Glossary
Bookkeeping glossary
Short, plain-English definitions with an example and a link to the lesson where each term is taught.
A
- Account
- A record of increases and decreases for one item.
- Accounting equation
- Assets = Liabilities + Equity.
- Accounts payable
- Amounts owed to suppliers.
- Accounts receivable
- Amounts customers owe for goods or services provided.
- Accrual
- Recording something earned or incurred before cash moves.
- Accrual basis
- Recording revenue when earned and expenses when incurred.
- Accrued expense
- A cost incurred but not yet paid or recorded.
- Accrued revenue
- Revenue earned but not yet billed or received.
- Accumulated depreciation
- Total depreciation recorded on an asset to date.
- Adjusted trial balance
- The trial balance after period-end adjustments.
- Adjusting entry
- A period-end entry that updates accounts for accruals and deferrals.
- Allowance method
- Estimating uncollectible receivables at period end.
- Asset
- A resource the business controls that is expected to provide future benefit.
B
- Balance sheet
- Assets, liabilities, and equity at a date.
- Bank reconciliation
- A comparison that explains differences between the bank statement and the Cash account.
- Bill
- A supplier's invoice received by the business.
- Book value
- Cost minus accumulated depreciation.
C
- Cash basis
- Recording revenue and expenses when cash is received or paid.
- Cash-flow view
- How cash changed, by activity.
- Chart of accounts
- The numbered list of all accounts a business uses.
- Closing entries
- Entries that reset temporary accounts to zero.
- Compound entry
- A journal entry with more than two lines.
- Contra account
- An account that reduces a related account.
- Control account
- A general-ledger account summarizing a subledger.
- Cost of goods sold
- The cost of inventory sold in a period.
- Credit
- An entry on the right side of an account.
- Credit note
- A document reducing what a customer owes.
- Cutoff
- Recording transactions in the correct period.
D
- Debit
- An entry on the left side of an account.
- Deferral
- Postponing recognition of a cash movement already recorded.
- Deposit in transit
- A deposit recorded in the books but not yet on the bank statement.
- Double-entry bookkeeping
- Every transaction is recorded with equal debits and credits.
E
- Equity
- The owner's claim on the business's assets.
- Error of principle
- Posting to the wrong class of account.
- Expense
- A cost used up in earning revenue.
F
- FIFO
- First-in, first-out inventory costing.
G
- General ledger
- The collection of all accounts with their detailed postings.
- Gross pay
- Total earnings before deductions.
- Gross profit
- Net sales minus cost of goods sold.
I
- Income statement
- Revenue minus expenses for a period.
- Income summary
- A temporary account used during closing.
- Invoice
- A document requesting payment for goods or services provided.
J
- Journal entry
- The first record of a transaction, listing debits and credits.
L
- Liability
- An amount the business owes to someone else.
M
- Matching
- Recording expenses in the same period as the revenue they help earn.
- Month-end close
- The process of finalizing the books for a month.
N
- Net income
- Revenue minus expenses.
- Net pay
- Pay after withholdings.
- Normal balance
- The side (debit or credit) on which an account increases.
- Notes payable
- Formal loans the business must repay.
- NSF check
- A customer check returned for non-sufficient funds.
O
- Outstanding check
- A check written and recorded but not yet cleared by the bank.
- Owner capital
- The owner's equity account in a sole proprietorship.
- Owner drawings
- Withdrawals by the owner for personal use.
P
- Payment terms
- When payment is due and any early-payment discount.
- Perpetual inventory
- Updating inventory with every purchase and sale.
- Petty cash
- A small cash fund for minor expenses.
- Post-closing trial balance
- A trial balance after closing entries.
- Posting
- Copying journal lines to their ledger accounts.
- Prepaid expense
- A cost paid before it is used.
R
- Revenue
- Amounts earned from providing goods or services.
- Revenue recognition
- When revenue is recorded.
- Reversing entry
- The exact opposite of a prior entry.
S
- Sales discount
- A reduction for early payment, recorded as contra revenue.
- Sales returns and allowances
- A contra-revenue account for returns and price reductions.
- Sales tax
- Tax collected from customers on taxable sales.
- Salvage value
- Estimated value at the end of an asset's useful life.
- Source document
- The evidence that a transaction happened.
- Straight-line depreciation
- Equal depreciation each period.
- Subledger
- A detailed ledger supporting a control account.
T
- T-account
- A simple sketch of an account with debits left and credits right.
- Temporary account
- An account closed at period end.
- Transposition error
- Digits swapped when recording an amount.
- Trial balance
- A list of account balances with total debits and credits.
U
- Unearned revenue
- Cash received before the service is performed.
- Useful life
- How long an asset is expected to be used.
V
- VAT
- Value-added tax charged on sales with credit for tax on purchases.
W
- Withholding
- Amounts deducted from pay and owed to authorities.
- Write-off
- Removing a specific uncollectible receivable.