Accounts Payable (AP)
Money owed by a business to its suppliers shown as a liability on a company’s balance sheet.
Accounts Receivable (AR)
Money owed to a business by its customers shown as an asset on a company’s balance sheet.
Accrual Basis Accounting
An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.
Amortization
The process of gradually writing off the initial cost of an intangible asset over a period of time.
Assets
Resources owned by a business that have economic value and can provide future benefits.
Balance Sheet
A financial statement that reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
Bookkeeping
The recording of financial transactions and the maintenance of financial records.
Capital
Wealth in the form of money or other assets owned by a business.
Cash Flow
The net amount of cash being transferred into and out of a business, especially as it affects liquidity.
Chart of Accounts
A list of all accounts used by a business in its accounting system.
Cost of Goods Sold (COGS)
The direct costs attributable to the production of the goods sold by a company.
Credit
An accounting entry that either decreases assets or increases liabilities and equity on the company’s balance sheet.
Debit
An accounting entry that either increases assets or decreases liabilities and equity on the company’s balance sheet.
Depreciation
The process of allocating the cost of a tangible asset over its useful life.
Equity
The value of an owner’s interest in a company, calculated as total assets minus total liabilities.
Expenses
The costs incurred in the process of earning revenue.
Financial Statements
Written records that convey the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.
Fixed Assets
Long-term tangible assets such as property, plant, and equipment used in the operations of a business.
General Ledger
A complete record of all financial transactions of a company.
Gross Profit
The difference between revenue and the cost of goods sold before deducting operating expenses, taxes, and interest.
Income Statement
A financial statement that shows a company’s revenue and expenses over a specific period of time.
Inventory
The goods and materials that a business holds for the purpose of resale.
Liabilities
The company’s financial debts or obligations that arise during the course of its business operations.
Net Income
The total profit of a company after all expenses and taxes have been deducted from revenue.
Operating Expenses
The expenses required for the day-to-day functioning of a business.
Profit and Loss Statement (P&L)
Another term for the income statement, showing the revenues, costs, and expenses over a period of time.
Revenue
The income generated from normal business operations.
Trial Balance
A report that lists the balances of all general ledger accounts to ensure that total debits equal total credits.
Working Capital
The difference between a company’s current assets and current liabilities, indicating the liquidity and short-term financial health of the business.
Accounts Payable (AP)
Money owed by a business to its suppliers shown as a liability on a company’s balance sheet.
Accounts Receivable (AR)
Money owed to a business by its customers shown as an asset on a company’s balance sheet.
Accrual Basis Accounting
An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.
Amortization
The process of gradually writing off the initial cost of an intangible asset over a period of time.
Assets
Resources owned by a business that have economic value and can provide future benefits.
Balance Sheet
A financial statement that reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
Bookkeeping
The recording of financial transactions and the maintenance of financial records.
Capital
Wealth in the form of money or other assets owned by a business.
Cash Flow
The net amount of cash being transferred into and out of a business, especially as it affects liquidity.
Chart of Accounts
A list of all accounts used by a business in its accounting system.
Cost of Goods Sold (COGS)
The direct costs attributable to the production of the goods sold by a company.
Credit
An accounting entry that either decreases assets or increases liabilities and equity on the company’s balance sheet.
Debit
An accounting entry that either increases assets or decreases liabilities and equity on the company’s balance sheet.
Depreciation
The process of allocating the cost of a tangible asset over its useful life.
Equity
The value of an owner’s interest in a company, calculated as total assets minus total liabilities.
Expenses
The costs incurred in the process of earning revenue.
Financial Statements
Written records that convey the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.
Fixed Assets
Long-term tangible assets such as property, plant, and equipment used in the operations of a business.
General Ledger
A complete record of all financial transactions of a company.
Gross Profit
The difference between revenue and the cost of goods sold before deducting operating expenses, taxes, and interest.
Income Statement
A financial statement that shows a company’s revenue and expenses over a specific period of time.
Inventory
The goods and materials that a business holds for the purpose of resale.
Liabilities
The company’s financial debts or obligations that arise during the course of its business operations.
Net Income
The total profit of a company after all expenses and taxes have been deducted from revenue.
Operating Expenses
The expenses required for the day-to-day functioning of a business.
Profit and Loss Statement (P&L)
Another term for the income statement, showing the revenues, costs, and expenses over a period of time.
Revenue
The income generated from normal business operations.
Trial Balance
A report that lists the balances of all general ledger accounts to ensure that total debits equal total credits.
Working Capital
The difference between a company’s current assets and current liabilities, indicating the liquidity and short-term financial health of the business.