As you progress through the course, you will be exposed to industry-specific terms. These terms will become a language that you will use every day, so it is important to learn and understand what they mean. In addition to the glossary, there are various resources you can touch on for inspiration or simply use if you want to know more.
Let’s take a look at the glossary and some (of many) videos related to Accountancy.
Sub Topics
The following table defines common and typical industry terms in Accountancy. It is important you familiarise yourself with them to support your learning and expand on the common vocabulary you will regularly use within the Accounting industry.
| Account |
An account is a unit or record in an accounting system to track the financial activities of an asset, revenue, expense, liability, or equity. |
| Accounts Payable | Refers to the amount due to vendors or suppliers for goods or services that have not been paid for or purchased on credit without a promissory note. |
| Accounts Receivable | It refers to the amount owed by a company for providing goods and/or services on credit. The term trade receivable is also used in place of accounts receivable. |
| Accrual | The recognition of an expense or revenue that has occurred but has not yet been recorded. |
| Accrual Accounting | Accrual accounting is an accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made. The method follows the matching principle, which states that revenues and expenses should be recognised in the same period. The key accrual accounting principles are Revenue, Expense, and Matching principles. |
| Assets | These are resources owned by a company that has economic value and is used to generate profit. |
| Bad Debt | Bad debt is defined as a debt that cannot be recovered |
| Bad Debt Expense | The entry is made for uncollectible or non-recoverable debts. This happens when a customer has failed to pay the company for the rendered services or delivered products on credit. |
| Balance Day Adjustments | Balance day adjustments are done at the end of the accounting period and are used to ensure that the organisation's revenue and expenses align with the correct accounting period. It involves aligning recorded costs, aligning recorded revenues, and reversing entries with the appropriate accounting period. |
| Balance Sheet or Statement of Financial Position | reports the assets, liabilities, and owner's (stockholders') equity. It provides a summary statement of the firm's financial position at a given time. It reveals the worth of a company, how that worth is made up, its assets (what the company owns and each asset's current book value) and its liabilities (how the assets were funded). |
| Bank Reconciliation | Bank reconciliation is the process of comparing the amounts in the Cash account in the general ledger to the amounts appearing on the bank statement. The objective is to be certain that there is consistency between the amounts and that the company's amounts are accurate and complete. |
| Bank Statement | A business Activity Statement (BAS) is a type of report used to assess the business' tax liability depending on the type of business. BASs are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO, and payment must be made to the ATO by the due dates. |
| Business Activity Statement | A business Activity Statement (BAS) is a type of report used to assess the business' tax liability depending on the type of business. BASs are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO, and payment must be made to the ATO by the due dates. |
| Cash Accounting | Cash accounting is an accounting method where payment receipts are recorded during the period in which they are received, and expenses are recorded in the period in which they are actually paid. It recognises transactions only when payment is exchanged. |
| Cash Flow Statement | The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities, and certain supplemental information for the period specified in the statement's heading. It summarises the amount of cash or cash equivalents entering and leaving a company. |
|
A chart of Accounts |
is a list of accounts used to classify and summarise the transactions of a business. |
| Cost of Goods Sold (COGS) | The total cost of inventory sold in a given period |
| Cost Principle | The cost principle states that amounts in the accounting system should be quantified or measured using historical costs. |
| Credit | A credit is an entry made on the right side of an account. It either increases equity, liability, or revenue accounts or decreases an asset or expense account. Record the corresponding credit for purchasing a new computer by crediting your expense account. |
| Closing Procedures | This is the phase in the accounting cycle when the balances of the temporary accounts are transferred to the capital account. Therefore, the balance of the owner's capital account includes, on a cumulative basis, the net results of all revenue, expense, and drawings transactions. |
"I just wanted to be a business man, and to me, the best way to understand business was to be an accountant"- aubrey mc clendon
| Debit | A debit is an entry made on the left side of an account. It either increases an asset or expense account or decreases equity, liability, or revenue accounts. For example, you would debit the purchase of a new computer by entering the asset gained on the left side of your asset account. |
| Deferred Revenue | These are transactions ordinarily recorded by debiting cash and crediting a liability account for the unearned revenue when a business receives fees for services before the actual service is rendered. It shows the obligation to perform future services. |
| Depreciation Expense | This is an expense that is listed on the Income Statement, while Accumulated Depreciation may be a negative asset. The accounting entry for depreciation involves a journal entry that creates a depreciation expense and an accumulated depreciation account |
| Depreciation Schedule | A depreciation schedule should show the book value at the beginning of each year, the rate of depreciation applied (if the method requires it), the depreciation expense, the accumulated depreciation, and the book value at the end of each year |
| Depreciation Straight Line | This is a method of depreciation used to determine the salvage value (this is the value of an asset at the end of its life) of a fixed asset, subtract that from the original cost of the asset and expense the remaining value over the useful life of the asset equally each year. |
| Depreciation Reducing Balance Method | This is a method of depreciation used to capture a higher level of depreciation in the early years of an asset's life, with lower values in later years. This method of depreciation is calculated simply by multiplying the book value at the beginning of the year by a specific depreciation rate. |
| Double Entry Bookkeeping | Double-entry bookkeeping or double-entry accounting means that every transaction will involve at least two accounts (a debit to one account and a credit to another) to keeps a company's accounts balanced |
| Doubtful Debt |
A doubtful debt is a debt that a business or individual might be able to collect. A doubtful debt may, at some point in the future, become a bad debt. |
| Equity | Also known as owner's capital or shareholder equity, it refers to the remaining value of an owner's interest in a company after all liabilities have been deducted. It is referred to as "shareholders' equity" (for corporations) or "owner's equity" (for sole proprietorships). |
| Expense | Expense in accounting is the money spent or costs incurred by a business in its effort |
| Financial Statements | Written records that summarise a business's operations, financial position, and cash flow over an accounting cycle. |
| Fixed Asset | This is any form of asset that cannot be easily turned into cash. They are referred to as property, furniture and fittings, plant, and equipment, as these are the types of asset that are most commonly fixed. |
| Fixed Asset Register | This is a system used to compile and hold details of each fixed asset that a business owns |
| General Ledger | Referred to as "the books", it contains all the organised accounts (chart of accounts) of the business transactions. It provides a permanent record of all the transactions throughout the life of the business. The five essential accounting items that a general ledger tracks are: Assets; Liabilities; Owner's Capital (Equity); Revenue, and Expenses. |
| Going Concern Assumption | Going concern assumption, also known as continuity assumption, states that accounting systems assume that a business will continue to operate |
| Gross Profit | Net sales – Cost of Goods Sold = Gross profit |
| Income Statement | The income statement, also referred to as a 'profit and loss statement,' 'statement of incomes and losses,' or 'report of earnings,' shows the income the business has earned in the accounting period, the costs or expenses that were incurred by the business during the period, and the net profit. |
| Interim Reports | Interim reports are reports of a financial period shorter than a fiscal year. These reports are usually produced during three (3) quarters of each financial year. These reports include the following financial statements: Balance sheet, Income statement, and statement of cash flows. |
| Inventory | This is done at the end of the month to undertake a closing of an account. The account is closed by physically making the values in the account match the physical count of products left. It also acts to close the purchases account, and the difference between the two becomes the cost of goods sold. |
| Invoice | An invoice is a document sent by the seller to the customer that requests payment for products or services. It lists what goods or services were provided, how much they cost, and which forms of payment the seller accepts. |
"never call an accountant a credit to his profession; a good accountant is a debit to his profession"- Charles lyell
| Journal | The journal is a record that keeps the accounting transactions in the order of occurrence (listed or ordered by date). It is used to record and summarise the transactions that occur in a business. |
| Journal Entry | The journal entry is when an entry is made to the appropriate journal. |
| Ledger | The ledger is the record that keeps accounting transactions by accounts. |
| Liability or Liability Account | A liability account is a general ledger account that records the company's obligations, debt, customer deposits, customer prepayments, deferred income, and others. This account is the result of past transactions. |
| Net Profit | It is the amount gained by the business by computing the difference between the costs and income in a given period. |
| Objectivity Principles | The objectivity principle states that accounting measurements and accounting reports should use objective, factual and verifiable data |
| Opening Entries | This refers to recording the assets, liabilities, and equity to start the accounting system of a business – to 'open' its accounting records (a once-only entry). |
| Petty Cash | Petty cash or a petty cash fund is a small amount of money available for paying small expenses (incidentals) that occurs during the day to day running of a business. Petty cash is also the title of the general ledger current asset account that reports the amount of the company's petty cash. |
| Profit and Loss Statement | The profit and loss statement shows whether the business is making a profit or loss. This statement may be kept for any period of time. For example, at start-up, they may be produced monthly. Annual ones are produced at the end of the year for the preparation of your income tax. It only shows revenues, expenses, gains, and losses. It will not display money received, or money paid out in an accrual-based system. |
| Proof of Lodgement | A deposit slip or lodgement slip that is filled out and stamped whenever cash or cheques are deposited into a bank account. Another form of proof of lodgement is the receipts for online banking transactions. These items help with the bank reconciliation process as they provide evidence that money was indeed deposited and should be showing on the bank statement. |
| Reconciliation | In an accounting process, reconciliation is comparing two sets of records to check that figures are correct and confirms that accounts in the general ledger are consistent, accurate, and complete. |
| Revenue | This refers to the amount a company receives from selling goods and/or providing services to customers. |
| Revenue, Expense, and Drawings Accounts |
These are temporary accounts that accumulate data related to a specific accounting year and are used to facilitate the preparation of the income statement and provide additional information. |
| Separate Entity Assumption | Separate entity assumptions states that a business entity, like a sole proprietorship, is a separate entity - a separate thing from its business owner. |
| Source Documents | The source documents used for creating your general ledger are the various documents that exist in your organisation used for creating journals (e.g. invoices, bank statements). |
| Subsidiary Ledgers or Sub Ledgers | These are ledgers used for maintaining individual records of specific aspects of the business, which are summarised in the general ledger. It records individual transactions from the journals. |
| Trial Balance | These are ledgers used for maintaining individual records of specific aspects of the business, which are summarised in the general ledger. It records individual transactions from the journals. |
| Unit of Measure Assumption | Under the unit-of-measure assumption, it is assumed that a business's domestic currency is the appropriate measure for the business to use in its accounting. |
Take the time to watch the following videos on what makes a successful accountant, starting with a video that explains why choosing this career can have a huge important in many aspects of your life
Why do we need accounting?
5 Reasons to be an accountant
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Accounting is the Language of business
When Warren Buffet stated that "Accounting is the language of business", he explained how that can help you understand the intricacies or business deals being made and how these skills can be used to help you achieve financial success. Watch the following video, which showcases how Accounting is a crucial skill to learn when working within Business.
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