Accounting glossary
Every word, defined once.
One word per concept, used identically in the code, the interface copy and the documentation. Terminology drift is the fastest way to make a financial product feel amateur to the people who use it professionally — so every term here also records the words we refuse, and why.
- Terms
- 287
- Categories
- 19
- Metrics with formulas
- 45
- Words proscribed
- 10
Foundations
- Accounting equationAssets = liabilities + equity. True after every single entry, not just at period end.
- Accounts payableWhat we owe vendors for bills already received
- Accounts receivableWhat customers owe us for invoices already issued
- Accrual basisRecognizing revenue when earned and expense when incurred, regardless of when cash moves
- AmortizationSpreading the cost of a finite-lived intangible, a prepaid or a debt discount over the periods it serves
- AssetA present right of the entity to an economic benefit (FASB CON 8 ¶E16)
- Cash basisRecognizing revenue and expense only when cash moves. Not GAAP for any entity — it is a special purpose framework (AICPA AU-C 800), and for tax a method IRS Pub. 538 and IRC §448 limit by entity type and gross receipts
- Cash flow statementWhere the cash went in a period, reconciled from net income
- CreditThe right column. It increases liabilities, equity and revenue, and decreases assets and expenses.
- DebitThe left column. It increases assets and expenses, and decreases liabilities, equity and revenue.
- Deferred revenueConsideration received, or unconditionally due, before the goods or services are transferred — a liability until the performance obligation is satisfied. ASC 606 calls it a contract liability
- DepreciationSpreading the cost of a fixed asset over the periods it serves
- Double-entryRecording every transaction as equal debits and credits, so the ledger proves itself
- EquityThe residual interest in the assets that remains after deducting liabilities (FASB CON 8 ¶E61)
- ExpenseOutflows or using up of assets, or incurrences of liabilities, from delivering goods or services — recognized when incurred, not when paid
- General ledgerThe complete set of accounts, holding every posted entry
- Gross profitNet revenue less cost of revenue, as an amount
- JournalThe chronological record of entries, before they are summarized by account
- LiabilityA present obligation of the entity to transfer an economic benefit (FASB CON 8 ¶E37)
- Matching principleRecognizing an expense in the same period as the revenue it helped produce
- Net incomeRevenues and gains less expenses and losses, including income tax, for the period — the bottom line of the P&L, before any allocation to non-controlling interests
- Prepaid expenseCash paid before the benefit is consumed — an asset until it is
- Retained earningsAccumulated net income not distributed to owners — where the P&L lands on the balance sheet
- RevenueInflows or enhancements of assets, or settlements of liabilities, from delivering goods or services — recognized when control transfers, not when cash arrives
- T-accountThe two-column sketch of one account — debits left, credits right
- Trial balanceEvery account's balance in two columns, proving that total debits equal total credits
Core ledger
- AccountA GL account in the chart of accounts. Always qualify when a bank account is meant.
- BasisCash or accrual
- Chart of accountsThe account structure
- Clearing accountAn account that should net to zero once both sides of a flow have posted — payroll clearing, GR/IR, a payment processor clearing account; a residual balance is the exception
- Contra accountAn account with the opposite normal balance to its type, presented as a deduction from its parent — accumulated depreciation against PP&E, the allowance against AR
- Control accountA GL account whose balance is the total of a subledger — AR, AP, fixed assets — and is posted only from it
- DimensionA non-account axis: entity, department, project
- Error of commissionThe right amount posted to the wrong account of the right type — a payment applied to the wrong customer, an expense coded to the wrong department. Debits still equal credits, so the trial balance will not find it
- Error of principleAn entry posted to the wrong type of account in breach of an accounting rule — a repair capitalized as an asset, a loan receipt booked as revenue. The trial balance still balances; only review finds it
- Fiscal yearThe twelve-month (or 52–53 week) reporting year an entity has chosen, which need not start in January
- Idempotency keyA unique value sent with a write request so a retried request is applied once — the API returns the original result instead of posting a second invoice, payment or journal
- Journal entryA balanced set of debit and credit lines posted to the GL
- Normal balanceThe side that increases an account — debit for assets and expenses, credit for liabilities, equity and revenue, inverted for a contra account
- PeriodA fiscal reporting window
- PostingCommitting an entry to the ledger, making it immutable
- ReversalAn offsetting entry that undoes a posted entry
- SubledgerThe detail, by customer, vendor or asset, whose total must equal its control account in the GL
- Suspense accountA temporary holding account for an amount that must be posted before its correct account is known — cleared to zero before close, never reported
- TransactionA business event — a payment, a sale, a purchase
- Transposition errorTwo digits swapped when an amount is keyed — 54 entered as 45. The trial balance goes out by a difference that is always divisible by nine, which is how it is found
Close
- AccrualAn expense incurred, or revenue earned, before it is invoiced — recorded at period end so it lands in the right period
- Accrued liabilityAn obligation for goods or services received but not yet invoiced or paid — wages, interest, professional fees — recorded by an accrual
- Adjusting entryA close entry to apply accrual accounting
- CloseThe process of finalizing a period
- Closing entryThe year-end entry that zeroes every temporary account — revenue, expense, gains, losses, dividends or drawings — into retained earnings, so the new year's P&L starts at nil. Most ledger software performs it virtually
- CutoffRecording each transaction in the period in which it occurred — the boundary tested at every period end
- DeferralCash paid or received ahead of the expense or revenue it relates to, held on the balance sheet — as a prepaid or deferred revenue — until consumed or earned
- Flux analysisExplaining period-over-period variances
- Hard closeA close in which every step is done — reconciliations, accruals, review, sign-off — and the period is locked against posting, so its statements can go to lenders, investors and auditors
- Lead scheduleThe working paper that lists each GL account in a balance sheet or P&L caption with its balance and the schedule or reconciliation that supports it
- MaterialityWhether a misstatement or omission would likely change the judgment of a reasonable user of the statements — judged on size and nature together, never a fixed percentage
- Out-of-period adjustmentCorrecting a prior-period error in the current period, permitted only when the error is immaterial to both periods
- Permanent accountA balance sheet account — asset, liability or equity — whose closing balance carries forward as the next period's opening balance
- ReclassificationMoving an amount from one account or line to another without changing net income or total equity — current portion of debt, a miscoded bill
- ReconciliationComparing our record to an external party's
- RestatementRevising previously issued statements to correct an error material to them ("Big R") — comparatives are relabeled Restated and the error disclosed
- Reversing entryAn entry dated the first day of the next period that exactly offsets a period-end accrual, so the real invoice can be coded normally without double-counting
- RevisionCorrecting an immaterial prior-period error that would be material if corrected in the current period by adjusting the comparatives ("little r") — labeled As revised, no reissuance
- Roll-forwardOpening → movements → closing, proven
- Sign-offFormal approval that a section is complete
- Soft closeA period state in which routine posting has stopped and only adjusting entries by a controller are accepted. In common usage also an abbreviated month-end that estimates rather than fully reconciles — directional numbers, never the basis for external reporting
- Subsequent eventAn event after the balance sheet date but before the statements are issued — recognized if the condition existed at the balance sheet date, disclosed only if it arose after
- Temporary accountAn account that measures one period only — revenue, expense, gain, loss, dividends declared — and is closed to retained earnings at year end
- Tie-outProving a GL balance against supporting evidence
- True-upThe adjustment that replaces an estimate with the actual amount once it is known
Receivables
- AgingGrouping open receivables or payables into buckets by days past due date — current, 1–30, 31–60, 61–90, 90+
- Allowance for credit lossesThe contra-asset holding the expected credit losses on receivables, so AR is presented at the amount expected to be collected
- ApplicationAssigning received cash to specific invoices
- Bad debt expenseThe P&L charge that builds the allowance for credit losses — the provision, not the write-off
- CECLCurrent expected credit losses — the ASC 326 model that books lifetime expected losses from day one using history, current conditions and reasonable forecasts. ASU 2025-05 adds a practical expedient for current AR and contract assets
- Credit noteA reduction of what a customer owes
- DunningThe sequence of collection communications
- InvoiceA claim on a customer
- PayerThe party paying us
- Payment termsThe agreed timing of payment and any early-payment discount — Net 30, Net 30 EOM, 2/10 net 30, due on receipt; the due date that aging is measured from
- Promise to payA customer commitment to a date and amount
- RefundReturning cash already received
- Unapplied cashCustomer cash received but not yet assigned to an invoice. It reduces that customer's AR; only a net credit balance is reclassified to a liability at period end
- Write-offRemoving an uncollectible receivable against the allowance for credit losses — under the allowance method it has no P&L effect; the expense was taken in the provision
Payables
- BillA claim against us
- Early-payment discountA reduction offered for paying before the net due date — 2/10 net 30 is 2% off if paid in 10 days, an annualized return of about 37%
- Goods receiptConfirmation that goods arrived
- GR/IRGoods received / invoice received — the clearing account credited at receipt and debited when the vendor invoice arrives; its balance is received-not-yet-invoiced
- PayeeThe party receiving a payment
- Payment runA batch of payments released together
- Purchase orderA commitment to buy
- Three-way matchAgreeing the purchase order, the goods receipt and the vendor invoice — quantity and price, line by line, within tolerance — before a bill is approved for payment
- Two-way matchAgreeing the vendor invoice to the purchase order, without a receipt — used for services and where nothing physical arrives
- VendorA party we buy from
Cash
- ACHThe Automated Clearing House network — the US batch system for electronic credits and debits under Nacha rules; same-day to two-day settlement, with limited return rights
- Available balanceSpendable now
- Bank-postedRecorded by the bank (distinct from posting an entry to the ledger)
- Cash equivalentsShort-term, highly liquid investments readily convertible to known cash amounts, with an original maturity of three months or less — treasury bills, money market funds
- ChargebackA card payment reversed by the cardholder's issuing bank on a cardholder claim — fraud, goods not received, not as described. The processor debits the merchant the amount plus a fee; the merchant may contest it with evidence (representment)
- Current balancePosted, including uncleared items
- Day-count conventionThe rule that turns a date range into a fraction of a year for interest — 30/360, actual/360, actual/365, actual/actual. The same rate on the same loan accrues a different amount under each
- Deposit in transitA receipt recorded in the book cash account but not yet on the bank statement — added to the bank balance in a reconciliation
- Dormancy periodThe time without owner contact after which property — an uncashed vendor check, a customer credit balance, unpaid wages — is presumed abandoned and must be reported to the state. Commonly three years for vendor checks and one year for wages, varying by state and property type
- EscheatmentRemitting unclaimed property — uncashed vendor checks, customer credit balances — to the state after its dormancy period
- Outstanding checkA check recorded as paid in the books but not yet presented to the bank — deducted from the bank balance in a reconciliation
- PendingSubmitted or authorized, not settled
- Positive payA bank fraud control: the company sends the bank a file of issued checks (or approved ACH debits) and the bank returns any presented item that does not match for a decision
- Processor reserveCard settlements a payment processor withholds against future chargebacks and refunds — a rolling percentage held for a set number of days, a fixed amount, or an upfront hold. It is the merchant's receivable from the processor, not cash on hand
- ReconciledMatched to a bank statement line
- Restricted cashCash legally or contractually unavailable for general use — escrow, collateral, compensating balances. Presented separately, but included with cash in the statement of cash flows since ASU 2016-18
- SettledFinally and irrevocably transferred
- Stale-dated checkA check presented more than six months after its date, which the bank may refuse — still a liability on our books until voided or escheated
- SweepAn automatic transfer between our own accounts at a set time or threshold — typically excess balances into a concentration or investment account
- Wire transferA payment settled individually and in full — domestically over Fedwire, cross-border through correspondent banks via SWIFT — same-day and final once sent, which is why it carries the highest fraud risk
Statements
- As atThe point-in-time label for a balance sheet
- Balance sheetAssets, liabilities and equity at a point in time, proving the accounting equation
- ComparativeA prior period column
- ConsolidatedPresenting a parent and the entities it controls as one economic entity, with intercompany balances and transactions eliminated
- Cost of revenueThe direct costs of producing the goods or delivering the services sold in the period — the line gross profit is measured after
- CTACumulative translation adjustment — the running total of translation differences, held in AOCI until the foreign entity is sold or substantially liquidated
- Current assetAn asset expected to be realized, sold or consumed within twelve months of the balance sheet date or the operating cycle, if longer
- Current liabilityAn obligation expected to be settled with current assets, or by creating another current liability, within twelve months or the operating cycle, if longer
- Direct methodPresenting operating cash flows as gross receipts and payments by major class — cash from customers, cash paid to suppliers and employees. Encouraged by ASC 230, but it must still be accompanied by the reconciliation from net income
- EliminationA consolidation-only entry removing intercompany balances, transactions and unrealized profit, so the group does not report trading with itself
- For the period endedThe label for a P&L or cash flow
- Functional currencyThe currency of the primary economic environment in which the entity generates and spends cash — a judgment from cash-flow, sales-price, expense and financing indicators
- Income tax expenseThe P&L charge for income taxes — current tax payable for the period plus the change in deferred tax assets and liabilities
- Indirect methodPresenting operating cash flows by starting from net income and adjusting for non-cash items and changes in working capital — the method most entities use. ASC 230 also calls it the reconciliation method
- Non-GAAP financial measureA numerical measure of performance, position or cash flow that adjusts a GAAP figure — EBITDA, free cash flow, adjusted net income. A registrant publishing one must reconcile it to the most comparable GAAP measure
- Operating incomeGross profit less operating expenses — the result of the core business before interest, other income and tax
- Other comprehensive incomeGains and losses that bypass net income by standard — translation adjustments, unrealized gains on available-for-sale debt securities, cash-flow hedges, pension remeasurements — accumulated in AOCI within equity
- P&LPerformance over a period
- Presentation currencyThe currency the statements are shown in. ASC 830 calls it the reporting currency; IAS 21 the presentation currency — we use the latter
- RemeasurementRestating foreign-currency monetary balances, or books kept in a currency other than the functional one, into the functional currency — differences go to the P&L
- StandaloneA single entity, without consolidation
- StatementP&L, balance sheet, or cash flow
- TranslationConverting an entity's functional-currency statements into the presentation currency — assets and liabilities at the closing rate, income and expense at average — with the difference recorded in OCI as the CTA
Revenue recognition
- Accrued revenueRevenue earned and recognized before it is invoiced. ASC 606 splits it: an unbilled receivable where only time stands between it and payment, a contract asset where the right still depends on further performance
- BreakageThe portion of a prepaid right a customer is expected never to exercise — unused gift card balances, unredeemed credits. Recognized in proportion to the pattern of redemption if the entity expects breakage; otherwise when redemption becomes remote. Amounts owed to a state under unclaimed property law are a liability, not revenue
- Contra-revenue accountAn account with a debit balance netted against gross revenue — returns, allowances, sales discounts, rebates — so net revenue is presented after them
- Contract assetRevenue recognized ahead of an unconditional right to payment — the right still depends on something other than the passage of time
- Material rightA customer option to buy additional goods or services at a discount it would not get without the contract — a renewal discount, loyalty points — accounted for as a separate performance obligation, deferring part of today's price
- Performance obligationA promise in a contract to transfer a distinct good or service, or a series of substantially the same ones — the unit revenue is recognized by
- Principal versus agentWhether the entity controls a good or service before it passes to the customer — a principal reports revenue gross, an agent reports only its fee or commission net
- Remaining performance obligationsTransaction price allocated to obligations not yet satisfied — deferred revenue plus contracted, unbilled amounts — disclosed with when it is expected to be recognized
- Standalone selling priceThe price at which an entity would sell a good or service separately — the basis for allocating the transaction price across performance obligations
- Transaction priceThe consideration an entity expects to be entitled to for the contract, including estimated variable consideration and excluding amounts collected for third parties such as sales tax
- Unbilled receivableRevenue recognized where the right to payment is unconditional but the invoice has not yet been issued — a receivable, not a contract asset
- Variable considerationAny part of the price that can change — discounts, rebates, refunds, credits, usage, bonuses, penalties — estimated and included only to the extent a significant reversal is not probable
Fixed assets & leases
- Capital expenditureCash spent acquiring or improving long-lived assets in the period — the investing outflow free cash flow subtracts
- CapitalizationRecording a cost as an asset rather than an expense because it brings a future benefit — then allocated to expense over that benefit
- Finance leaseA lease that effectively transfers control of the asset — ownership transfer, purchase option reasonably certain, major part of life or substantially all of fair value, or a specialized asset — expensed as amortization plus interest
- Fixed assetA tangible asset held for use in operations over more than one period — property, plant and equipment — carried at cost less accumulated depreciation
- GoodwillThe excess of the consideration paid in a business combination over the fair value of the identifiable net assets acquired — not amortized by public companies, tested for impairment at least annually
- ImpairmentWriting an asset down because its carrying amount is not recoverable — for long-lived assets, a recoverability test on undiscounted cash flows, then a write-down to fair value
- Incremental borrowing rateThe rate the lessee would pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments — the discount rate when the implicit rate is unknown
- Intangible assetA non-physical asset other than goodwill — software, customer lists, patents, trademarks — amortized over its useful life unless indefinite-lived
- Lease liabilityThe present value of the lease payments not yet paid, discounted at the rate implicit in the lease or, if not determinable, the incremental borrowing rate
- Net book valueCost less accumulated depreciation and impairment — the carrying amount of an asset
- Operating leaseUnder ASC 842, a lessee lease that is not a finance lease — on the balance sheet, with a single straight-line lease cost in the P&L
- Right-of-use assetThe lessee's right to use an underlying asset for the lease term — the lease liability plus prepaid lease payments and initial direct costs, less incentives received
- Salvage valueThe amount expected from disposing of an asset at the end of its useful life, net of disposal costs — the floor depreciation stops at
- Short-term leaseA lease with a term of twelve months or less and no purchase option the lessee is reasonably certain to exercise — may be kept off the balance sheet by policy election
- Useful lifeThe period over which an asset is expected to contribute to cash flows, which sets the depreciation period — an estimate, revised prospectively
Multi-entity
- Average rateAn average of exchange rates over the period, used as a practical proxy for transaction-date rates when translating income and expenses — its method stated
- Closing rateThe spot exchange rate at the balance sheet date, used to translate assets and liabilities and to remeasure monetary items
- Combined reportingFiling one state income tax return for a unitary group — the members' income combined, then apportioned. Two rules decide whose in-state sales count in the numerator: Joyce (only members with nexus) and Finnigan (every member, once any member has nexus)
- Equity methodAccounting for an investee over which the investor has significant influence — presumed at 20–50% of the vote — as one investment line adjusted by the investor's share of its earnings
- IntercompanyA balance or transaction between two entities in the same group — real in each entity's books, eliminated on consolidation
- Monetary itemA balance fixed in currency units — cash, receivables, payables, debt — and therefore remeasured when exchange rates move; inventory, prepaids and PP&E are non-monetary
- Non-controlling interestThe equity in a consolidated subsidiary not attributable to the parent — shown within equity, separately from the parent's, with its share of net income allocated on the P&L
- Realized FX gain or lossThe exchange difference crystallized when a foreign-currency item is settled — settlement-date rate versus the rate it was last carried at
- Transaction currencyThe currency a single transaction is denominated in — the invoice's currency, which may differ from the entity's functional currency
- Unrealized FX gain or lossThe exchange difference on an open foreign-currency monetary item at period end, recognized in the P&L and reversed or carried forward until settlement
- Water's-edge electionAn election by a unitary group filing a combined state return to leave most foreign affiliates out of the combined report — in California a binding contract for 84 months
Equity & financing
- 83(b) electionAn election, filed with the IRS within 30 days of receiving restricted stock, to be taxed on its value at grant rather than as it vests — at a founder's purchase price, usually no tax at all, and the capital gain holding period starts at once
- Accumulated deficitRetained earnings below zero — cumulative losses exceeding cumulative earnings, presented as a negative within equity, as at almost every venture-funded startup
- Default aliveWhether, with expenses held where they are and revenue growing at its recent rate, a company reaches profitability on the cash it already has. If not, it is default dead and its runway ends in a raise
- DividendA distribution of earnings to shareholders, declared by the board — a liability from the declaration date and a reduction of retained earnings, never an expense
- Liquidation preferenceA preferred stockholder's right to be paid a stated amount — usually 1× the original issue price plus declared but unpaid dividends — before common stockholders in a sale or liquidation. Non-participating preferred takes the greater of that or its as-converted share; participating preferred takes both
- Qualified small business stockOriginal-issue stock of a domestic C corporation with gross assets of $75 million or less at issuance that lets holders exclude gain on sale — for stock issued after 4 July 2025, 50% after three years, 75% after four and 100% after five, up to the greater of $15 million or ten times basis per issuer. Stock issued earlier keeps the old rules: $50 million of gross assets, five years, $10 million
- Quality of earningsA diligence analysis, usually by an accounting firm before an acquisition or financing, of whether reported EBITDA is sustainable — normalizing and non-recurring adjustments, proof of cash, the net working capital peg. It gives no assurance and is not an audit
Tax
- ABC testA state test presuming a worker is an employee unless the hiring entity proves all three: (A) free from its control, (B) work outside the usual course of its business, and (C) customarily engaged in an independent trade — California (AB 5), Massachusetts, and New Jersey for unemployment
- ApportionmentDividing a multistate business's taxable income among states by formula — historically property, payroll and sales; now in most states the sales factor alone
- Assumed par value capital methodThe alternative Delaware franchise tax calculation: assumed par (total gross assets ÷ issued shares) times authorized shares, taxed at $400 per $1,000,000, minimum $400 — usually far below the authorized shares method for a startup with millions of authorized shares
- Backup withholdingFederal income tax a payer must withhold at 24% from reportable payments — contractor fees, interest, dividends, card settlements — when the payee has not given a correct TIN or the IRS has notified the payer to withhold. Deposited and reported on Form 945
- Bonus depreciationAdditional first-year tax depreciation under §168(k) — 100%, permanently, for qualified property acquired after 19 January 2025 under the OBBBA. Not limited to taxable income, so it can create an NOL; book depreciation is unaffected, creating a temporary difference
- Combined Federal/State Filing ProgramThe IRS program that forwards 1099s filed electronically to participating states, satisfying their filing requirement — though many states still require direct filing, or a reconciliation return of their own
- Cost-of-performance sourcingAssigning receipts from services to the state where the income-producing activity is performed — under the UDITPA rule, all of it to the state with the greater share of the costs of performance
- De minimis safe harborAn annual tax election to deduct, rather than capitalize, tangible property costing up to $2,500 per invoice or item — $5,000 with an applicable financial statement — provided the books expense the same amounts under an accounting policy in place at the start of the year
- Deferred tax assetFuture tax savings from deductible temporary differences and carryforwards, measured at enacted rates
- Deferred tax liabilityFuture tax payable on taxable temporary differences — typically accelerated tax depreciation — measured at enacted rates
- Economic nexusA connection with a state created by economic activity alone — sales into the state above a threshold — rather than physical presence. The basis of remote-seller sales tax since South Dakota v. Wayfair (2018), and of many states' income and franchise taxes, where P.L. 86-272 still shields solicitation of tangible goods sales
- Effective tax rateTotal income tax expense divided by pre-tax income, reconciled to the statutory rate in the notes — by category and jurisdiction under ASU 2023-09
- Exemption certificateThe document a buyer gives a seller to claim a sales tax exemption — resale, manufacturing, an exempt organization — which the seller keeps to prove why it did not collect. New Mexico's version is the nontaxable transaction certificate (NTTC)
- Form 1099-KThe information return from a payment settlement entity reporting a payee's gross payment card and third-party network receipts — card transactions at any amount; third-party network transactions only above $20,000 and 200 transactions, the threshold the OBBBA retroactively reinstated. Gross of refunds, chargebacks and fees, so it never ties to revenue
- Form 1099-NECThe IRS information return for nonemployee compensation paid to a contractor in the course of business — required at $600 a year for payments through 2025 and $2,000 from 2026 (indexed from 2027), due to the recipient and the IRS by 31 January
- Form 7004The IRS application for an automatic extension of time to file business income tax returns — six months for Forms 1120, 1120-S and 1065 — filed by the original due date. It extends the time to file, not the time to pay
- Form W-9The IRS form a US payee gives a payer to certify its name, tax classification and taxpayer identification number — collected before the first payment, because it drives 1099 reporting and backup withholding
- FUTAThe federal unemployment tax an employer pays — 6.0% of the first $7,000 of each employee's wages, reduced to a net 0.6% by the state credit unless the state is a credit-reduction state; filed on Form 940
- FUTA credit reductionThe cut to the 5.4% state credit against FUTA for employers in a state that has carried a federal unemployment loan for two consecutive 1 January balances and not repaid it by 10 November — 0.3 points, growing each further year. For 2025: California 1.2%, US Virgin Islands 4.5%
- Gross receipts taxA tax on a business's gross receipts with no deduction for costs, levied on the seller — Washington B&O, Ohio CAT, Nevada commerce tax, New Mexico GRT, Arizona TPT. An operating expense, not an income tax under ASC 740; Texas's margin tax, measured on a modified gross margin, is treated as an income tax
- Home-rule sales taxA local sales tax that a home-rule city administers itself — its own license, return, base and audit — rather than through the state. Common in Colorado, Louisiana and Alabama
- IRC conformityHow a state's income tax adopts the federal Internal Revenue Code — rolling (as currently amended), fixed-date (as of a stated date, updated by legislation) or selective. A fixed-date state may not follow §174A, bonus depreciation or other recent federal changes
- Large corporate filerA Delaware corporation with stock listed on a national securities exchange that reports consolidated gross revenues or assets of $750 million or more — it pays a flat $250,000 annual franchise tax instead of the $200,000 maximum
- Market-based sourcingAssigning receipts from services and intangibles to the state where the customer receives the benefit, for the sales factor — the rule in most states
- Marketplace facilitatorA platform — Amazon, Etsy, eBay — that every sales-tax state requires to collect and remit sales tax on sales it facilitates for third-party sellers; the seller does not collect again on those sales
- Monopolistic state fundA state workers' compensation fund that is the only insurer allowed — North Dakota, Ohio, Washington and Wyoming — so coverage cannot be bought privately (Ohio and Washington permit self-insurance)
- Municipal net profit taxA city income tax on a business's net profits, usually paired with a tax on wages earned in the city — Ohio municipalities, Philadelphia, Wilmington, Kansas City and St. Louis. Filed with the city, not the state
- Net operating lossThe excess of tax deductions over gross income for a year. Federal NOLs arising after 2017 carry forward indefinitely, cannot be carried back (farming aside), and may offset only 80% of taxable income computed before the NOL deduction
- NOL deduction capA limit on how much of a year's income a loss carryforward may offset — federally 80% for post-2017 NOLs; in the states it varies: Pennsylvania caps pre-2025 losses at 40% and later ones at 50% in 2026, rising ten points a year to 80% from 2029, and some states suspend NOL deductions outright in deficit years
- Paid family and medical leaveA state insurance program, funded by payroll contributions from employees, employers or both, that pays wage replacement during leave for a serious health condition, a new child or family care — in about a dozen states and DC, each with its own rate and wage base
- Payroll tax offsetAn election by a qualified small business — gross receipts under $5 million and none before the last five years — to apply up to $500,000 a year of its research credit against the employer share of Social Security and then Medicare tax. Elected on Form 6765 with a timely original return, claimed on Form 8974 from the next quarter
- Refundable creditA tax credit whose excess over the tax due is paid out in cash. Because it does not depend on taxable income, it is generally accounted for outside ASC 740 — as a reduction of the related cost or as other income
- Remote-seller grace periodThe time a seller with no physical presence has, after crossing a state's economic nexus threshold, before it must register and collect — immediately, the first day of a following month, or the next calendar year, depending on the state
- Sales tax nexusThe connection with a state that obliges a seller to collect its sales tax — physical presence, or economic nexus from sales into the state above a threshold (commonly $100,000) since South Dakota v. Wayfair (2018)
- Section 174AThe OBBBA rule restoring immediate deduction of domestic research or experimental expenditures for tax years beginning after 2024, with an election to amortize over 60 months or more instead. Foreign research stays capitalized over 15 years under §174; small businesses could apply it back to 2022–2024
- Section 179 expensingAn election to deduct the cost of qualifying equipment and software in the year it is placed in service — up to $2,560,000 for 2026, phased out dollar for dollar above $4,090,000 of purchases, and limited to taxable business income
- Section 382 limitationThe annual cap on using pre-change NOLs and credits after an ownership change — a more-than-50-percentage-point increase in ownership by 5% shareholders over a rolling three-year testing period. The cap is the loss corporation's equity value immediately before the change times the IRS long-term tax-exempt rate; unused cap carries forward
- Social Security wage baseThe maximum annual wages subject to the 6.2% Social Security tax, for employee and employer each — $184,500 in 2026, $176,100 in 2025, indexed every year. Medicare tax has no cap
- State disability insuranceA state program paying partial wages to employees off work with a non-work-related illness or injury, funded mainly by employee withholding — California, Hawaii, New Jersey, New York, Rhode Island and Puerto Rico
- SUTAThe state unemployment insurance tax an employer pays on each employee's wages up to a state wage base, at an experience-rated rate assigned by the state
- Temporary differenceA difference between an asset or liability's tax basis and its book carrying amount that will reverse in future years — the source of deferred taxes
- Transferable creditA tax credit the holder may sell for cash to another taxpayer — federal clean-energy credits under §6418, many state film and historic credits; New Jersey's program also lets technology companies sell NOLs
- Use taxThe buyer-side complement of sales tax, owed at the same rate on taxable goods and services used in a state when the seller did not collect sales tax — self-assessed and remitted by the buyer
- Valuation allowanceThe reduction of a deferred tax asset to the amount more likely than not (over 50%) to be realized
- Vendor's compensationThe share of collected sales tax a seller may keep, in states that allow it, for filing and paying on time — usually a small percentage, often capped
- Voluntary Classification Settlement ProgramThe IRS program letting an employer prospectively reclassify contractors as employees by paying 10% of one year's employment tax liability, computed at the reduced §3509 rates — no interest or penalties, and no audit of the prior classification. Applied for on Form 8952
- Voluntary disclosure agreementAn agreement in which a business with unfiled state tax obligations comes forward before the state contacts it — often anonymously at first — and files and pays a limited lookback period, typically three to four years, with penalties waived and interest usually due
- Worker classificationDeciding whether a worker is an employee or an independent contractor — federally by the common-law control test (behavioral, financial and relationship facts), in some states by the stricter ABC test. It decides who withholds and pays employment taxes
Controls
- ApprovalFormal authorization of a specific version
- Audit trailThe immutable record of every state change
- CompilationAn engagement in which an accountant presents financial statements from management's information without obtaining or giving any assurance — no audit, no review — and says so in the report; an accountant who is not independent must disclose it
- EvidenceDocumentation supporting a recorded amount
- ExceptionA break requiring investigation
- FindingAn identified control or accounting problem
- ICFRInternal control over financial reporting — the process designed to give reasonable assurance that the financial statements are reliable, which management of an SEC registrant must assess annually
- Material weaknessA deficiency, or combination of deficiencies, in ICFR such that there is a reasonable possibility a material misstatement will not be prevented or detected on a timely basis
- Segregation of dutiesSplitting authorization, recording, custody of assets and reconciliation across different people, so no one person can both commit and conceal an error or fraud — at minimum, preparer ≠ approver
- Significant deficiencyA control deficiency less severe than a material weakness yet important enough to merit the attention of those overseeing financial reporting
Liquidity & working capital
- Cash ratioCash ratio is a liquidity and working-capital metric, calculated as Cash and equivalents ÷ Current liabilities.Formula
- CCCCCC is a liquidity and working-capital metric, calculated as DSO + DIO − DPO.Formula
- CEICEI is a liquidity and working-capital metric, calculated as (Opening AR + Credit sales − Closing total AR) ÷ (Opening AR + Credit sales − Closing current AR).Formula
- Current ratioCurrent ratio is a liquidity and working-capital metric, calculated as Current assets ÷ Current liabilities.Formula
- DIODIO is a liquidity and working-capital metric, calculated as (Inventory ÷ COGS for the period) × Days in the period.Formula
- DPODPO is a liquidity and working-capital metric, calculated as (Ending AP ÷ COGS for the period) × Days in the period.Formula
- DSODSO is a liquidity and working-capital metric, calculated as (Ending AR ÷ Credit sales for the period) × Days in the period.Formula
- Inventory turnoverInventory turnover is a liquidity and working-capital metric, calculated as COGS ÷ Average inventory.Formula
- Quick ratioQuick ratio is a liquidity and working-capital metric, calculated as (Cash and equivalents + Short-term investments + Accounts receivable) ÷ Current liabilities.Formula
- Receivables turnoverReceivables turnover is a liquidity and working-capital metric, calculated as Credit sales ÷ Average AR.Formula
- Working capitalWorking capital is a liquidity and working-capital metric, calculated as Current assets − Current liabilities.Formula
Profitability
- Contribution marginContribution margin is a profitability metric, calculated as (Revenue − Variable costs) ÷ Revenue.Formula
- EBITEBIT is a profitability metric, calculated as Net income + Interest expense + Income tax expense.Formula
- EBITDAEBITDA is a profitability metric, calculated as Net income + interest + income taxes + D&A (≈ operating income + D&A with no other non-operating items).Formula
- EBITDA marginEBITDA margin is a profitability metric, calculated as EBITDA ÷ Revenue.Formula
- Gross marginGross margin is a profitability metric, calculated as (Revenue − COGS) ÷ Revenue.Formula
- Net marginNet margin is a profitability metric, calculated as Net income ÷ Revenue.Formula
- Operating marginOperating margin is a profitability metric, calculated as Operating income ÷ Revenue.Formula
- Rule of 40Rule of 40 is a profitability metric, calculated as Revenue growth % + EBITDA margin %.Formula
Cash & runway
- Burn multipleBurn multiple is a cash and runway metric, calculated as Net burn ÷ Net new ARR, over the same period.Formula
- Free cash flowFree cash flow is a cash and runway metric, calculated as Operating cash flow − Capital expenditures.Formula
- Gross burnGross burn is a cash and runway metric, calculated as Total operating cash outflows in the month.Formula
- Months of cashMonths of cash is a cash and runway metric, calculated as Same as runway.Formula
- Net burnNet burn is a cash and runway metric, calculated as Operating and investing cash out − cash in, excluding financing inflows.Formula
- RunwayRunway is a cash and runway metric, calculated as Cash ÷ net monthly burn.Formula
Recurring revenue
- ARRARR is a recurring-revenue metric, calculated as MRR × 12.Formula
- Churned MRRChurned MRR is a recurring-revenue metric, calculated as Full cancellations.Formula
- Contraction MRRContraction MRR is a recurring-revenue metric, calculated as Downgrades, not cancellations.Formula
- Expansion MRRExpansion MRR is a recurring-revenue metric, calculated as Upgrades and seat additions from existing customers.Formula
- Gross revenue retentionGross revenue retention is a recurring-revenue metric, calculated as (Starting − Contraction − Churn) ÷ Starting.Formula
- Logo churnLogo churn is a recurring-revenue metric, calculated as Customers lost ÷ starting customers.Formula
- MRRMRR is a recurring-revenue metric, calculated as Sum of normalized monthly recurring subscription value.Formula
- Net new MRRNet new MRR is a recurring-revenue metric, calculated as New + Expansion − Contraction − Churned.Formula
- Net revenue retentionNet revenue retention is a recurring-revenue metric, calculated as (Starting + Expansion − Contraction − Churn) ÷ Starting.Formula
- New MRRNew MRR is a recurring-revenue metric, calculated as From customers new this period.Formula
Unit economics
- ARPAARPA is a unit-economics metric, calculated as MRR ÷ Active customers, per month.Formula
- CACCAC is a unit-economics metric, calculated as Sales & marketing spend ÷ new customers.Formula
- CAC paybackCAC payback is a unit-economics metric, calculated as CAC ÷ (Monthly ARPA × Gross margin), in months.Formula
- LTVLTV is a unit-economics metric, calculated as (ARPA × Gross margin) ÷ Revenue churn rate, both in the same period unit.Formula
- LTV:CACLTV:CAC is a unit-economics metric. It has no single agreed formula — state the inputs.
- Magic numberMagic number is a unit-economics metric, calculated as Net new ARR in the quarter ÷ prior-quarter S&M (equivalently (Δ quarterly revenue × 4) ÷ prior-quarter S&M).Formula
Leverage & coverage
- Debt-to-equityDebt-to-equity is a leverage and coverage metric, calculated as Total debt ÷ Total equity.Formula
- DSCRDSCR is a leverage and coverage metric, calculated as Cash available for debt service ÷ Debt service (interest + scheduled principal).Formula
- Interest coverageInterest coverage is a leverage and coverage metric, calculated as EBIT ÷ Interest expense.Formula
- Leverage ratioLeverage ratio is a leverage and coverage metric, calculated as Net debt ÷ EBITDA (or total debt ÷ EBITDA).Formula
- Net debtNet debt is a leverage and coverage metric, calculated as Total debt − Cash.Formula
Words we don't use
The register of a financial product is set by the words it refuses as much as the ones it chooses.
Every term, A to Z
A
- ABC test
- Account
- Accounting equation
- Accounts payable
- Accounts receivable
- Accrual
- Accrual basis
- Accrued liability
- Accrued revenue
- Accumulated deficit
- ACH
- Adjusting entry
- Aging
- Allowance for credit losses
- Amortization
- Application
- Apportionment
- Approval
- ARPA
- ARR
- As at
- Asset
- Assumed par value capital method
- Audit trail
- Available balance
- Average rate
B
C
- CAC
- CAC payback
- Capital expenditure
- Capitalization
- Cash basis
- Cash equivalents
- Cash flow statement
- Cash ratio
- CCC
- CECL
- CEI
- Chargeback
- Chart of accounts
- Churned MRR
- Clearing account
- Close
- Closing entry
- Closing rate
- Combined Federal/State Filing Program
- Combined reporting
- Comparative
- Compilation
- Consolidated
- Contra account
- Contra-revenue account
- Contract asset
- Contraction MRR
- Contribution margin
- Control account
- Cost of revenue
- Cost-of-performance sourcing
- Credit
- Credit note
- CTA
- Current asset
- Current balance
- Current liability
- Current ratio
- Cutoff
D
E
F
G
I
L
M
N
O
P
R
- Realized FX gain or loss
- Receivables turnover
- Reclassification
- Reconciled
- Reconciliation
- Refund
- Refundable credit
- Remaining performance obligations
- Remeasurement
- Remote-seller grace period
- Restatement
- Restricted cash
- Retained earnings
- Revenue
- Reversal
- Reversing entry
- Revision
- Right-of-use asset
- Roll-forward
- Rule of 40
- Runway
S
- Sales tax nexus
- Salvage value
- Section 174A
- Section 179 expensing
- Section 382 limitation
- Segregation of duties
- Settled
- Short-term lease
- Sign-off
- Significant deficiency
- Social Security wage base
- Soft close
- Stale-dated check
- Standalone
- Standalone selling price
- State disability insurance
- Statement
- Subledger
- Subsequent event
- Suspense account
- SUTA
- Sweep
T
V
Common questions
What is this glossary?
287 accounting and finance terms, each defined once and then used identically in the component names, the interface copy, the documentation and the source. It is the vocabulary the Lopifi components assume you already share.
Why does one concept get exactly one word?
Because a system that calls the same thing a balance, a total and an amount in three places has three concepts as far as a reader is concerned — and as far as a model reading the page is concerned. Each entry therefore also states the words this system refuses for that concept, and why they are wrong.
What is the difference between the lexicon and the metrics?
A lexicon term is a thing the books contain — an account, a journal entry, a period. A metric is a number computed from them, and every metric entry carries its formula, so two pages cannot quietly compute the same ratio two ways.
Are these definitions traceable to a standard?
Every term states its authority: a Codification topic, a Concepts Statement or an SEC release where one governs, and an explicit note that the concept is a convention of bookkeeping rather than a requirement where none does.