Abatement – The exemption or reduction of the level of taxation of an individual or company. These are allowed for reasonable reasons such as reasonable causes like long-term illness, appeals and settlements, or statutory exceptions such as being located in a disaster relief area, and similar.
ACCA – Association of Certified Chartered Accountants. It is a London-based institution that administers the Chartered Accountant Certification.
Acid-Test – Where the business’s short-term assets are measured against their short-term liabilities to gauge whether it is able to meet its short-term expenses.
Accountant – Someone who has received a Bachelor’s degree or higher in either Accountancy or a similar field.
Accounts – Relating to assets, income, expenses, equity and liabilities that are entered onto individual ledger pages. There are three types of accounts in accounting:
- Nominal accounts – Relates to accounts in which transactions are stored for one fiscal year in terms of income, expenses and losses.
- Personal accounts – Relates to an individual for their personal use.
- Real accounts – Relating to both the tangible and intangible assets of a company
Account payable – Refers to the monies owed to suppliers by a business. They are short-term expenses that are found on the credit side of ledger and are legally enforceable claims by the party owed.
Accounts receivable – These are short-term monies owed to the business for services rendered or goods supplied. They are legally enforceable claims that are registered on the Debit side of the ledger.
Accrual – The increase of investment value or interest over time.
AICPA – American Institute of Certified Public Accountants. They are the US’s national organization of Certified Public Accountants, whose members have passed the Uniform CPA exam. It represents CPAs as individuals.
Allocate – To divide costs among various items, departments, and periods.
Amortization – A method of gradually decreasing an intangible assets value over time. It does so in a way to evenly distribute the cost over the expected lifespan of the asset. These assets include patents, propriety processes and similar.
Annuity – A financial product offered by insurance companies that pays the investor a fixed income over time. These include savings accounts, and retirement plans, among other things.
Appreciation – The deliberate upward adjustment of the value of any asset in a systematic manner to reflect the increased value of a tangible item over time. This is done to reflect the increasing value of tangible items such as vehicles, equipment, appliances, electronics, and other items over time. Some items, such as property value, are calculated at a set percentage of the original price, while others are adjusted as an approximation of current value such as stocks.
Assets – An asset is any resource that provides a current, future, or potential economic benefit for an individual, business or other economic entity.
Audit – It is the examination of financial documentation by an external professional to ensure consistency in the books, and that they follow legal requirements.
Auditor – The professional accountant who performs audits.
Balance sheet – Summary of the financial balances of an individual organization
Bookkeeper – The person responsible for balancing all of the transactions in their company’s general ledger.
Budget – This is a financial plan that outlines the projection of revenue based on estimations of financial and non-financial information. It entails monitoring expenditures and income to ensure that known costs are met, and that some money is saved for unforeseeable expenses and investment opportunities.
CA – Chartered Accountant. This is an international accounting title awarded by institutions to those who pass the exam. It is similar to the CPA and allows them the same practice privileges in the issuing countries.
Capital – The money or assets owned by an individual or company that is invested into a business. It represents the funds available to support the day-to-day operations and investments of a business.
Cash – This refers to money that is available for use. This can be in the form of paper money, coins, bank balances, cashable checks, money orders, redeemable stocks and so on.
Cash Account – These are accountants that are set up between businesses and consumers or businesses and businesses to facilitate full immediate payments for services rendered or products purchased.
Cash flow – How capital moves in an out of a business
CEO – Chief Executive Officer. Topmost manager responsible for the overall running of the business.
CFO – Chief Financial Officer. They are the senior executives who are tasked with managing the financial aspects of the company.
CMA – Certified Management Accountant. It is an accounting license exclusive to Australia and the US that emphasizes corporate accounting and management accounting.
CPA – Certified Public Accountant. An accountant who has received CPA licensure after passing the Uniform CPA exam. They are legally permitted to participate in public accounting and taxation.
CPE – Continuing Professional Education. Once licensed, CPAs are expected to meet a certain number of CPE hours in order to be eligible to renew their license. The requirements vary from state to state.
Credit – A transfer of value out of an account that causes the asset to decrease or the liability to increase
Debit – A transfer of value into an account that causes the asset to increase or the liability to decrease
Deficit – Expenditures that exceed revenue over time.
Devaluation – The deliberate downward adjustment of the book value of a fixed asset in a systematic manner until the item’s value is reduced to zero. This is done to reflect the decreasing value of tangible items such as vehicles, equipment, appliances, electronics, and other items over time. It is usually calculated at a set percentage of the original price.
Dividends – A regular distribution of profits that is paid out to investors whenever a surplus or profit is made by the business, with the remainder reinvested to promote further profit.
Double-entry ledger – A system of data entry used in bookkeeping whereby transactions are recorded in terms of debits and credits on corresponding sides so that the total debit and credit amounts are always equal.
EA – Enrolled Agent. – These are federally licensed taxation professional who is legally permitted to represent clients for taxation before the IRS.
Encumbrance – These are funds that are set aside specifically to accommodate known future expenditures such as contract fulfillment. By recording it in the ledger, it ensures that the funds are there when it is time to pay the expense.
Equity – The subtraction of liabilities from the value of the assets to illustrate the company’s overall book value.
Expenditure – The costs of running the business, such as purchasing equipment, general maintenance, salary payments, rent and any other form of fund outflow.
FIFO – First in, first out. An accounting method that records the earliest produced items as being sold first. This ensures that oldest stock is used first to reduce instances of losses caused by obsolete inventory, such as vegetables or other perishable goods.
Forecast – Using past and current financial ledgers to predict future expenditures and income.
Gain – Pertains to an increase in net profit due to something outside of the normal earnings and general operations of the business, such as through the sale or appreciation of an asset
General ledger – This is the account used to record all of the company’s transactions
Income statement – It is a summary of all income and expenditures over a specific period.
Inflation – The increased cost of purchases over a period of time. This can be caused by the devaluation of currency or by the increase of municipal costs such as electricity or the country’s general economic performance in comparison to other countries.
Interest – This is the payment received by the lender above what was lent. This can be done as once-off payments between individuals, as incremental percentages of income deposited with a bank or other institution, or other financial arrangements.
Investment – This is an asset or item that is acquired for the purposes of generating income or appreciation. This can be in the form of time, money, property or equipment, among others.
Invoice – A document issued by the service or product provider to the recipient detailing the transaction and agreed-upon payment terms.
Journal – The journal records all financial transactions in the business as they occur. It is the first step in the financial data entry system that provides source data to be entered into the formal ledger.
Ledger – This is a book or collection of accounts that is used to record transactions.
Leverage – Incurring debt for the purposes of engaging in a business opportunity or investment.
Liability – These are the businesses financial obligations that must be fulfilled as a result of past transactions and agreements.
LIFO – Last In, First Out. An accounting method that records the most recently produced items as being sold first. It is only practiced in the US.
Loan – The lending of money to an individual or business entity, which must be repaid at a later date that is usually agreed upon before the transaction occurs. These can be either long or short-term loans.
Loss – Pertains to the decrease in net income due to something outside of the normal transactions and general operations of the business, such as the depreciation of assets or legal expenditures
NASBA – National Association of State Boards of Accountancy. It is an association that serves the 56 state accountancy boards that are its members. It does so by providing administrative services, evaluations and examinations on behalf of the boards, as well as other functions. It also acts as an intermediary and platform for discussion between the boards.
NIES – NASBA International Evaluation Services. They evaluate foreign transcripts and educations to verify that they meet a particular state’s requirements for either CPA examination or licensure.
Operations – The internal management of a company to ensure that it functions optimally in terms of productivity.
Petty cash – On-hand funds used for small, immediate purchases.
Profit – A financial gain calculated as the monetary value of current assets in comparison to the amount invested.
Projection – Similar to forecasting, it also takes into account past and current income and expenditure to foretell future events. However, this also takes into account other factors to predict various possible outcomes in order to prepare for multiple future possibilities.
Qualitative – Accurate financial information that is relevant to the management of the business to enable them to make decisions. The information must be understandable and comparable to information from other financial periods. It does not necessarily need to relate to profits and losses, but also to information that keeps customers satisfied and loyal.
Quantitative – Entails analyzing existing data in order to discover correlating information such as the net income of the company for the fiscal year, or changes in cashflow over a specific period.
Reserve – Funds that have been appropriated for specific purposes such as paying out debts or dividends.
Return – Funds gained or lost over a specific period.
Revenue – Total income generated from the main sale of goods or services of the business.
Risk – Financial endeavors where the outcome is uncertain, such as investments.
ROI – Return on Investment. The profits or losses gained from investments.
Securities – A tradable financial asset or instrument that is used to raise capital in both public and private markets.
Shares – Unit of equity in a business that represents a percentage of overall ownership of the company. Some benefits can include voting rights or dividends. However often the benefit is only capital appreciation.
Statement of Cash Flow/Cash Flow Statement – It is a financial statement that illustrates inflows and outflows of cash within the business.
Subsidiary – A company that is controlled or owned by another company known as the ‘holding’ or ‘parent’ company.
Surplus – The excess amount of a resource or asset. It can refer to excess of production or supply beyond what is needed, or the amount of assets that exceed what is needed to match the liabilities.
Valuation – The estimated worth of an asset or resource according to the evaluation of a professional valuer.
Value – This refers to the perceived worth or usefulness something.
Variance – A measure of statistical dispersion usually in relation to the mean.
Vendor – An individual or business offering goods or services for sale.
Yield – The amount of return that a security holder receives on their investment over a specific period of time.