200+ Accounting Glossary and Terms
Get answers to accounting terms in a clear and simple manner. Easy to understand explanation of accounting terms for small business owners.
A
- Absorption Costing
- Accelerated Depreciation Method
- Accounting Adjustments
- Accounts Payables Turnover
- Accounts Receivable
- Accounts Receivable Aging Method (summary)
- Accounts Receivable Turnover
- Accrual Accounting
- Activity Costing
- Activity-Based Budgeting
- Activity-Based Costing
- Adjusted Trial Balance
- Aging Schedule
- Allowance for uncollectible accounts
- Asset Turnover
- Articles of Incorporation
- Asset Writedowns
- Average cash conversion cycle
- Average collection period
- Average inventory days outstanding
B
- Backflush costing
- Balance sheet
- Balanced scorecard
- Bottom-up budget
- Break-even point
- Budgeted financial statement
- Budgeting
- Bootstrapping
- Business Insurance
- Business to business
- Bank Reconciliation
- Bankruptcy
- Bill of Lading
- Billable Hours
- Billable Expense Income
- Billing Cycle
- Book Value
- Bookkeeping
- Business Plan
- Buydown
- Buyer’s Market
- Bad Debt
- Backorder
- Balance Transfer
- Balloon Payment
- Bank Draft
- Bearer Instrument
C
- Capital Budgeting
- Capital Expenditures
- Capital Lease
- Cash Accrual
- Cash Conversion Cycle
- Cash and Cash Equivalents
- Cash Budgets
- Cash Discount
- Chained Target Costing
- Chart of Accounts
- Common Stock
- Commerical Invoice
- Comparative Financial Statement
- Contingent Liabilities
- Continuous Budgeting
- Contra Account
- Contributed Captial
- Contribution Income Statement
- Contribution Margin
- Conversion Cost
- Convertible Bond
- Convertible Securities
- Core Income
- Cost Allocation Base
- Cost Driver Analysis
- Cost Estimation
- Cost Method
- Cost of Captial
- Cost of Goods Sold
- Cost of Materials
- Cost of Production Report
- Cost Prediction
- Cost-Volume-Profit Analysis
- Coupon Rate
- Covenants
- Credit Terms
- Credits
- Current Assets
- Current Liabilities
- Current Ratio
- Customer Level Activity
- Customer Profitability Analysis
- Cycle Efficiency
- Cycle Time
D
- Days Sales in Inventory
- Days Sales in Receivables
- Debit (entry)
- Debit to Equity Ratio
- Declining Balance Method
- Deferred Revenue
- Deferred Tax Liability
- Deferred Tax Valuation Allowance
- Defined Contribution Plan
- Degree of Operating Leverage
- Depreciation
- Depreciation Tax Shield
- Direct Costing
- Differential Cost Analysis
- Direct Method
- Discontinued Operations
- Discounted Cashflow Method
- Double Entry Accounting System
E
F
- FIFO (First In, First Out) — An inventory valuation method where the oldest stock is assumed to be sold first. Common for perishable or trend-sensitive goods, and generally results in inventory value on the balance sheet reflecting more recent purchase costs.
- Fiscal Year — A 12-month period a business uses for accounting and tax reporting. It doesn’t have to match the calendar year — many businesses choose a fiscal year that aligns with their natural sales cycle.
- Fixed Asset — A long-term physical asset used in running the business — like equipment, vehicles, or property — that isn’t expected to be sold or converted to cash within a year.
- Fixed Cost — An expense that stays the same regardless of sales volume, such as rent or insurance. Contrast with variable costs, which rise and fall with output.
- Freight In / Freight Out — Freight In is the shipping cost to bring inventory into the business (added to inventory cost); Freight Out is the cost of shipping goods to customers (recorded as a selling expense).
H
- Historical Cost — An accounting principle where assets are recorded on the books at their original purchase price, rather than current market value.
- Holding Company — A business entity that owns enough voting stock in other companies to control their policies and management, without itself producing goods or services.
- Horizontal Analysis — A method of comparing financial statement line items across multiple periods (e.g., year-over-year) to spot trends in growth, decline, or seasonality.
I
J
- Journal — The accounting record where all business transactions are first logged in chronological order, before being posted to the general ledger.
- Journal Entry — A single record of a financial transaction in the accounting journal, showing the accounts debited and credited and the amounts involved.
- Joint Venture — A business arrangement where two or more parties combine resources for a specific project or period, sharing profits, losses, and control.
K
- Kanban — An inventory and workflow management method that uses visual signals (cards, bins, or software boards) to trigger restocking or production only when needed, reducing excess inventory.
- KPI (Key Performance Indicator) — A measurable value that shows how effectively a business is achieving key objectives, such as gross margin, inventory turnover, or customer acquisition cost.
- Kickback — An illegal or unethical payment made to someone in exchange for facilitating a business transaction, often flagged in fraud and internal-control audits.
L
M
N
O
- Operating Expenses (OPEX) — The day-to-day costs of running a business — rent, salaries, utilities, marketing — not including the cost of goods sold.
- Order Fulfillment — The complete process of receiving, processing, and delivering a customer order, from purchase to delivery.
- Overhead — Ongoing business expenses not directly tied to producing a specific product or service, such as administrative salaries or office costs.
- Owner’s Equity — The owner’s claim on business assets after all liabilities are subtracted — essentially what the business is worth to its owner(s).
P
R
- Reorder Point — The inventory level at which a business should place a new purchase order to avoid stockouts, based on lead time and average sales velocity.
- Retained Earnings — The portion of net profit a business keeps rather than distributing to owners/shareholders, used to reinvest in operations or pay down debt.
- Return on Investment (ROI) — A profitability measure calculated as (Net Profit / Cost of Investment) × 100, used to evaluate the efficiency of an investment or purchase.
- Revenue Recognition — The accounting principle determining when revenue is officially recorded — generally when it’s earned, not necessarily when cash is received.
S
T
U
- Unearned Revenue — Money received from a customer for goods or services not yet delivered — recorded as a liability until the business fulfills its obligation.
- Unit Cost — The total cost (materials, labor, overhead) to produce, store, and sell one unit of a product.
- Useful Life — The estimated period over which a fixed asset is expected to remain productive and usable, used to calculate depreciation.
V
- Value Chain — The full sequence of activities a business performs — from sourcing raw materials to delivering the final product — that add value at each stage.
- Variable Cost — An expense that rises and falls directly with production or sales volume, such as raw materials or sales commissions.
- Vendor — A supplier that provides goods or services to a business, typically in exchange for payment on agreed terms.
- Voucher — A document that authorizes a payment, typically including supporting details like invoice number, amount, and approval sign-off — used as an internal control before cash disbursement.
W
- Weighted Average Cost — An inventory valuation method that calculates cost of goods sold and ending inventory using the average cost of all units available for sale, rather than tracking individual purchase batches.
- Wholesale — Selling goods in large quantities, typically to retailers rather than directly to end consumers, usually at a lower per-unit price.
- Working Capital — Current Assets minus Current Liabilities; measures a business’s short-term liquidity and ability to cover near-term obligations.
- Write-off — Formally recognizing that an asset (such as unpaid invoice or obsolete inventory) has no remaining value, removing it from the books as a loss.
Z
- Zero-Based Budgeting — A budgeting method where every expense must be justified from zero each period, rather than using the prior period’s budget as a baseline.
- Z-Score (Altman Z-Score) — A formula combining several financial ratios to predict the likelihood a company will face bankruptcy within two years.