Accounting Dictionary

1. General Accounting Terms

Account: A record in which transactions are recorded.

Accounts Payable: Amounts owed by a company to suppliers for goods and services received.

Accounts Receivable: Amounts owed to a business by customers for goods or services delivered.

Assets: Resources owned by a company, such as cash, property, and equipment.

Balance Sheet: A financial statement showing a company's assets, liabilities, and shareholders' equity.

Capital: Financial resources or assets invested in a business.

2. Financial Statements

Income Statement: A financial report showing a company’s revenues, expenses, and profits over a specific period.

Cash Flow Statement: A report showing the inflow and outflow of cash in a business.

Statement of Retained Earnings: A report that shows the changes in retained earnings from one period to the next.

3. Types of Accounts

Revenue Account: Accounts tracking the income generated from business operations.

Expense Account: Accounts recording the costs incurred in the process of earning revenue.

Equity Account: Accounts related to owner’s equity or shareholders’ equity in a business.

4. Accounting Principles

GAAP (Generally Accepted Accounting Principles): A set of standard accounting principles used in the U.S.

IFRS (International Financial Reporting Standards): A global set of accounting standards.

Accrual Accounting: The method of accounting that recognizes revenues and expenses when they occur, regardless of when cash is received or paid.

Cash Accounting: Accounting method that recognizes revenues and expenses when cash is received or paid.

5. Taxation Terms

Taxable Income: Income on which taxes are calculated.

Tax Deduction: An expense that can be deducted from taxable income.

Tax Credit: A direct reduction in the amount of tax owed.

6. Audit and Internal Controls

Audit: The examination of a company’s financial statements and accounting records to ensure accuracy and compliance.

Internal Control: Procedures and processes to ensure the integrity of financial and accounting information.

7. Cost Accounting

Fixed Costs: Costs that do not change with the level of production.

Variable Costs: Costs that vary depending on the production level.

Break-even Point: The point at which total revenues equal total costs, resulting in no profit or loss.

8. Managerial Accounting

Budgeting: The process of planning and allocating financial resources for the business.

Cost-Volume-Profit Analysis: A tool used to understand the relationship between costs, sales volume, and profit.

9. Banking and Finance

Loan Amortization: The gradual repayment of a loan over time through regular payments.

Interest: The cost of borrowing money, usually expressed as a percentage.

Dividends: Payments made to shareholders from a company’s profits.

10. Legal and Regulatory Terms

Corporation: A legal entity that is separate from its owners, offering limited liability protection.

Securities and Exchange Commission (SEC): A U.S. government agency that regulates securities markets.