Accounting Vocab 2026

401K

A qualified retirement plan sponsored by an employer

Accrued revenue

Revenue earned in one fiscal period but not received until a later fiscal period

Amortization

The spreading of the cost of an intangible asset over its useful life.

Benchmark

A standard used to compare financial performance.

Bond

A long-term promise to pay a specified amount on a specified date and to pay interest at stated intervals.

Book value

The difference between an asset’s account balance and its related contra account balance.

Collateral

Assets pledged to a creditor to guarantee repayment of a loan.

Commission

A method of paying an employee based on the amount of sales the employee generates. Commissions are normally calculated as a percent of an employee’s sales

Current assets

Cash and other assets expected to be exchanged for cash or consumed within a year.

Debt financing

Obtaining capital by borrowing money for a period of time.

Debt ratio

Total liabilities divided by total assets.

Depreciation

A loss in the usefulness of a plant asset as a result of wear or obsolescence.

Dishonored note

A note that is not paid when due

Dividend yield

The relationship between dividends per share and market price per share.

Double declining-balance method of depreciation

A declining-balance rate that is two times the straight-line rate.

Financial leverage

The ability of a business to use borrowed funds to increase its earnings.

Gain

An increase in equity resulting from activity other than selling goods or services

Gross profit

The operating revenue remaining after cost of merchandise sold has been deducted

Intangible asset

An asset that does not have physical substance.

Interest expense

Interest accrued on borrowed funds

Long-term liabilities

a company's financial debts or obligations that are not due within one year of the balance sheet date or the normal operating cycle

Maturity date

The date on which the principal of a note is due to be repaid.

Medicare tax

A federal tax paid for hospital insurance

Net sales

The amount of sales, less sales discounts and sales returns and allowances.

Operating revenue

The revenue earned by a business from its normal business operations

Par value

A value assigned to a share of stock and printed on the stock certificate

Principal

The original amount of a note, sometimes referred to as the face amount

Profit margin

Net income after federal income tax as a percent of net sales

Real Property

Land and anything attached to the land

Salvage value

The amount that will be received for an asset at the time of its disposal.

Social security tax

A federal tax paid for old-age, survivors, and disability insurance

Solvency ratio

A ratio that measures the ability of a business to pay its long-term liabilities.

Tax bracket

Each tax rate and taxable income amount on one line of a tax table

Withholding allowance

A deduction from total earnings for each person legally supported by a taxpayer, including the employee.

Writing off an account

Canceling the balance of a customer account because the customer does not pay.