Account – A standardized record that represents a single categorized financial part of a business
Accounting Period – The time period when financial statements are prepared, usually on a monthly, quarterly or yearly basis
Accounting – The process of recording and reporting financial transactions
Accounts Payable – The outgoing amount owed (but not paid) for goods or services bought
Accounts Receivable – The incoming amount due (but not paid), usually after a sale or service has been completed
Accrual Method – aka Accrual Basis, a system used by most businesses to record revenues and expenses when the transaction occurs (as opposed to money transferring), contrast with Cash Method
Accruals – Expenses that were incurred but not paid (e.g., salaries, interest on a loan), which are usually included in accounts and adjusted once the invoice is received
Acquisition – A company another company absorbs
Adjusted Gross Income (AGI) – A tax evaluation of income, adjusted for certain deductions
Aggressive Growth Fund – Very high-risk, high-return mutual funds
Aging – Accounts receivables are sorted by age, and aging focuses on accounts that are overdue, often assigns percentages to categories of age
Amortization – The decrease in value of an intangible asset over fixed time periods, contrast to depreciation
Annual Report – A report for shareholders that breaks down a company’s annual statements, cash flows and any other important financial information
Appreciation – The opposite of depreciation, when an asset increases in value and the amount of depreciation decreases, only applicable in very special circumstances in accounting but very common in investing
Arrears – Bills that were due but haven’t been paid
Ask – A price a seller is willing to pay for a stock, typically compares with bid, often related to stock markets
Asset – Thing of value that a business either owns or is due, which includes physical items, money and certain legal rights
Asset Class – A type of asset, typically refers to investments
Audit – The process of reviewing financial records to verify their accuracy and completeness, which includes internal auditing that accountants perform within an organization and independent audits by an outside party
Average Cost Method – An inventory method that averages out the total value of all the inventory purchased to determine the Cost of Goods Sold
Back-to-Back Letters of Credit – Financing where a bank’s letter of credit is collateral for another bank’s letter of credit, often used to circumvent restrictions on a direct letter of credit or remove a bank’s name from the documentation
Bad Debt – Debts that can’t be paid, which is usually a tax-deductible expense
Balance Sheet – An annual statement that shows the financial position of a business with a summary of its assets and liabilities
Bank – An entity that borrows money from entities to loan it to other entities
Bankrupt – A state where a person or group has more liabilities than assets, LLCs use the word “insolvent” instead
Bank Draft – A promised transfer of assets between banks, typically grouped together in “batch processing” to make the accounting more convenient
Batch Processing – transferring multiple data transactions together to make bank transfers more convenient
Bear Market – A market with a negative outlook, contrast to bull market
Bid – A price a buyer is willing to pay for a stock, typically compares with ask, often related to stock markets
Bid-Ask Spread – The difference between the buying and selling price
Bond – aka Debenture or Loan Stock, a loan that doesn’t have to be paid off until a certain number of years
Bond Fund – A mutual fund made of bonds
Book Value – The original cost paid for an asset (Historical Value) or its current value (Fair Market Value), whichever is lower
Break-Even Point – The specific number where one additional unit of production will generate a profit
Bubble – A market condition where the price of an object is significantly higher than its intrinsic value
Bull Market – A market with a positive outlook, contrast to bear market
Capital – aka Startup Costs, money business owners invest to acquire assets and start operating
Capital Allowances – aka Tax Credit, deductions from the total taxes a company has to pay, usually based on something the company has to do
Capital Gains Tax – The tax on an asset that is sold for a profit, which is subject to adjustments from inflation, allowances and other factors to determine its taxable amount
Cash Collateralized Loan – A loan with cash collateral
Cash Method – aka Cash Basis, a system used by most businesses that only tracks paid invoices, contrast with Accrual Method
Cash Flow – the amount of money coming into and out of a business during an accounting period, usually shown on a Cash Flow Statement or Statement of Cash Flows
Cash Flow Forecast – A prediction of the cash flows of an upcoming financial period
Chart of Accounts – A big list of all of the accounts that a business uses to organize and record financial transactions
Charge Back – The act of cancelling a credit or debit card transaction before it has been processed, which will probably still charge the seller a fee
Circulating Assets – Assets that turn from cash to goods and then back to cash again, which includes manufacturing materials and inventory
Closing the Books – A term for making the final entries that bring the profit and loss accounts to zero for the next period and closing out the transactions that happened in that period, followed by Opening the Books
Collection Account – An account with a past due balance
Concentration Account – aka Omnibus Account, internal account for transferring large amounts of funds without identifying each originator
Concentration Risk – Legal requirements regarding asset-holding that create percentage limits on how much a bank can lend to a single borrower
Cost, Insurance and Flight (CIF) – An international contract for sale where the seller agrees to pay shipping, insurance and freight charges before the item is delivered and the buyer is fully responsible after delivery
Cost of Goods Sold (COGS) – The reported cost of items that have been sold
Common Stock – A share of a company that allows shareholders a portion of the Dividend, usually the highest risk but the highest rewards
Compensating Error – Two mistakes that curiously cancelled each other out
Compound Interest – interest accrued on the principal and interest based on the amounts every period, as opposed to Simple Interest
Confirmation – aka Trade Confirmation, legally-affirmed indication of a contractual trade, often includes a fill
Consolidated Financial Statements – Combined financial statements of a parent company and all of its subsidiaries
Consolidation – Combining all of a company’s accounts into one single parent company
Cost-Based Pricing – A pricing method where companies base their fees on the price of manufacturing
Cost Center – A portion of a business that is focused on maintaining the business in a way that doesn’t generate profit such as accounting or custodial
Coupon – Periodic interest payments on a bond that hasn’t reached maturity, typically represented as a percentage.
Creative Accounting – An underhanded way of making accounts appear more or less appealing to shareholders than they actually are, which many accountants would call fraud
Credit – (bookkeeping) Any recordkeeping that decreases assets or expenses or increases capital or liability (business) When a supplier agrees to allow the buyer to pay after receiving the goods or services, the opposite of a Debit
Credit Card – A plastic card with a credit limit designed to obtain cash advances
Credit Note – A document sent to a customer that cancel’s their debt, usually for defective goods or poor service
Creditors – Suppliers that a business owes money to
Currency – Banknotes and coins in circulation as a means of exchange
Current – Generally, “current” in accounting means it happens within the next 12 month cycle
Current Assets – aka Convertible Assets, assets than can be turned into cash quickly and include money in banks, money owed, petty cash, raw materials and stock
Current Cost Accounting – aka Cost Accounting, a type of accounting where assets are valued at their current market value instead of their historical cost
Current Liabilities – Things that are owed within the next 12 months, which includes things essential to day-to-day operating such as include bank overdrafts, short-term loans and lines of credit with suppliers
Cut-off Procedures – Methods used to separate out transactions into different accounting periods
Debit – Any recordkeeping that increases assets or expenses or decreases capital or liability, the opposite of a Credit
Credit Card – A plastic card designed to purchase things without currency
Debtors – Customers who owe money
Default – When a financial obligation cannot be met
Deferred Expenditure – Expenses that can’t be applied to the present accounting period and are treated as an expense later
Deferred Income – Income received or recorded before it is earned
Deficit – When expenses or liabilities are more than income or assets
Depreciation – The decrease in value of a fixed asset over fixed time periods, contrast to amortization
Derivative – aka Underlying, a contract that derives its value from the performance of an underlying entity
Disclosure – Being transparent about accounting information so that financial statements can be understood
Discounted Cash Flow – A method for investors to see if an investment is worth their time by adjusting the cash flows based on time
Dividend – The profit that ultimately gets to a shareholder
Dollar Cost Averaging – Using the same ratio of investment categories at regular intervals to build a portfolio, a great habit-building way to invest
Double-Entry Bookkeeping – A universal accounting system where everything is recorded as both a debit and credit
Drawing – Money that a company owner takes out of a company for their own personal use, which is not wages
Earned Income – Cash or equivalents that someone gets as compensation for goods or services
EFT – Electronic Funds Transfer, movement of funds between financial institutions
Earnings Per Share – The total profit of a company divided by the number of shares
Encumbrance – Money that has to be put aside for any purpose
Entry – The information put into a Journal or Ledger
Entry Reversal – An error where a credit swapped with a debit
Equity – The total incomes and assets minus the total expenses and liabilities of something
Error of Commission – An error where the information was correctly entered to the right account, but the value is wrong
Error of Omission – An error where a transaction wasn’t entered at all
Error of Principle – An accounting entry that doesn’t conform to GAAP
Escrow – Assets a third party holds onto until specified conditions have been met
Exclusions – aka Excluded Income, things excluded from a taxpayer’s gross income such as gifts and inheritances
Exemption – The amount of income that isn’t taxed, but sometimes refers to a specific amount for a specific thing
Expenditure – aka Expense, anything a business purchases (e.g., inventory, salaries)
Face Value – aka Par Value, the indicated price for bond or stock to be sold, can be sold at a premium or discount
Fair Market Value (FMV) – The price a reasonable person would pay someone who wants to sell for something assuming both people know everything relevant to the product or service
Federal Trade Commission (FTC) – A governing board alongside the Securities and Exchange Commission that oversees trade in the USA
Fill – An executed trade for a security or commodity
Financial Accounting Standards Board (FASB) – A group that spends all day making standards on accounting practices, sometimes against the IASB
First In, First Out (FIFO) – an inventory method that values inventory sold by the cost of the earliest inventory purchased
Financial Contagion – The tendency for people to rapidly proliferate investing trends by observing each other
Financial Statements – Documents that show financial information, the most popular ones being the Balance Sheet, Income Statement and Cash Flow Statement
Financing Activities – one of the three Cash Flow Statement categories of financial activity with Operating Activities and Investing Activities that refers to managing debts and managing the company’s stock
Finished Goods – The processed inventory made from Raw Materials
Fiscal Year – A 12 month period that can begin on any date that a business chooses as their accounting year
Fixed Assets – aka Non-Current Assets, things a business owns that will be around for more than a year and include land, buildings, machinery, vehicles and other long-term investments that will affect day-to-day operations if it’s turned into cash
Fixed Cost – A cost that remains about the same from period to period like salaries and rental agreements
Forecast – An estimate of the future finances of a company with concrete numbers based on how the company has done in the past
Fraud – Intentionally misusing a company’s resources
Flow of Funds – A report that shows how the balance sheets have changed from one accounting period to the next
Future Value – The value of something in the future after accounting for inflation and the inability to spend it during that time, as opposed to Present Value
Generally Accepted Accounting Principles (GAAP) – a century-old standard for how accountants should think and work
Gain – aka Profit, when revenue is more than expenses, the opposite of a loss
General Ledger – aka Book of Entry or Chart of Accounts, a large collection of all of a company’s accounting information that all the financial statements pull from
Golden Parachute – Provisions for executives in the event of a corporate merger or takeover, leaving the executive unemployed and much wealthier
Goodwill – The difference between the Book Value and Fair Market Value of an asset, which includes overpaying to buy a company for its reputation and rewarding customers for their loyalty
Gross – aka Gross Income, total profits before making any deductions or discounts
Gross Margin – The difference between the cost of making or getting something and the cost of selling it
Growth and Acquisition – How a business grows, either by getting bigger and expanding operations or by buying other companies
Growth Fund – A mutual fund oriented toward higher-risk medium/large company stocks
Hedge Fund – A mutual fund managed in an unconventional way
Historical Cost – The original price of something
International Accounting Standards Board (IASB) – a group that spends all day making standards on accounting practices, sometimes against the FASB
Impairment – The decreased value of an asset that can no longer be depreciated
Impersonal Accounts – Accounts not held in the name of a person for any other entity outside of a company
Imprest System – A method of restoring an account, usually petty cash, to its original value when it starts running out
In-the-Money – A situation where the strike price of an option has actual value on a market, contrast to out-of-the-money
Income – aka Turnover or Yield, revenue minus expenses
Income Statement – aka Profit and Loss Account (P&L), a financial statement that is a summary of revenue, expenses and profit
Incorporation – The date a business is legally established
Initial Public Offering (IPO) – The first official sale of a corporation’s stock to the public
Intangible Assets – Assets that have value but cannot be physically touched such as patents, copyrights, trademarks and licenses
Interest – A payment to a lender for a loan, usually a percentage of the remaining principal
Inventory – Goods that are manufactured for sale or purchased for re-sale
Inventory Obsolescence – Inventory that can no longer be sold like out-of-style clothing or rotten food
Inventory Shrinkage – A reduction of inventory for non-selling reasons such as theft
Inventory Turnover Rate – aka Stock Holding Period, the number of days inventory stays in storage before being sold
Investing Activities – One of the three Cash Flow Statement categories of financial activity with Operating Activities and Financing Activities that refers to buying things that can keep the company going in the long run or help the company expand
Investment – Buying goods or services that are likely to increase profit
Investment Portfolio – An investor’s list of owned assets
Investors – People or businesses who have invested money into a business to become part-owner
Insider Trading – Making a stock trade based on specialized information other people have told you
Journal – A system that records chronological business transactions that get posted to the General Ledger
Joint Venture – Capital that is combined to provide products or services, usually as business partnerships where everyone involved is fully responsible for the business
Key Performance Indicators (KPI) – A numerical measurement that calculates the performance of a business
Last In, First Out (LIFO) – an inventory method that values inventory sold by the cost of the last inventory purchased
Leasing – A rental agreement which lets someone use an asset for a set amount of time
Ledger – The financial record that keeps track of business transactions posted from Journal Entries
Leveraging – aka Gearing, borrowing against an asset to do something productive
Liabilities – Things one entity owes for money, goods, or services
Liquidity – Available assets that can be quickly converted to cash
Listed Company – A company that can be bought and sold on the stock market
Listing Requirements – Stock market rules to companies that want to buy and sell on the stock market
Long-Term – Generally, “long-term” in accounting means anything that extends beyond the next 12 month cycle
Long-Term Asset – An asset that expected to be around for over a year (e.g., factory machine, auto)
Long-Term Liabilities – Things owed that aren’t due for more than one year (e.g., mortgages, bonds)
Loss – Where expenses are more than revenue, the opposite of a Gain or Profit depending on the context
Majority Stakeholder – The person or entity that owns most of a company’s shares
Management Accounting – The profession of creating specially-made reports to fit the needs of the people who run a company
Margin Account – A stockbroker’s account that allows them to quickly borrow and pay off loans, with the fees for keeping it open as a “margin” of their returns
Market Maker – An organization or individual who makes a profit with a bid-ask price
Matching – Combining sales and expenses together in an accounting period
Maturity – The date a liability is first due
Merger – When two organizations share their assets and liabilities and combine into one organization without becoming a new third entity in the process
Mirror Trade – A trade that involves buying securities in one currency and then selling identical ones in another currency
Money Laundering – The process of hiding illegally obtained money so it seems legal, usually by transactions alongside or inside legal money
Moving Average – A method of showing data on graphs to display trends that averages out the numbers to make smooth lines instead of jagged points
Mutual Fund – aka Fund, a combination of assets that a fund manager directs toward investing
National Best Bid and Offer (NBBO) – The tightest bid-ask spread in a security
Net Worth – aka Net Worth, Net Profit or simply Net, the “true” worth of something after adding together all incomes and assets and then subtracting all expenses and liabilities
Net Assets – All of something’s assets minus all of their liabilities
Net Operating Loss (NOL) – A tax situation where an entity’s expenses exceed an entity’s revenues.
Net-Net Investing – An investing strategy that focuses on sending funds toward equities valued at less than all of a company’s current assets.
No-Show Job – A form of tax fraud where an employee is hired financially, but they don’t actually do any work.
Nominal Value – A share’s first value during an IPO
Not-For-Profit Organization (NPO) – A company that uses all its income for a specific purpose outside of organization, and where trustees and shareholders do not receive financial benefits
Not Sufficient Funds (NSF) Fee – A fee for a customer not having enough funds to cover a cost, called an overdraft fee if a bank uses it
Opening the Books – After a business has Closed the Books, they start the recordkeeping for the next period
Operating Activities – one of the three Cash Flow Statement categories of financial activity with Financing Activities and Investing Activities that refers to the day-to-day operations of the company
Operating Cycle – The amount of time between things being bought and things being delivered or fulfilled
Operating Risk – When the cost of fixed operating costs is high and could cause a fluctuation in profits
Option – The rights to buy (Call) or sell (Put) a stock or asset for a certain period of time
Originator – Account holder who begins a wire transfer
Out-of-the-Money – A situation where the strike price of an option doesn’t have actual value on a market, contrast to in-the-money
Overhead – The costs of running a business that are not tied directly to production or sales
Parent Company – A company that controls at least one subsidiaries
Partnership – An agreement between at least two people where they agree to conduct profitable business together and be liable for the debts of a company
Pay on Delivery – Where goods and services are only paid after they have been received
Payment for Order Flow (PFOF) – A payment that a stockbroker pays a market maker to route payments
PE Ratio – Profit-Equity Ratio, an equation used to see how confident the shareholders are about profits
Perpetual Inventory – A system where the inventory balance is updated after every transaction
Petty Cash – A small account companies use for tiny purchases, with bank cards this idea has become largely obsolete
Plug – A small number used to correct rounding errors that can show up on financial statements
Point of Sale – The place where a transaction is conducted
Ponzi Scheme – A fraudulent system framed as an investment vehicle that involves borrowing ever-increasing money from investors to pay off other investors
Pyramid Scheme – A fraudulent system framed as a business arrangement that involves directing funds upward along a hierarchy
Position – A holding in an investment
Preferred Stock – A type of share that allows the shareholder to have preference to receive a dividend before common shares’ dividends are declared
Premium – The amount paid over face value
Pre-Payment – An amount paid in advance such as insurance or rent, usually for the coming year
Present Value – The current value of an amount of something, used to analyze investment opportunities, as opposed to Future Value
Price-Sensitive Information – Knowledge that would change a company’s stock price if the public knew about it
Principal – The original or remaining amount of a loan
Profit – aka Margin, the revenue of a business minus expenses
Profit Center – A portion of a business that is focused on generating profits for a company
Profit Margin – aka Markup, the percentage difference between the cost of a product or service and the price it’s sold for
Projection – Hypothetical assumptions that estimate future financial statements
Prospectus – A document used to advertise shares an investor can buy which usually contains financial statements and detailed supporting information
Provisions – Amounts put aside in accounts to cover future Liabilities
Proxy Statement – A document required by the Securities and Exchange Commission that helps shareholders make informed decisions about matters that will be addressed at a stockholder meeting
Qualified Opinion – A report an accountant issues when the information presented is not sound in their professional opinion, as opposed to an Unqualified Opinion
Quality of Earnings – The earnings that can be attributed to higher sales or lower costs instead of accounting anomalies
Raw Materials – Materials bought to be processed into Finished Goods
Refinancing Agreement – A company’s arrangement to replace existing financing with other funding instead of defaulting
Realization Principle – A principle of GAAP where revenue can only be recognized when the goods or services that created that revenue have been delivered
Rebate – A partial refund for overpaying or services that were cancelled before they ended
Receipt – A record of payment, usually written or printed
Replacement Cost – The cost of replacing an asset or liability
Required Minimum Distribution – A individual’s legal requirement to take a specific fraction of their retirement money sometime after age 70.
Reserve Account – An account set up to retain earnings, usually to make balance sheets clearer or to reserve money against future purchases or liabilities
Retained Earnings – Net income that a company keeps rather than distributed to shareholders as Dividends
Return on Investment (ROI) – A very popular profitability ratio most frequently calculated by dividing the gain from the investment by the cost of the investment
Revenue – The money a business receives for its commercial activities
Risk – aka Volatility, the possibility of financial loss, used in investing to determine the most marketable return
Rounding Error – An error that rounds a number upward or downward, a natural product of computer-based math
Sales – The total income from selling goods or services
Secured Loan – A loan where the borrower pledges an asset in exchange for a loan that the lender then uses as collateral
Securities – A broad term referring to any outstanding obligations by companies, typically refers to stocks or bonds
Securities and Exchange Commission (SEC) – A governing board alonside the Federal Trade Commission that oversees trade in the USA
Segment Reporting – Where divisions of a business are separated for individual reporting
Share – aka Stock, an evenly divided part of a company
Share Repurchase – aka Stock Buyback, where a corporation buys back is shares from its stockholders
Shareholder – aka Stockholders, the owner of shares in a company
Short Position – A specific option where an investor purchases sends a short order to a broker, the broker sells the asset with a loan to the investor, and the investor pays it back later and keeps or pays the price difference
Simple Interest – Interest applied to the original principal of a loan
Sinking Fund – Money set aside over time to repay a debt or replace a wasting asset
Speculation – Analysis that makes predictions about an entity’s future performance for the purpose of making investment decisions
Stakeholder – Vague term for any entity who may have any interest in an organization
Statement of Cash Flows – A common financial statement that shows how changes in the Balance Sheet affects the movement of cash, categorized as Operating, Investing and Financing Activities
Stock-For-Stock Merger – A merger where all of a subsidiary company’s shares are directly exchanged for all of a parent company’s shares, effectively conjoining the companies’ equity.
Stock Exchange – aka Stock Market, an organization that sets legal standards for buying and selling publicly traded Shares
Stockbroker – A person or organization who buys and sells securities
Strike Price – The price an option has to arrive at to have any legitimate value
Subordinated Debt – The amount of Unsecured Debt a company owes if the company is liquidated
Subsidiary Company – A company a Parent Company owns
Subtotal – Smaller items grouped together to create a Total
Sunk Costs – Money that cannot be recovered from being spent
Suspense Account – A temporary account where funds are deposited before being sent to the correct place
Tangible Assets – Physical assets, such as buildings, vehicles and machinery
Tax – A mandatory contribution to a government, typically measured by the government through financial transactions
Tax Haven – Jurisdictions that give special tax incentives to foreign investors and depositors
Taxation – The act of taxing people and businesses
Total – the “bottom line”, usually represented by a line above and two lines below
Total Cost of Ownership (TCO) – the complete cost of an asset, which include renewal fees and other mandatory expenses
Trade – An investing transaction, typically trading cash with an asset
Transposition – An error where the digits of a number are swapped
Undeposited Funds Account – aka Cash-in-Hand Account, an account that shows the money that a company has received but not banked or spent
Unlisted Company – A Limited Liability Company not listed on a Stock Exchange
Unqualified Opinion – A report an accountant issues when the information presented is sound in their professional opinion, as opposed to a Qualified Opinion
Unsecured Creditor – A creditor who doesn’t have a claim against a particular Asset, meaning they will only get whatever is left if a company is liquidated
Unsecured Loan – A debt without any collateral attached to it
Valuation – A process that determines the worth of a company’s assets
Variance – The difference between the estimated cost and the actual cost
Vest – A window of time before an investment can be redeemed
Wages – An expense made to employees for their services
Withholding – The amount of money withheld from salaries and paid by the employer to the correct authority
Working Capital – The excess of Current Assets minus Current Liabilities
Work-in-Progress (WIP) – Partially completed goods or services that will be recorded as an asset upon completion
Write-down – A non-cash partial-value expensed reduction of an asset
Write-off – The non-cash total-value expensed reduction of an asset
Yield to Call (YTC) – The chances of a bond being called before its maturity
Zero Based Account (ZBA) – A bank account which is always kept as close to zero as possible
Zero Based Budget (ZBB) – Financial forecasting where every dollar is allocated to a specific purpose to make the starting and ending balances zero