100 Words Every Accountant Should Know

No.	Term	Definition
1.	Absorption costing	Allocates fixed overhead to product costs.
2.	Accounts payable (AP)	Amounts owed to suppliers.
3.	Accounts receivable (AR)	Amounts owed by customers.
4.	Accrual accounting	Records revenue and expenses when incurred.
5.	Accumulated depreciation	Total depreciation recorded to date.
6.	Acid-test ratio	Liquidity measure excluding inventory.
7.	Adjusting entry	Entry to update accounts at period-end.
8.	Amortization	Systematic expensing of intangible asset cost.
9.	AP aging	Schedule of payables by due date.
10.	AR aging	Schedule of receivables by age.
11.	Audit trail	Documented path of transactions and changes.
12.	Authorization controls	Approvals required before processing transactions.
13.	Bad debt expense	Estimated uncollectible receivables expense.
14.	Balance sheet	Statement of assets, liabilities, and equity.
15.	Bank reconciliation	Matches bank statement to cash records.
16.	Basis of accounting	Rules for recognizing revenues and expenses.
17.	Book value	Asset cost minus accumulated depreciation.
18.	Break-even point	Sales level where profit equals zero.
19.	Budget variance	Difference between actual and budgeted amounts.
20.	Capital expenditure (CapEx)	Spending to acquire or improve long-term assets.
21.	Cash flow statement	Reports cash inflows and outflows.
22.	Chart of accounts	List of all general ledger accounts.
23.	Closing entry	Transfers temporary balances to retained earnings.
24.	COGS	Direct costs of goods sold.
25.	Compliance	Adherence to laws, regulations, and standards.
26.	Consolidation	Combines financials of parent and subsidiaries.
27.	Contra account	Account offsetting related account balance.
28.	Contribution margin	Sales minus variable costs.
29.	Control environment	Tone and structure supporting internal control.
30.	Cost allocation	Assigns indirect costs to cost objects.
31.	Cost center	Unit where costs are accumulated.
32.	Credit memo	Reduces customer balance for returns or adjustments.
33.	Current ratio	Current assets divided by current liabilities.
34.	Deferred revenue	Cash received before earning revenue.
35.	Depreciation	Allocates tangible asset cost over useful life.
36.	Direct costs	Costs traceable to a product or service.
37.	Disbursement	Payment of cash or funds.
38.	Discount rate	Rate used to compute present value.
39.	Double-entry	Each transaction affects debits and credits.
40.	Due diligence	Investigation before a transaction or investment.
41.	Earnings per share (EPS)	Profit available per common share.
42.	EBIT	Earnings before interest and taxes.
43.	EBITDA	EBIT plus depreciation and amortization.
44.	Encumbrance	Committed funds not yet spent.
45.	Equity	Residual interest in assets after liabilities.
46.	Error correction	Fixes misstatements in accounting records.
47.	Expense recognition	Records expenses in appropriate period.
48.	Fair value	Price received to sell an asset.
49.	FIFO	First-in, first-out inventory costing method.
50.	Financial statements	Formal reports of financial position and performance.
51.	Fixed costs	Costs unchanged within relevant activity range.
52.	Forecasting	Predicts future financial outcomes.
53.	Fraud risk	Likelihood of intentional misstatement or theft.
54.	GAAP	Standard U.S. financial reporting principles.
55.	General ledger (GL)	Main record of all accounts and balances.
56.	Going concern	Assumption entity will continue operating.
57.	Gross margin	Gross profit divided by revenue.
58.	Impairment	Write-down when asset value declines.
59.	Income statement	Reports revenues, expenses, and net income.
60.	Indirect costs	Costs not directly traceable to outputs.
61.	Internal controls	Policies preventing errors and fraud.
62.	Inventory	Goods held for sale or production.
63.	Invoice	Bill requesting payment for goods or services.
64.	Journal entry	Record of transaction debits and credits.
65.	Key performance indicators	Metrics tracking performance against objectives.
66.	Last-in, first-out (LIFO)	Inventory costing method using latest costs first.
67.	Ledger	Collection of accounts recording transactions.
68.	Leverage	Use of debt to finance assets.
69.	Liquidity	Ability to meet short-term obligations.
70.	Matching principle	Aligns expenses with related revenues.
71.	Materiality	Significance of information to decision makers.
72.	Net income	Profit after all expenses and taxes.
73.	Net present value (NPV)	Present value of inflows minus outflows.
74.	Notes payable	Written promises to pay specified amounts.
75.	Operating cash flow	Cash generated from core operations.
76.	Operating lease	Lease not recorded as owned asset.
77.	Overhead	Indirect production or operating costs.
78.	Payroll liabilities	Amounts owed for wages and withholdings.
79.	Petty cash	Small cash fund for minor expenses.
80.	Posting	Transferring entries to ledger accounts.
81.	Prepaid expense	Payment recorded as asset until used.
82.	Present value	Current worth of future cash flows.
83.	Profit and loss (P&L)	Another name for income statement.
84.	Provision	Liability of uncertain timing or amount.
85.	Quick ratio	Liquid assets divided by current liabilities.
86.	Receipts	Records evidencing cash received.
87.	Reconciliation	Explains differences between two records.
88.	Retained earnings	Cumulative profits kept in the business.
89.	Revenue recognition	Rules for recording revenue when earned.
90.	Risk assessment	Identifies and evaluates business risks.
91.	Segregation of duties	Splits tasks to reduce fraud risk.
92.	Standard costing	Uses predetermined costs for variance analysis.
93.	Statement of equity	Shows changes in owners’ equity.
94.	Subsidiary ledger	Detailed ledger supporting a control account.
95.	Tax basis	Asset or liability value for tax purposes.
96.	Trial balance	List of accounts with debit and credit totals.
97.	Unearned revenue	Liability for cash received in advance.
98.	Variable costs	Costs that change with activity volume.
99.	Variance analysis	Explains differences between actual and expected.
100.	Working capital	Current assets minus current liabilities.