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The process of spreading out a loan or an intangible asset cost over time. Example: Amortizing the cost of a patent over its useful life.

An entry on the left side of an account ledger to increase asset or expense accounts or decrease liability, revenue or equity accounts. Example: Debiting cash when a sale is made.

The value of an asset as it appears on the balance sheet, calculated by subtracting accumulated depreciation or amortization. Example: A machine purchased for $50,000 with accumulated depreciation of$10,000 has a book value of $40,000.$

A system where every transaction affects at least two accounts, with debits equaling credits. Example: Paying rent affects both cash and expense accounts.

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives. Example: A report showing cash received from customers, paid to suppliers, etc.

An accounting method where revenues and expenses are recognized only when cash is exchanged. Example: Recording revenue only when cash is received from customers.

Money received by a company for which the goods or services are to be provided in the future. Example: Customer deposits for future deliveries.

The complete record of all financial transactions over the life of a company. Example: A book in which all accounts, debits, and credits are compiled.

Reports that provide information about a company's financial performance and position. Example: Balance Sheet, Income Statement, Statement of Cash Flows.

Payments made in advance for goods or services to be received in the future. Example: Prepaid rent or insurance.

The ability of a company to meet its short-term obligations using current assets. Example: Using cash or converting receivables into cash to pay debts.

An accounting principle that dictates expenses should be recorded in the same period as the revenues they help to generate. Example: Matching the cost of goods sold with the revenue from the goods sold.

The systematic allocation of the cost of a tangible asset over its useful life. Example: Depreciating equipment through regular charges to expense.

A listing of all accounts used in the general ledger of an organization. Example: A numerically-organized structure categorizing assets, liabilities, equity, revenue, and expenses.

Funds contributed by investors or owners, plus any retained earnings used to sustain or grow a business. Example: Issuing equity shares or retaining profits from prior years.

The owner's residual interest in the company's assets after deducting liabilities. Example: Common stock, retained earnings.

Income generated from normal business operations. Example: Sales of products or services, interest income.

Journal entries made at the end of an accounting period to zero out temporary accounts and transfer their balances to permanent accounts. Example: Transferring income statement balances to retained earnings.

Money owed by customers for goods or services already provided. Example: A client owes payment for a delivered service.

The cost incurred in the process of earning revenue. Example: Cost of goods sold, salaries, rent, utilities.

A report that lists the balances of all general ledger accounts to check that debits equal credits. Example: A spreadsheet summarizing all account balances before producing financial statements.

An entry on the right side of an account ledger to increase liability, revenue, or equity accounts and decrease asset or expense accounts. Example: Crediting accounts receivable when issuing an invoice.

The net amount of cash being transferred into and out of a business. Example: Positive cash flow from customer payments exceeding the cash paid to suppliers.

An account used to reduce the value of a related account. Example: Accumulated depreciation reducing the value of equipment.

A financial statement that shows a company's revenues and expenses over a period of time. Example: An income statement for the fiscal year showing profit or loss.

The span of time covered by financial statements. Example: A fiscal quarter or year.

Revenues or expenses that are recognized when earned or incurred, not when cash is exchanged. Example: Accruing interest expense before payment is made.

Money a company owes its suppliers or vendors for goods or services received. Example: Unpaid invoices from suppliers.

Resources owned by a company with future economic value. Example: Cash, inventory, property, equipment.

The method of recording transactions where a debit and credit are entered in a journal. Example: Recording a sale on credit.

A financial statement that reports a company’s assets, liabilities, and equity at a specific point in time. Example: A balance sheet as of December 31st showing company resources and obligations.

Expenses that have been incurred but not yet paid. Example: Salaries owed to employees that have not yet been dispersed.