Bookkeeping Master Vocabulary

A comprehensive vocabulary list of 190 bookkeeping terms including definitions in simple terms for exam preparation.

Account Reconciliation

Comparing two sets of records to make sure the balances and activity match.

Accountant

A professional who reviews, analyzes, and reports on financial records.

Accounts Payable

Money the business owes to vendors, suppliers, or others.

Accounts Payable Reconciliation

Checking that vendor bills and statements match what the books say is owed.

Accounts Receivable

Money customers owe the business for goods or services already provided.

Accounts Receivable Aging Report

A report that shows unpaid customer invoices grouped by how long they have been outstanding.

Accounts Receivable Doubtful / Allowance for Doubtful Accounts

An estimate of receivables the business may not collect.

Accounts Receivable Reconciliation

Checking that customer balances, invoices, and payments match the books.

Accounts Uncollectible

Customer balances that likely will not be paid.

Accrual

An entry that records revenue or expense before cash is received or paid.

Accrual Accounting

A method that records revenue when earned and expenses when incurred, not just when cash moves.

Accumulated Depreciation

Total depreciation recorded on an asset since it was placed in service.

Adjusted Trial Balance

A list of account balances after adjusting entries have been made.

Adjusting Entries

Journal entries made to update accounts before financial statements are prepared.

Amortization

Spreading a cost or loan repayment over time.

Assets

Resources the business owns or controls that have value.

Average Cost Method (AVCO)

Inventory costing method that uses the average cost of items purchased.

Bad Debt

Money owed to the business that is unlikely to be collected.

Bad Debt Expense

The loss recorded when customer balances are estimated or determined uncollectible.

Balance Sheet

Financial statement showing assets, liabilities, and equity at a point in time.

Balances / Account Balances

The amount currently in an account.

Bank Deposit Receipt / Slip

A document showing money deposited into a bank account.

Bank Reconciliation

Comparing bank statement activity to the books to make sure cash records match.

Bill

A record showing what the business owes for goods or services.

Book Balance

The cash balance according to the business records.

Bookkeeper

The person who records business transactions and maintains the books.

Budget

A plan or forecast of expected revenue and expenses.

C Corp

A corporation owned by shareholders and treated as a separate legal entity.

Capital

Money or resources used to operate or grow a business.

Capital Contribution

Money or assets contributed to the business by an owner or partner.

Cash

Money or funds that can be used immediately.

Cash Payments

Money paid out by the business.

Cash Sales

Sales where the customer pays immediately.

Cash Basis Accounting

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

Chart of Accounts

The organized list of accounts used to categorize transactions.

Check

A written order directing a bank to pay money from an account.

Close the Books

Completing end-of-period tasks so reports can be finalized.

Commercial Loans

Loans made to a business for business purposes.

Common Stock

Ownership shares issued by a corporation.

Compensating Error

Two or more errors that offset each other.

Complete Reversal of Entries

An error where the debit and credit are posted backward.

Confidentiality

Protecting client financial information and not sharing it improperly.

Conflict of Interest

A situation where personal interests could affect professional judgment.

Contra Asset

An account that reduces the balance of a related asset account.

Cost of Goods Sold (COGS)

Direct costs of products sold by the business.

Credit Card Reconciliation

Matching credit card statements to receipts and book records.

Credit Memo

A document that reduces what a customer owes.

Credit Sales

Sales made on terms where the customer pays later.

Credits

Entries on the right side; they increase liabilities, equity, and revenue and decrease assets and expenses.

Current Assets

Assets expected to become cash or be used within $1\,\text{year}$.

Current Liabilities

Debts due within $1\,\text{year}$.

Data Entry Error

A mistake made while entering information.

Debits

Entries on the left side; they increase assets and expenses and decrease liabilities, equity, and revenue.

Dedicated Accounting Software

Software designed to record transactions and manage accounting tasks.

Deferral

Recording cash received or paid now but recognizing revenue or expense later.

Deferred Revenue / Unearned Revenue

Money received before goods or services are provided; recorded as a liability.

Depreciation

Allocating the cost of a physical asset over its useful life.

Depreciation Expense

The amount of depreciation recorded for one period.

Discrepancy

A difference between records that should match.

Disposition

Removing, selling, or disposing of an asset.

Dividend

A distribution of earnings to shareholders.

Double Entry Accounting

System where every transaction affects at least two accounts with debits and credits.

Draw

Money an owner takes from the business for personal use.

Efficiency

How effectively a business uses resources over time.

Employee

A worker on payroll whose taxes are withheld by the business.

Employee Vacation Payable

Amounts owed to employees for earned vacation or paid time off.

Equity

Owner or shareholder interest in the business after liabilities are subtracted from assets.

Error of Commission

Entry made to the correct type of account but wrong customer, vendor, or item.

Error of Omission

A transaction was left out.

Error of Original Entry / Transposition

Numbers were entered incorrectly or flipped.

Error of Principle in Accounting

Entry was posted to the wrong type of account.

Exempt

Employee classification usually not eligible for overtime under certain rules.

Federal Insurance Contributions Act (FICA)

Payroll taxes for Social Security and Medicare, paid by employees and employers.

Federal Unemployment Tax Act (FUTA)

Federal unemployment tax paid by employers.

Financial Analysis

Reviewing financial information to understand performance and trends.

Financial Ratios

Calculations comparing financial statement numbers.

Financial Statements

Reports showing business financial performance and position.

Financing Activities

Cash flow activities related to owners, borrowing, or repaying financing.

Finished Goods

Completed products ready for sale.

First In, First Out (FIFO)

Inventory method assuming the oldest items purchased are sold first.

General Ledger / Ledger

The full record of transactions and balances for all accounts.

Gross Pay / Gross Wages

Total employee earnings before deductions.

Gross Profit

$\text{Revenue} - \text{COGS}$.

Gross Profit Margin

Gross profit shown as a percentage of sales.

Historical Cost

Recording assets at their original purchase cost.

Honesty

Being truthful and transparent in bookkeeping work.

Horizontal Analysis

Comparing financial information across periods.

Hospital Insurance / Medicare Tax

Medicare portion of FICA payroll taxes.

In Transit

Recorded in the books but not yet processed by the bank.

Income Statement

Report showing revenue, expenses, and profit or loss over a period.

Independent Contractor

Self-employed worker who is not treated as an employee for payroll purposes.

Insolvency

When a business cannot pay debts as they become due.

Interest Rate

Percentage charged for borrowing money.

Inventory

Goods or materials held for sale or production.

Investing Activities

Cash flow activities related to buying or selling long-term assets or investments.

Inventory Reconciliation

Comparing physical inventory counts to book records.

Inventory Valuation

Assigning a dollar value to inventory on the balance sheet.

Invoice

Itemized bill for goods or services provided or purchased.

Last In, First Out (LIFO)

Inventory method assuming the newest items purchased are sold first.

Lease

Agreement to use an asset by paying rent for a period.