An entry that increases asset accounts and decreases liability or equity accounts.
16. Depreciation ⇒ The allocation of the cost of a tangible asset over its useful life.
17. Double Entry Accounting ⇒ A system in which every transaction has equal and opposite effects on two or more
accounts.
18. Equity ⇒ The ownership interest in a business, often represented as shareholders’ equity.
19. Expense ⇒ The cost incurred to generate revenue in a business.
20. Financial Statement ⇒ Reports that summarize a company’s financial activities, including the income statement, balance sheet, and cash flow statement.
21. Fixed Asset ⇒ A long-term asset, such as machinery or property, used in a business.
22. General Ledger ⇒ A master accounting record that contains all the accounts used by a company.
23. Income Statement ⇒ A financial statement that shows a company’s revenues, expenses, and profit or loss over a
specific period.
24. Internal Control ⇒ Policies and procedures implemented to safeguard a company’s assets and ensure accuracy in financial reporting.
25. Journal Entry ⇒ The record of a financial transaction before it is posted to the general ledger.
26. Liabilities ⇒ Debts or obligations owed by a business to external parties.
27. Liquidation ⇒ The process of selling off a company’s assets to pay its debts.
28. Long-Term Liabilities ⇒ Debts or obligations that are not due within the current year.
29. Net Income ⇒ The profit earned by a company after deducting all expenses and taxes.
30. Operating Income ⇒ A company’s profit from its core business activities.
31. Overhead ⇒ Indirect costs not directly tied to the production of goods or services.
32. Payroll ⇒ The list of employees and their wages or salaries.
33. Profit and Loss Statement ⇒ Another term for the income statement.
34. Revenue ⇒ The income earned from sales of goods or services.
35. Trial Balance ⇒ A list of all account balances to check for errors before preparing financial statements.
36. Accrued Expense ⇒ An expense that has been incurred but not yet paid.
37. Asset Turnover Ratio ⇒ A measure of how efficiently a company uses its assets to generate revenue.
38. Bad Debt ⇒ An amount that is unlikely to be collected from a customer and is written off as a loss.
39. Budget ⇒ A financial plan that outlines expected income and expenses.
40. Cash Accounting ⇒ A method of accounting that records transactions when cash is received or paid.
41. Chart of Accounts ⇒ A list of all the accounts used by a company.
42. Contingent Liability ⇒ A potential obligation that depends on future events.
43. Cost Accounting ⇒ A branch of accounting focused on tracking and controlling the costs of producing goods
or services.
44. Credit Memo ⇒ A document issued to reduce or cancel an invoice.
45. Debit Memo ⇒ A document issued to increase the amount of an invoice.
46. Dividend⇒ A distribution of profits to shareholders.
47. FIFO (First-In, First-Out)⇒ An inventory valuation method where the oldest items are sold first.
48. GAAP (Generally Accepted Accounting Principles) ⇒ A set of accounting standards and principles used in the
United States.
49. Gross Profit ⇒ The profit earned from sales after deducting the cost of goods sold.
50. Income Tax ⇒ A tax on a company’s profits.
51. Intangible Asset ⇒ A non-physical asset with value, such as patents or trademarks.
52. Inventory ⇒ Goods held for sale in the normal course of business.
53. Journal ⇒ The book or electronic record where financial transactions are initially recorded.
54. LIFO (Last-In, First-Out) ⇒ An inventory valuation method where the most recent items are sold first.
55. Marketable Securities ⇒ Investments that can be easily converted into cash.
56. Net Assets ⇒ Total assets minus total liabilities.
57. Operating Expense ⇒ Costs associated with a company’s day-to-day operations.
58. Partnership ⇒ A business structure where two or more individuals share ownership and responsibilities.
59. Prepaid Expense ⇒ An expense paid in advance, recorded as an asset until it is used.
60. Retained Earnings ⇒Profits that are reinvested in the business rather than distributed to shareholders.
61. Statement of Cash Flows ⇒ A financial statement that shows how cash is generated and used in a specific period.
62. Tax Deduction ⇒ An expense that reduces taxable income.
63. Unearned Revenue ⇒ Money received in advance for goods or services to be provided in the future.
64. Amortization Expense ⇒ The portion of an intangible asset’s cost expensed each period.
65. Audit Trail ⇒A detailed record of all transactions, enabling traceability and accountability.
66. Break-Even Point ⇒ The level of sales at which a business covers its costs and neither makes a profit nor incurs a loss.
67. Capital Stock ⇒ The total amount of shares issued by a corporation.
68. Consolidation ⇒ Combining financial statements of multiple entities into one.
69. Cost Allocation ⇒The process of assigning indirect costs to specific cost centers.
70. Credit Terms⇒ The agreed-upon conditions for payment between a buyer and seller.
71. Deferral ⇒ Delaying the recognition of revenue or  expenses to a future period.
72. Equity Method – Accounting for investments when a company has significant influence over another entity.
73. FASB (Financial Accounting Standards Board) – The organization responsible for setting accounting standards
in the United States.
74. Goodwill – The excess of the purchase price of a business over the fair value of its net assets.
75. Gross Margin – The difference between revenue and the cost of goods sold, expressed as a percentage.
76. Income Tax Expense – The amount of income tax owed by a company in a given period.
77. Joint Venture – A business arrangement where two or more entities collaborate for a specific project.
78. Liquidity – The ability of a company to meet its shortterm obligations with its current assets.
79. Materiality – The concept that financial information should be reported if its omission or misstatement could
influence decisions.
80. Net Book Value – The carrying amount of an asset on the balance sheet.
81. Operating Lease – A lease that does not transfer ownership of the asset to the lessee.
82. Par Value – The nominal or face value of a share of stock.
83. Quick Ratio – A measure of a company’s ability to pay its short-term liabilities with its most liquid assets.
84. Receivables Turnover – A ratio that measures how efficiently a company collects on its accounts receivable.
85. Statement of Retained Earnings – A financial statement that reconciles changes in retained earnings over a period.
86. Taxable Income – A company’s income on which it is subject to taxation.
87. Unexpired Cost – The portion of prepaid expenses that has not yet been consumed.
88. Working Capital – The difference between current assets and current liabilities.
89. 401(k) – A retirement savings plan that allows employees to contribute a portion of their salary on a taxdeferred basis.
90. Accruals – Unrecorded expenses or revenues that have been incurred but not yet recognized.
91. Angel Investor – An individual who provides capital to startups or small businesses in exchange for ownership
equity.
92. Articles of Incorporation – A legal document that establishes the formation of a corporation.
93. Bankruptcy – A legal status of insolvency where a business cannot meet its financial obligations.
94. Cash Equivalent – Short-term, highly liquid investments that are easily convertible to cash.
95. Cost Driver – A factor that directly influences the cost of producing goods or services.
96. Depreciation Expense – The cost allocated to a tangible asset over its useful life.
97. Earnings Before Interest and Taxes (EBIT) – A measure of a company’s profitability before interest and taxes.
98. Financial Analyst – A professional who analyzes financial data to make investment or business decisions.
99. Generally Accepted Accounting Principles (GAAP) – A set of accounting standards and principles used in many
countries.
100. Hedge Fund – An investment fund that uses various strategies to generate returns for its investors.