Account
A record used to track a specific type of financial activity, asset, liability, income, expense, or equity amount.
Read definition →TYS Trusted Advisors and Accountants
Accounting Glossary
101 accounting terms, explained in plain English—with TYS’s practical perspective for business owners, financial leaders, and contractors.
Clear definitions for better decisions
Accounting terminology can be confusing, especially for people who need to make informed financial decisions without working in accounting every day. This glossary explains common terms connected to financial statements, bookkeeping, cash flow, tax conversations, business performance, and construction accounting.
Every term is intended as a useful starting point. Select a term to learn what it means, why it matters, and how it may apply in a real business setting.
Accounting Fundamentals
The core building blocks of bookkeeping, account organization, transaction recording, and period-end reporting.
Account Balance
The amount currently recorded in an account after debits, credits, additions, and reductions have been posted.
Read definition →Adjusting Entry
A period-end journal entry used to record accruals, prepayments, depreciation, or earned revenue.
Read definition →Bookkeeping
The process of recording transactions and maintaining the information used for financial reporting.
Read definition →Chart of Accounts
An organized list of all accounts used in a business’s accounting system.
Read definition →Closing Entry
A period-end entry that transfers temporary revenue and expense balances to an equity account.
Read definition →Credit
An entry on the right side of an account; its effect depends on the type of account involved.
Read definition →Debit
An entry on the left side of an account; its effect depends on the type of account involved.
Read definition →Double-entry Accounting
A system in which every transaction affects at least two accounts and total debits equal total credits.
Read definition →General Ledger
The central accounting record containing all accounts and transactions posted to them.
Read definition →Journal Entry
A record of a financial transaction that identifies the accounts affected and related debits and credits.
Read definition →Reconciliation
The process of comparing records or balances and investigating differences until they are explained or corrected.
Read definition →Subledger
A subledger is a detailed accounting record that supports a general-ledger account, such as customer balances in accounts receivable or vendor balances in accounts payable.
Read definition →Trial Balance
A list of general-ledger balances used to check that total debits equal total credits.
Read definition →Financial Statements & Reporting
Terms used to describe a company’s financial position, results of operations, resources, obligations, and ownership interest.
Asset
A resource expected to provide future economic benefit, such as cash, equipment, inventory, or receivables.
Read definition →Balance Sheet
A statement reporting assets, liabilities, and equity at a specific point in time.
Read definition →Book Value
The amount at which an asset, liability, or equity item is recorded in accounting records.
Read definition →Cash Flow Statement
A statement showing cash provided or used by operating, investing, and financing activities.
Read definition →Equity
The residual interest in a business after liabilities are subtracted from assets.
Read definition →Expense
A cost incurred in the course of earning revenue or operating a business.
Read definition →Financial Statements
Formal reports summarizing financial position, operating results, cash flows, and changes in equity.
Read definition →Going Concern
The assumption that an entity will continue operating for the foreseeable future.
Read definition →Income Statement
A statement reporting revenue, expenses, and profit or loss over a specific period.
Read definition →Liability
A present obligation that may require a future transfer of cash, goods, services, or other resources.
Read definition →Materiality
The significance of an item or error such that it could influence a financial-statement user’s decision.
Read definition →Net Income
The amount remaining after expenses, losses, and taxes are deducted from revenue and gains.
Read definition →Net Loss
A negative result that occurs when total expenses and losses exceed total revenue and gains.
Read definition →Profit and Loss Statement
Another name for an income statement, commonly called a P&L.
Read definition →Retained Earnings
Cumulative profits retained in the business rather than distributed to owners.
Read definition →Revenue
Income earned from a company’s primary activities, such as selling products or providing services.
Read definition →Statement of Cash Flows
A statement of cash flows is another name for a cash flow statement.
Read definition →Statement of Retained Earnings
A schedule showing changes in retained earnings during a reporting period.
Read definition →Cash Flow, Receivables & Working Capital
Terms that help business owners understand collections, obligations, liquidity, and the resources available for near-term operations.
Accounts Payable
Money a business owes suppliers, vendors, contractors, or other creditors for goods or services already received.
Read definition →Accounts Receivable
Money owed to a business by customers for products delivered or services performed but not yet paid for.
Read definition →Allowance for Doubtful Accounts
An estimate of the portion of accounts receivable a business may not collect.
Read definition →Bad Debt Expense
The expense recognized when a business determines that receivables may not be collected.
Read definition →Cash Flow
The movement of cash into and out of a business during a period.
Read definition →Current Asset
An asset expected to be converted to cash, sold, or used within one year or the normal operating cycle.
Read definition →Current Liability
A debt or obligation expected to be paid within one year or the normal operating cycle.
Read definition →Current Ratio
A liquidity measure calculated by dividing current assets by current liabilities.
Read definition →Days Sales Outstanding
A measure of the average number of days it takes a business to collect payment after a credit sale.
Read definition →Liquidity
A company’s ability to meet short-term obligations as they come due.
Read definition →Payroll Liability
Amounts owed by an employer for wages, payroll taxes, withholdings, benefits, or other payroll obligations.
Read definition →Quick Ratio
A liquidity ratio comparing highly liquid assets, such as cash and receivables, with current liabilities.
Read definition →Sales Tax Payable
Sales tax collected from customers that a business owes to the appropriate taxing authority.
Read definition →Working Capital
Current assets minus current liabilities, a common measure of short-term operating liquidity.
Read definition →Write-off
The removal or reduction of a recorded amount when it is no longer expected to provide value or be collected.
Read definition →Profitability, Planning & Business Performance
Terms that help management evaluate profitability, spending, operating results, assets, and plans for growth.
Accumulated Depreciation
The total depreciation recorded on an asset since it was placed in service.
Read definition →Amortization
The systematic allocation of an intangible asset’s cost or certain financing costs over a defined period.
Read definition →Break-even Point
The sales level at which total revenue equals total costs, producing neither a profit nor a loss.
Read definition →Budget
A financial plan estimating expected revenue, expenses, cash flow, and other results for a future period.
Read definition →Capital Asset
A long-term asset such as equipment, vehicles, buildings, or machinery used in operations.
Read definition →Capital Expenditure
Money spent to acquire, improve, or extend the useful life of a long-term asset.
Read definition →Cost of Sales
The direct costs associated with generating revenue, including project costs in many construction businesses.
Read definition →Depreciation
The systematic allocation of a tangible long-term asset’s cost over its estimated useful life.
Read definition →Direct Cost
A cost that can be specifically connected to a product, service, project, department, or customer.
Read definition →Earnings Before Interest and Taxes (EBIT)
A measure of operating profit before interest expense and income taxes.
Read definition →Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
A non-GAAP measure often used to evaluate operating performance before specified expenses.
Read definition →Fixed Asset
A long-term tangible asset used in business operations, such as machinery, furniture, vehicles, or buildings.
Read definition →General and Administrative Expense
Indirect costs associated with managing and operating a business, commonly called G&A expenses.
Read definition →Goodwill
An intangible asset that may arise when one company acquires another for more than the fair value of identifiable net assets.
Read definition →Gross Margin
The amount remaining after direct costs are subtracted from revenue, often expressed as a dollar amount or percentage.
Read definition →Gross Profit
Revenue minus the direct cost of goods sold or cost of sales.
Read definition →Indirect Cost
A cost that supports multiple activities and cannot be easily assigned to one product, project, or service.
Read definition →Intangible Asset
A nonphysical asset with value, such as a patent, trademark, license, customer relationship, or software right.
Read definition →Net Profit Margin
Net income divided by revenue, often expressed as a percentage.
Read definition →Operating Expense
A cost incurred through normal business operations that is not a direct cost of producing goods or services.
Read definition →Operating Income
Profit from normal operations before interest and income taxes.
Read definition →Overhead
Indirect business costs required to operate a company, such as rent, insurance, utilities, and administrative payroll.
Read definition →Return on Assets
A profitability measure that compares net income with average total assets, often called ROA.
Read definition →Return on Equity
A profitability measure comparing net income with average equity, often called ROE.
Read definition →Straight-line Depreciation
A depreciation method that records an equal amount of expense during each period of an asset’s useful life.
Read definition →Useful Life
The estimated period during which an asset is expected to be used or provide economic benefit.
Read definition →Variance
The difference between an actual result and a planned, budgeted, estimated, or prior-period result.
Read definition →Accounting Methods & Revenue
Terms related to when income and expenses are recorded, how revenue is reported, and how inventory or long-term work may be treated.
Accrual Accounting
An accounting method that records revenue when earned and expenses when incurred, regardless of cash timing.
Read definition →Accrued Expense
An expense incurred but not yet paid or recorded through a vendor invoice.
Read definition →Accrued Revenue
Revenue earned but not yet billed to a customer or received in cash.
Read definition →Cash Basis Accounting
An accounting method that generally records income when cash is received and expenses when cash is paid.
Read definition →Cost of Goods Sold
The direct cost of products sold by a business during a period.
Read definition →Deferred Revenue
Cash received before the related goods or services have been delivered; generally a liability until earned.
Read definition →Inventory
Goods held for sale or materials and supplies expected to be used in producing goods for sale.
Read definition →Prepaid Expense
A payment made in advance for a future benefit, such as insurance, rent, software, or a service contract.
Read definition →Revenue Recognition
The accounting process of determining when and how much revenue should be recorded.
Read definition →Unearned Revenue
Another term for deferred revenue: money received before a business has earned it.
Read definition →Debt, Financial Health & Assurance
Terms used in lending, business-health analysis, formal obligations, and independent financial-statement review.
Audit
An independent examination of financial statements and related records designed to provide assurance under an applicable framework.
Read definition →Debt-to-Equity Ratio
A leverage ratio that compares a company’s liabilities or debt with its equity.
Read definition →Long-term Debt
Debt that is not expected to be due within the next year or normal operating cycle.
Read definition →Net Worth
The difference between total assets and total liabilities; for a business, generally another way to describe equity.
Read definition →Notes Payable
Formal written promises to repay borrowed money, often including interest and a stated repayment schedule.
Read definition →Solvency
A company’s ability to meet long-term obligations and continue operating over time.
Read definition →Construction Accounting
Terms that help contractors understand job-level performance, billing, project reporting, cash flow, and the financial information behind active work.
Backlog
The value of contracted work that has not yet been completed or recognized as revenue.
Read definition →Change Order
A written modification to a contract’s scope, price, schedule, or other terms.
Read definition →Cost to Complete
An estimate of the additional cost required to finish a project or contract.
Read definition →Estimated Cost at Completion
The total estimated cost of a project when completed, often costs incurred plus cost to complete.
Read definition →Gross Profit Fade
A decline in expected gross profit on a job compared with an earlier estimate or original bid.
Read definition →Job Costing
A method of assigning and tracking costs by individual job, project, contract, or customer engagement.
Read definition →Overbilling
A condition in which amounts billed to date exceed revenue recognized or work performed, subject to method and contract terms.
Read definition →Percentage of Completion
A long-term contract accounting concept in which revenue and costs may be recognized based on progress, subject to the applicable framework.
Read definition →Retainage
A portion of a contract payment withheld until specified conditions are met, often at completion or acceptance.
Read definition →Underbilling
A condition in which amounts billed to date are less than revenue recognized or work performed, subject to method and contract terms.
Read definition →Work in Progress
For construction, a schedule used to track the financial status of active contracts and projects.
Read definition →Work with a trusted advisor
TYS provides accounting, tax, construction-accounting, and business-advisory support to closely held businesses, contractors, individuals, and families. With offices in Fairport, New York, and Walnut Creek, California, TYS helps clients better understand their financial information and prepare for important decisions.
The information on this page is provided for general educational purposes only and is not accounting, tax, legal, financial, insurance, bonding, or business advice. Consult qualified professionals regarding your particular circumstances.