100

Most Important
Accounting Terms

You Should not ignore

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1. Account Balance - The total amount of money in an
account at a given time.

2. Accounts Payable - Money owed by a business to its

creditors for goods or services.

3. Accounts Receivable - Money owed to a business by its

customers for goods or services provided.

4. Accrual Basis Accounting - A method of accounting

that records transactions when they are earned or
incurred, not when cash changes hands.

5. Amortization - The gradual reduction of an intangible

asset's value over time.

6. Asset - Anything of value owned by a business, such as

cash, inventory, or property.

7. Audit - A systematic examination of a company's

financial records and processes.

8. Balance Sheet - A financial statement that shows a

company's assets, liabilities, and equity at a specific point
in time.
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9. Bank Reconciliation - The process of matching a

company's records with those of its bank to ensure
accuracy.

10. Bookkeeping - The process of recording financial

transactions.

11. Capital Expenditure - Money spent on acquiring or

improving long-term assets.

12. Cash Flow Statement - A financial statement that

shows the movement of cash in and out of a business.

13. Cost of Goods Sold (COGS) - The direct costs

associated with producing goods or services.

14. Credit - An entry that increases liability or equity

accounts and decreases asset accounts.

15. Debit - An entry that increases asset accounts and

decreases liability or equity accounts.

16. Depreciation - The allocation of the cost of a tangible

asset over its useful life.
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17. Double Entry Accounting - A system in which every

transaction has equal and opposite effects on two or more
accounts.

18. Equity - The ownership interest in a business, often

represented as shareholders' equity.

19. Expense - The cost incurred to generate revenue in a

business.

20. Financial Statement - Reports that summarize a

company's financial activities, including the income
statement, balance sheet, and cash flow statement.

21. Fixed Asset - A long-term asset, such as machinery or

property, used in a business.

22. General Ledger - A master accounting record that

contains all the accounts used by a company.

23. Income Statement - A financial statement that shows a

company's revenues, expenses, and profit or loss over a
specific period.

24. Internal Control - Policies and procedures implemented

to safeguard a company's assets and ensure accuracy in
financial reporting.
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5. Journal Entry - The record of a financial transaction

before it is posted to the general ledger.

26. Liabilities - Debts or obligations owed by a business to

external parties.

27. Liquidation - The process of selling off a company's

assets to pay its debts.

28. Long-Term Liabilities - Debts or obligations that are

not due within the current year.

29. Net Income - The profit earned by a company after

deducting all expenses and taxes.

30. Operating Income - A company's profit from its core

business activities.

31. Overhead - Indirect costs not directly tied to the

production of goods or services.

32. Payroll - The list of employees and their wages or

salaries.

33. Profit and Loss Statement - Another term for the

income statement.
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34. Revenue - The income earned from sales of goods or

services.

35. Trial Balance - A list of all account balances to check

for errors before preparing financial statements.

36. Accrued Expense - An expense that has been incurred

but not yet paid.

37. Asset Turnover Ratio - A measure of how efficiently a

company uses its assets to generate revenue.

38. Bad Debt - An amount that is unlikely to be collected

from a customer and is written off as a loss.

39. Budget - A financial plan that outlines expected

income and expenses.

40. Cash Accounting - A method of accounting that

records transactions when cash is received or paid.

41. Chart of Accounts - A list of all the accounts used by a

company.

42. Contingent Liability - A potential obligation that

depends on future events.
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43. Cost Accounting - A branch of accounting focused

on tracking and controlling the costs of producing goods
or services.

44. Credit Memo - A document issued to reduce or cancel

an invoice.

45. Debit Memo - A document issued to increase the

amount of an invoice.

46. Dividend - A distribution of profits to shareholders.

47. FIFO (First-In, First-Out) - An inventory valuation

method where the oldest items are sold first.

48. GAAP (Generally Accepted Accounting Principles) -

A set of accounting standards and principles used in the
United States.

49. Gross Profit - The profit earned from sales after

deducting the cost of goods sold.

50. Income Tax - A tax on a company's profits.

51. Intangible Asset - A non-physical asset with value,

such as patents or trademarks.
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52. Inventory - Goods held for sale in the normal course of

business.

53. Journal - The book or electronic record where

financial transactions are initially recorded.

54. LIFO (Last-In, First-Out) - An inventory valuation

method where the most recent items are sold first.

55. Marketable Securities - Investments that can be easily

converted into cash.

56. Net Assets - Total assets minus total liabilities.

57. Operating Expense - Costs associated with a company's

day-to-day operations.

58. Partnership - A business structure where two or more

individuals share ownership and responsibilities.

59. Prepaid Expense - An expense paid in advance,

recorded as an asset until it is used.

60. Retained Earnings - Profits that are reinvested in the

business rather than distributed to shareholders.

61. Statement of Cash Flows - A financial statement that

shows how cash is generated and used in a specific period.
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62. Tax Deduction - An expense that reduces taxable

income.

63. Unearned Revenue - Money received in advance for

goods or services to be provided in the future.

64. Amortization Expense - The portion of an intangible

asset's cost expensed each period.

65. Audit Trail - A detailed record of all transactions,

enabling traceability and accountability.

66. Break-Even Point - The level of sales at which a

business covers its costs and neither makes a profit nor
incurs a loss.

67. Capital Stock - The total amount of shares issued by a

corporation.

68. Consolidation - Combining financial statements of

multiple entities into one.

69. Cost Allocation - The process of assigning indirect

costs to specific cost centers.

70. Credit Terms - The agreed-upon conditions for

payment between a buyer and seller.
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71. Deferral - Delaying the recognition of revenue or

expenses to a future period.

72. Equity Method - Accounting for investments when a

company has significant influence over another entity.

73. FASB (Financial Accounting Standards Board) - The

organization responsible for setting accounting standards
in the United States.

74. Goodwill - The excess of the purchase price of a

business over the fair value of its net assets.

75. Gross Margin - The difference between revenue and

the cost of goods sold, expressed as a percentage.

76. Income Tax Expense - The amount of income tax

owed by a company in a given period.

77. Joint Venture - A business arrangement where two or

more entities collaborate for a specific project.

78. Liquidity - The ability of a company to meet its short-

term obligations with its current assets.

79. Materiality - The concept that financial information

should be reported if its omission or misstatement could
influence decisions.
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80. Net Book Value - The carrying amount of an asset on

the balance sheet.

81. Operating Lease - A lease that does not transfer

ownership of the asset to the lessee.

82. Par Value - The nominal or face value of a share of

stock.

83. Quick Ratio - A measure of a company's ability to pay

its short-term liabilities with its most liquid assets.

84. Receivables Turnover - A ratio that measures how

efficiently a company collects on its accounts receivable.

85. Statement of Retained Earnings - A financial statement

that reconciles changes in retained earnings over a period.

86. Taxable Income - A company's income on which it is

subject to taxation.

87. Unexpired Cost - The portion of prepaid expenses that

has not yet been consumed.

88. Working Capital - The difference between current

assets and current liabilities.
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89. 401(k) - A retirement savings plan that allows

employees to contribute a portion of their salary on a tax-
deferred basis.

90. Accruals - Unrecorded expenses or revenues that have

been incurred but not yet recognized.

91. Angel Investor - An individual who provides capital to

startups or small businesses in exchange for ownership
equity.

92. Articles of Incorporation - A legal document that

establishes the formation of a corporation.

93. Bankruptcy - A legal status of insolvency where a

business cannot meet its financial obligations.

94. Cash Equivalent - Short-term, highly liquid

investments that are easily convertible to cash.

95. Cost Driver - A factor that directly influences the cost

of producing goods or services.

96. Depreciation Expense - The cost allocated to a tangible

asset over its useful life.
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97. Earnings Before Interest and Taxes (EBIT) - A measure

of a company's profitability before interest and taxes.

98. Financial Analyst - A professional who analyzes

financial data to make investment or business decisions.

99. Generally Accepted Accounting Principles (GAAP) - A

set of accounting standards and principles used in many
countries.

100. Hedge Fund - An investment fund that uses various

strategies to generate returns for its investors.
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