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Quick glossary: Accounting
- Originally Published:
- Oct 2016
Everyone should have a basic working knowledge of financial accounting. This list of 27 accounting terms will help you grasp the vocabulary of this universal language of financial status and success.
From the glossary:
The ability to measure the financial success or failure of an enterprise is driven by the double-entry bookkeeping system, a financial accounting system that dates to the 13th century and a mathematician named Luca Pacioli. This venerable tried-and-true system is the universal language all enterprises use to describe their organization's financial position at any given time. That information is presented to the rest of the world through reports called financial statements.
The universal nature of this accounting system and the financial information it generates explains why everyone needs a basic working knowledge of double-entry bookkeeping, financial statements, and measures of profit and loss. This list of 27 accounting terms will help you grasp the vocabulary and the concepts underlying this universal language of financial status and success.
A liability on the balance sheet for accrued expense that will be paid at a future date, generally for operational expenses or inventory purchases.
An asset on the balance sheet for accrued revenue that will be received at a future date, generally as ordinary income from sales or services.
According to GAAP, organizations operating on an accrual basis are required to report a revenue or expense that has occurred but has not yet been entered in the accounting records as of the end of the accounting period. For example, when a company has sent an invoice for services (accounts receivable) but has yet to receive payment.
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