50
Most Important
Accounting Terminologies
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Assets: Economic resources owned or controlled by an
entity.
Liabilities: Obligations or debts owed by an entity.
Equity: Residual interest in assets after deducting liabilities.
Revenue: Income generated from sales of goods or
services.
Expenses: Costs incurred to generate revenue.
Income Statement: Financial statement showing revenue,
expenses, and net income.
Balance Sheet: Financial statement displaying assets,
liabilities, and equity.
Cash Flow Statement: Summary of cash inflows and
outflows.
Accounts Receivable: Money owed to a company by
customers.
Accounts Payable: Money a company owes to suppliers.
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Depreciation: Allocation of asset cost over its useful life.
Accruals: Revenues and expenses recognized before cash
changes hands.
Accrual Accounting: Recording revenues and expenses
when incurred, not when cash is exchanged.
GAAP (Generally Accepted Accounting Principles):
Standard accounting rules and guidelines.
IFRS (International Financial Reporting Standards): Global
accounting standards.
Double-Entry Accounting: System recording transactions
with equal debits and credits.
Trial Balance: Summary of all accounts with their debit and
credit balances.
General Ledger: Record of all financial transactions of a
company.
Debits and Credits: Entries in accounting representing
increases or decreases in accounts.
Fiscal Year: Accounting period used for financial reporting.
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Cost of Goods Sold (COGS): Direct costs related to producing
goods sold.
Profit and Loss Statement (P&L): Summary of a company’s
revenues, costs, and expenses.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization): Measure of a company's operating performance.
Amortization: Allocation of the cost of intangible assets over time
Dividends: Distribution of a portion of a company's earnings to
shareholders.
Retained Earnings: Accumulated profits not distributed as
dividends.
Financial Ratios: Metrics used to analyze a company's financial
performance.
Working Capital: Current assets minus current liabilities.
LIFO (Last In, First Out): Inventory valuation method assuming th
last items purchased are sold first.
FIFO (First In, First Out): Inventory valuation method assuming th
first items purchased are sold first.
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Cash Basis Accounting: Recording revenue and expenses
when cash is exchanged.
Entity: Organization or individual for which accounting records
are maintained.
Bookkeeping: Recording financial transactions and maintaining
records.
Audit: Examination of financial records to verify accuracy and
compliance.
Internal Controls: Policies and procedures safeguarding assets
and ensuring accuracy.
Cost Accounting: Recording, analyzing, and allocating costs
within a business.
Contra Account: Account used to offset another account
Materiality: Principle determining the significance of an
accounting item.
Journal Entry: Recording of a financial transaction in a journal.
Reconciliation: Comparing financial records for accuracy and
consistency.
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Tangible Assets: Physical assets with a monetary value.
Intangible Assets: Non-physical assets with a monetary value
(e.g., patents, goodwill).
Financial Statements: Reports summarizing a company’s
financial performance.
Accrual Basis Accounting: Recognizing revenues and
expenses when incurred, not when cash is exchanged.
Cost Allocation: Distributing costs among various
departments or products.
Going Concern Assumption: Presumption that a company will
continue operating indefinitely.
Non-Operating Income: Revenue not related to core business
operations.
Straight-Line Depreciation: Allocating the cost of an asset
evenly over its useful life.
Matching Principle: Accounting principle matching expenses
to the revenue they generate.
Taxation: Levies imposed by a government on individuals or
entities
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