A comprehensive guide to understanding key financial and accounting terms used in business.
A record of financial transactions related to an asset, liability, revenue, expense, etc.
Unpaid supplier invoices and bills, grouped under the AP account, found on the balance sheet as a liability.
Unpaid sales invoices, grouped under the AR account, found on the balance sheet as an asset.
A method where revenue is recorded when earned and expenses when incurred, regardless of when payment is made or received.
An entry made at the end of an accounting period to account for unrecognized income or expenses.
An estimate of the percentage of accounts receivable that are expected not to be collected.
Items of value owned by a business, including current assets like cash and non-current assets like equipment.
A report showing assets, liabilities, and equity of the business, aligning with the accounting equation.
The process of comparing a company's bookkeeping records to the information on the company's bank statement.
The process of recording, categorizing, and summarizing financial transactions of a business.
A financial plan estimating how much a business will earn and detailing planned expenditures.
The movement of cash through the business, detailing how cash flowed into and out of the business.
A list of accounts used in a business to categorize financial transactions, including assets, liabilities, equity, income, cost of goods sold, and expenses.
The process of finalizing end-of-year accounts, producing financial statements, and calculating tax payable.
An arrangement between a buyer and a seller for deferred payment on goods and services. A credit entry can reduce assets or increase liabilities.
An entry on the left side of a ledger account, which can increase assets or expenses or decrease liabilities, revenue, or net worth.
A method where every financial transaction is recorded twice, once as a credit and once as a debit.
The sum of money that the owner or shareholders would receive if all assets were liquidated and all company debt was paid off.
Money spent to operate a company that is not directly related to the sale of individual goods or services.
A 12-month period chosen by a business as its accounting period, which does not have to be a calendar year.
A tangible piece of equipment or property that a business plans to use long-term to generate income.
Contains summaries of all financial transactions over the life of the company.
A company's profit after deducting all the costs associated with producing and selling the product or services.
A financial statement showing monthly, quarterly, or yearly financial activity, including profits and losses.
Another term for account where daily business transactions are placed before being recorded in the general ledger.
An obligation to pay for receiving goods or services, classified as a liability.
The profit after all expenses have been deducted from revenue.
Calculated by dividing the net profit by the cost of the investment.
A list of all accounts and their balances at a specific point in time, used to check for errors in the accounting records.
Charging an asset account as an expense or loss, often for unpaid invoices or losses on assets.