US Accounting & Tax Glossary for CPA Firms.

Money a business owes to its suppliers and vendors for goods and services received but not yet paid for. recorded as a current liability on the balance sheet. AP management involves processing invoices, matching them to purchase orders, and releasing payments on schedule.

Money owed to a business by its customers for goods or services already delivered. recorded as a current asset. AR management involves invoicing, tracking outstanding balances, and following up on overdue accounts. aging reports show AR balances by how long they have been outstanding.

An accounting method that records revenues when earned and expenses when incurred, regardless of when cash changes hands. required for most businesses above a certain size. the opposite of cash-basis accounting.

A journal entry made at the end of an accounting period to record revenues and expenses that have been earned or incurred but not yet recorded. common adjusting entries include accruals, deferrals, depreciation, and prepaid expense allocations.

The gradual expensing of an intangible asset over its useful life. similar to depreciation but applied to non-physical assets such as patents, trademarks, software licences, and goodwill. also used to describe the reduction of a loan balance through scheduled payments.

One of the three core financial statements. shows a business's assets, liabilities, and equity at a specific point in time. the fundamental equation is: assets = liabilities + equity. a snapshot of financial position, not activity.

The process of comparing a business's cash records to the bank statement to identify and resolve any differences. completed monthly as a core bookkeeping control. discrepancies can indicate timing differences, errors, or fraud.

The systematic recording of a business's financial transactions. includes categorising income and expenses, reconciling bank accounts, managing accounts payable and receivable, and maintaining an accurate general ledger. the foundation of all financial reporting.

Common Area Maintenance reconciliation. an annual calculation in commercial real estate that compares actual operating costs for shared property areas against the estimated amounts tenants paid throughout the year. differences result in billings to tenants or credits.

One of the three core financial statements. shows how cash entered and left the business during a period, divided into operating, investing, and financing activities. critical for understanding whether a profitable business is generating or consuming cash.

A structured list of all accounts used in a business's accounting system, each with a unique number. organises transactions into assets, liabilities, equity, revenue, and expenses. the architecture of the general ledger.

The direct costs of producing the goods a business sells. includes materials, labour directly tied to production, and manufacturing overhead. COGS is subtracted from revenue to calculate gross profit. accurate COGS requires proper inventory accounting — not just expensing purchases when paid.

In healthcare accounting, the difference between the amount billed and the amount an insurer is contractually obligated to pay. not bad debt. must be posted as an adjustment to revenue rather than an expense. misclassifying contractual adjustments overstates revenue and inflates accounts receivable.

The systematic allocation of a tangible asset's cost over its useful life. reduces taxable income and reflects the consumption of the asset over time. common methods include straight-line, double-declining balance, and MACRS for US tax purposes.

A measure of how long on average a business takes to collect payment after a sale. calculated as (accounts receivable ÷ total credit sales) × number of days. a rising DSO indicates collections are slowing. key metric for professional services firms.

A federal tax practitioner licensed by the IRS to represent taxpayers before the IRS. the IRS's highest credential for tax professionals. earned by passing a three-part IRS Special Enrollment Examination covering individual tax, business tax, and representation. an EA can represent any taxpayer before any IRS office.

Earnings Before Interest, Taxes, Depreciation, and Amortisation. a proxy for operating cash flow used widely in business valuation and financial analysis. not a GAAP measure — must be calculated from the income statement. often used in lender covenant calculations.

A legal concept establishing that a business owes sales tax in a state if it exceeds a certain threshold of sales or transactions in that state, regardless of physical presence. established by South Dakota v. Wayfair (2018). most states set the threshold at $100,000 in revenue or 200 transactions annually.

An inventory valuation method that assumes the oldest inventory is sold first. in periods of rising costs, FIFO produces higher gross profit and higher ending inventory values than LIFO. commonly used by businesses with perishable goods and by companies reporting under IFRS.

IRS Form 940 — Employer's Annual Federal Unemployment (FUTA) Tax Return. filed annually by employers who paid wages of $1,500 or more in any quarter or had at least one employee for 20 weeks. reports FUTA tax liability for the year.

IRS Form 941 — Employer's Quarterly Federal Tax Return. filed quarterly by employers to report wages paid, federal income tax withheld, and both employer and employee shares of Social Security and Medicare taxes. the primary payroll compliance filing.

Annual information return filed by tax-exempt organisations with the IRS. includes financial data, program descriptions, governance information, and executive compensation. filed by 501(c)(3) and other exempt organisations. the public version is the primary transparency document for nonprofit donors and regulators.

An accounting system used by nonprofits and government entities that segregates resources into separate funds based on donor restrictions or intended purpose. net assets are classified as with donor restrictions or without donor restrictions under FASB ASC 958.

The standard set of accounting rules and principles used in the United States. established by the Financial Accounting Standards Board (FASB). all publicly traded companies are required to follow GAAP. private companies may choose between GAAP, tax-basis accounting, or other special-purpose frameworks.

The complete record of all financial transactions of a business, organised by account. every transaction is recorded in the GL. the GL is the source of truth for all financial statements and reports.

Revenue minus cost of goods sold, expressed as a percentage of revenue. a measure of how efficiently a business produces and sells its product. gross margin = (revenue − COGS) ÷ revenue × 100. different industries have dramatically different typical gross margins.

A trust account used by law firms to hold client funds. required by state bar rules. interest earned on pooled IOLTA accounts goes to state bar foundations that fund legal aid. commingling client trust funds with operating funds is a serious ethical violation.

The US federal agency responsible for tax collection and tax law enforcement. administers the Internal Revenue Code. the IRS also licenses Enrolled Agents, issues EINs, and conducts audits and examinations of tax returns.

An accounting method that tracks all costs — labour, materials, and overhead — associated with a specific project or job. essential in construction, manufacturing, and professional services. accurate job costing tells the business which jobs are profitable and which are losing money before the job is complete.

A record of a financial transaction in the accounting system. every journal entry has at least one debit and one credit of equal amounts. the foundation of double-entry bookkeeping.

Professional tax preparation software by Intuit, used widely by CPA firms for complex individual and business returns. supports all major return types including 1040, 1120, 1120S, 1065, 1041, and 990. integrates with ProConnect Tax Online.

An inventory valuation method that assumes the most recently acquired inventory is sold first. in periods of rising costs, LIFO produces lower taxable income than FIFO. permitted under US GAAP but not under IFRS.

The US tax depreciation method prescribed by the IRS for most business assets. allows accelerated depreciation in the early years of an asset's life. different asset classes have different recovery periods. distinct from GAAP book depreciation.

Financial reports prepared for internal management use rather than external compliance. typically include a P&L, balance sheet, cash flow summary, KPIs, and budget vs actuals variance analysis. prepared monthly for business owners and executives to support decision-making.

In real estate, net operating income is gross rental income minus operating expenses, excluding debt service, capital expenditures, and taxes. the primary measure of a property's financial performance and the key input in property valuation. NOI ÷ cap rate = property value.

The process of verifying that payroll records match the amounts posted to the general ledger and paid from the bank account. completed after each pay run. includes reconciling gross wages, tax withholdings, benefit deductions, and net pay to the bank disbursement.

A revenue recognition method used in construction and long-term contract accounting. revenue is recognised proportionally as the project is completed, based on costs incurred relative to total estimated costs. required by GAAP for long-term contracts. produces the WIP schedule.

Also called the income statement. shows revenues, costs, and expenses over a period of time, resulting in net profit or loss. one of the three core financial statements. the P&L shows what happened during a period — not the financial position at a point in time.

Intuit's certification for accounting professionals who work in QuickBooks Online. requires passing the QuickBooks Online ProAdvisor Certification exam. verifiable through the Intuit ProAdvisor directory. a minimum credential for any accountant working in QBO professionally.

A 20% deduction on qualified business income available to pass-through entity owners under Section 199A of the Tax Cuts and Jobs Act. subject to income limitations and restrictions for certain service businesses. applies to sole proprietors, partnerships, S corporations, and some trusts and estates.

A document listing all tenants in a property, their unit, lease start and end dates, monthly rent, and current payment status. used by property managers, lenders, and investors to assess property income. an inaccurate rent roll misstates property value and income — it is not just an administrative document.

In construction, a percentage of each progress billing withheld by the owner until the project is substantially complete. typically 5–10% of the contract value. retainage receivable is tracked separately from regular AR and released when contractual conditions are met.

The HMRC system requiring UK employers to report payroll information to HMRC on or before each payday. replaced the previous annual P35 return system. all UK PAYE submissions must be made via RTI-compliant payroll software.

IRS Schedule C — Profit or Loss from Business. filed by sole proprietors and single-member LLCs to report business income and expenses. the most common form for small business tax reporting. subject to self-employment tax on net profit.

A security certification issued by the AICPA attesting that an organisation's controls over security, availability, processing integrity, confidentiality, and privacy have been operating effectively over a period of time (typically 6–12 months). widely required by US enterprise clients when engaging service providers who handle their data.

A list of all accounts in the general ledger with their debit or credit balances at a specific point in time. used to verify that total debits equal total credits. the starting point for preparing financial statements.

The management of funds held in trust for a third party — most commonly client funds held by law firms (IOLTA) or tenant security deposits held by property managers. strict rules apply: trust funds must be segregated from operating funds, individual ledgers maintained per beneficiary, and three-way reconciliations completed monthly.

IRS Form W-2 — Wage and Tax Statement. issued by employers to employees by January 31 each year. reports total wages paid and taxes withheld during the prior year. employees use it to file their individual tax returns. employers must also file copies with the IRS and relevant state tax agencies.

South Dakota v. Wayfair, Inc. (2018) — the US Supreme Court ruling that states can require out-of-state sellers to collect and remit sales tax even without physical presence. established economic nexus as a basis for sales tax obligations. fundamentally changed sales tax compliance requirements for e-commerce businesses.

In construction accounting, the work-in-progress schedule calculates revenue earned versus billed for each active contract using the percentage-of-completion method. identifies which contracts are over-billed (collected more than earned) or under-billed (earned more than collected). a required schedule for contractor financial statements presented to lenders and sureties.

Xero's highest-level certification for accounting professionals. covers the full Xero platform including bank feeds, reconciliation, payroll, reporting, Xero HQ, and integrations. verifiable through the Xero advisor directory. required for accountants managing client engagements in Xero.