Reference
The finance words,
in plain language.
An A-Z of the accounting and bookkeeping terms you actually meet running a business, defined honestly and briefly. No jargon defended with more jargon.
Bookkeeping has its own vocabulary, and most of it is simpler than it sounds. These are the terms that turn up when you run a business, defined in a sentence or two, in plain language. Where a term maps to something Vinance does, we have linked it.
A
Accounts payable (AP)
Money your business owes suppliers for goods or services it has received but not yet paid for. It sits as a current liability on the balance sheet until the bill is settled.
Accounts receivable (AR)
Money customers owe you for invoices you have issued but not yet collected. It is a current asset, and its age tells you how quickly you are actually getting paid.
Accrual accounting
Recording revenue when it is earned and expenses when they are incurred, regardless of when the cash moves. It gives a truer picture of a period than cash basis, which only records money as it changes hands.
Aging report
A breakdown of unpaid invoices or bills by how long they have been outstanding, usually in buckets like current, 1-30 days, 31-60 days, and 60+ days. It shows at a glance who is late paying you, or who you are late paying.
Amortization
Spreading the cost of an intangible asset, such as software or goodwill, or the principal of a loan across the periods that benefit from it. It is the intangible-asset cousin of depreciation.
Asset
Something the business owns or is owed that carries future economic value: cash, receivables, inventory, or equipment. Assets sit on one side of the balance-sheet equation, assets = liabilities + equity.
B
Bad debt
An amount a customer owes that you no longer expect to collect. When you give up on it you write it off, removing the receivable and recording the loss as an expense.
Balance sheet
A snapshot at a single date of what the business owns (assets), what it owes (liabilities), and the owner's residual stake (equity). It must always balance: assets equal liabilities plus equity.
Bank feed
A connection that pulls transactions from your bank into your accounting software automatically, so you do not retype them. Vinance also accepts statement file imports where a live feed is not available.
Bank reconciliation
Matching the transactions on your bank statement against the entries in your books so the two agree. Any difference points to a missing entry, a duplicate, or a timing gap to explain. See banking & reconciliation.
C
Capital expenditure (CapEx)
Money spent to acquire or improve a long-lived asset, such as a vehicle or machinery. Rather than hitting the P&L all at once, it is capitalized and then depreciated over the asset's useful life.
Cash basis accounting
Recording revenue and expenses only when cash is actually received or paid. It is simpler than accrual accounting but can misstate a period when you invoice in one month and the cash lands in another.
Cash flow statement
A report that explains how cash moved over a period, split into operating, investing, and financing activities. A business can be profitable on paper yet still run out of cash, which is exactly what this statement is built to reveal.
Chart of accounts
The organized list of every account the business uses to record transactions, grouped into assets, liabilities, equity, income, and expenses. It is the backbone that every journal entry posts into. See accounting & ledger.
Cost of goods sold (COGS)
The direct cost of the products or services you sold in a period, such as materials and inbound freight. Revenue minus COGS gives gross profit.
Credit
One of the two sides of every double-entry transaction, recorded on the right. Credits increase liabilities, equity, and income, and decrease assets and expenses.
Credit note
A document that reduces or cancels an amount a customer owes, used for returns, overcharges, or goodwill. It is the formal opposite of an invoice and posts its own reversing entry.
D
Debit
The left side of every double-entry transaction. Debits increase assets and expenses, and decrease liabilities, equity, and income. In every entry, total debits equal total credits.
Depreciation
Spreading the cost of a tangible fixed asset over the years it is used, rather than expensing it all at purchase. A $30,000 van depreciated over five years charges $6,000 to the P&L each year.
Double-entry bookkeeping
The method where every transaction is recorded in at least two accounts, with total debits equal to total credits. It is what keeps the books self-checking and the balance sheet balanced. See how the ledger works.
E
EBITDA
Earnings before interest, tax, depreciation, and amortization. It approximates operating cash generation by stripping out financing and accounting choices, though it is not a substitute for actual cash flow.
Equity
The owner's residual stake in the business, equal to assets minus liabilities. It includes money put in by owners plus profits kept in the business as retained earnings.
Expense
A cost incurred to run the business and earn revenue, such as rent, salaries, or utilities. Expenses reduce profit in the period they relate to.
F
Fiscal year
The twelve-month period a business uses for its accounts and tax, which may or may not match the calendar year. Meridian Trading Co. closes its fiscal year on 31 December, but many businesses end on 31 March or 30 June.
Fixed asset
A long-lived, tangible item the business uses rather than sells, such as equipment, vehicles, or fit-out. Its cost is capitalized and then depreciated over its useful life.
FX revaluation
Restating foreign-currency balances, like an unpaid euro invoice, at the exchange rate on the period-end date. The movement since they were booked is recorded as an unrealized foreign-exchange gain or loss. See multi-currency & tax.
G
General ledger
The complete set of all accounts and the entries posted to them, from which every financial statement is built. Subsidiary records, like an individual customer's account, ultimately roll up into it.
Gross profit
Revenue minus cost of goods sold, before operating expenses. Expressed as a percentage of revenue it is the gross margin, a quick read on how much each sale contributes.
GST
Goods and services tax, a value-added consumption tax used in countries such as India, Singapore, and Australia. Like VAT, businesses collect it on sales and reclaim it on purchases, remitting the difference.
I
Income statement
Another name for the profit and loss statement, showing revenue, costs, and the resulting profit over a period.
Inventory
The goods a business holds to sell, plus raw materials and work in progress. It is an asset until sold, at which point its cost moves to COGS. See inventory.
Invoice
A document requesting payment from a customer for goods or services, listing what was supplied, the amount, any tax, and the due date. Issuing one records revenue and a receivable at the same moment. See invoicing & sales.
J
Journal entry
The record of a single transaction as balanced debits and credits posted to specific accounts. It is the atomic unit of double-entry bookkeeping, and every invoice, bill, or payment ultimately becomes one.
L
Ledger
A record of the entries posted to a particular account or group of accounts over time. The general ledger is the master; subsidiary ledgers hold detail such as individual customer or supplier balances.
Liability
Something the business owes to others: supplier bills, loans, taxes payable, or wages due. Liabilities sit alongside equity on one side of the balance-sheet equation.
N
Net profit
What is left after every cost, including operating expenses, interest, and tax, is subtracted from revenue. Also called the bottom line or net income, it is the figure that flows into retained earnings.
O
Opening balance
The balance in an account at the start of a period, carried forward from the end of the prior one. When you move to Vinance from another system, opening balances post as a single clean opening journal.
Operating expenses (OpEx)
The day-to-day costs of running the business that are not tied directly to producing a specific sale, such as rent, salaries, software, and marketing. They sit below gross profit on the P&L.
P
Payroll
The process of paying employees, including calculating gross pay, deductions, and net pay, and posting the total cost to the books. See payroll.
Profit and loss (P&L)
A statement of revenue, costs, and profit over a period, showing whether the business made or lost money. In Vinance it is derived live from the ledger rather than typed in. See reports & dashboards.
Purchase order (PO)
A document you send a supplier to commit to buying specified goods or services at agreed prices. When the supplier bills you, the invoice is matched back to the PO. See bills & purchases.
R
Reconciliation
The general act of matching two independent records so they agree, most often your books against a bank statement. Differences are investigated until every line is explained.
Retained earnings
The cumulative profit a business has kept rather than paid out to its owners. Each period's net profit adds to it, and dividends or drawings reduce it.
Revenue
The total value of sales earned in a period before any costs are deducted, sometimes called the top line. Under accrual accounting it is recognized when earned, not when the cash arrives.
T
Trial balance
A list of every account with its debit or credit balance at a point in time, used to confirm that total debits equal total credits. It is a health check run before producing the financial statements.
V
VAT
Value-added tax, a consumption tax charged at each stage of the supply chain and used across the UK, the EU, the UAE, and Saudi Arabia. Businesses collect VAT on sales (output tax), reclaim it on purchases (input tax), and pay over the difference. See multi-currency & tax.
W
Working capital
Current assets minus current liabilities, a measure of the short-term cash the business has to fund day-to-day operations. If Meridian holds $820,000 in current assets against $392,000 in current liabilities, its working capital is $428,000.
Write-off
Removing an asset or receivable from the books when it no longer has value, such as an uncollectible invoice or obsolete stock. The lost value is recorded as an expense in that period.
Definitions are general explanations, not tax or accounting advice, and the rules that apply to your business depend on where you trade. See the region guides for how Vinance handles tax in each market, or start with the accounting engine.
Frequently asked questions
What is the difference between accrual and cash basis accounting?
Accrual accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash moves. Cash basis records them only when money is received or paid. Accrual gives a truer picture of a period, which is why most growing businesses use it.
What is the difference between a debit and a credit?
They are the two sides of every double-entry transaction. A debit increases assets and expenses and decreases liabilities, equity, and income; a credit does the opposite. In any entry, total debits always equal total credits.
What is the difference between accounts payable and accounts receivable?
Accounts payable is money you owe suppliers for bills you have not yet paid, a liability. Accounts receivable is money customers owe you for invoices they have not yet paid, an asset.
What is the difference between gross profit and net profit?
Gross profit is revenue minus the direct cost of what you sold (COGS). Net profit is what remains after every other cost, including operating expenses, interest, and tax, is subtracted from revenue. Net profit is the bottom line.
Is this glossary specific to any one country's rules?
No. These are general definitions. The exact tax treatment and filing rules depend on where you trade, so see the region guides for how Vinance handles US sales tax, UK and EU VAT, UAE and Saudi VAT, and India GST.
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