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Accrual Accounting

Accounting method that recognizes revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.

Cash Basis Accounting

Accounting method that records revenues and expenses only when cash is received or paid.

Revenue Recognition Principle

The principle that revenues are recognized when goods or services are provided and payment is ensured.

GAAP

Generally Accepted Accounting Principles; a framework of accounting standards, principles, and procedures.

Matching Principle

An accounting principle that mandates that expenses be matched with revenues in the period they are incurred.

Accounting Conservatism

An accounting principle that advises caution and verification in financial reporting, recognizing potential losses but deferring gains.

Expense Recognition

The process of matching expenses with the revenues they help to generate.

Retained Earnings

The cumulative amount of net income retained in the corporation rather than paid out as dividends.

Financial Statements

Formal records of the financial activities of a business, including balance sheets and income statements.

Net Income

The total profit of a company calculated as revenues minus expenses.

Accrued Revenue

Revenue that has been earned but not yet received in cash.

Deferred Revenue

Cash received before goods or services have been delivered, recognized as a liability.

Accounts Payable

Liabilities owed by a company to creditors for goods or services purchased on credit.

Accounts Receivable

Assets representing money owed to a company by its customers for goods or services delivered.

Trial Balance

A report that lists the balances of all accounts in the general ledger to ensure that debits equal credits.

Journal Entries

Records of transactions entered into an accounting system.

Assets

Resources owned by a business that have economic value.

Liabilities

Obligations of a company to pay debts to creditors.

Cash Flow

The net amount of cash being transferred into and out of a business.

CapEx

Capital Expenditure; funds used by a company to acquire or upgrade physical assets.

Revenue

The income generated from normal business operations.

Expenses

Costs incurred in the process of earning revenue.

Standard Costing

The practice of comparing actual costs to standard costs to manage costs effectively.

Financial Accounting

The field of accounting that focuses on the reporting of an organization's financial information.

Internal Controls

Processes and procedures to ensure the integrity of financial and accounting information.

Fiscal Year

A one-year period that companies use for financial reporting and budgeting.

Audit Trail

A method of tracking financial transactions and changes to financial records.

Inventory

The goods and materials a business holds for the purpose of resale.

Legal Fees Expense

Costs incurred for legal services, recorded when the services are utilized or completed.

Delivery of Goods

The transfer of goods from the seller to the buyer as part of a transaction.

Prepayments

Payments made in advance for goods or services to be delivered or performed in the future.

Renovation Expense

Costs associated with improving or restoring a building or facility.

Employee Salaries

Compensation promised to employees for their work, to be recognized when the work is performed.

Accounting Cycle

The collective process of identifying, analyzing, and recording the financial transactions of a business.