100+ terms · Plain language · US accounting & tax focus
US Accounting & Tax Glossary for CPA Firms.
Plain-language definitions of the terms that come up most in offshore accounting engagements, tax season conversations, and CPA firm operations. Search, filter by category, or jump A–Z. Core terms link to full deep-dive guides.
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The IRS form individuals use to file their annual federal income tax return.
A family of IRS forms reporting income paid to non-employees and other parties outside regular payroll.
A
Money a business owes its suppliers for goods or services received but not yet paid for, recorded as a current liability.
A report grouping unpaid supplier bills by how long they have been outstanding, used to manage payment timing and cash.
The distinction between money a business owes to others (payable) and money others owe to the business (receivable).
Money owed to a business by its customers for goods or services already delivered, recorded as a current asset.
A report grouping unpaid customer invoices by how long they have been outstanding, used to manage collections.
An accounting method that records revenue when earned and expenses when incurred, regardless of when cash actually moves.
The contrast between recording transactions when they are earned or incurred (accrual) versus when cash actually changes hands (cash basis).
Expenses a business has incurred but not yet paid or been billed for, recorded as a liability to match the period they belong to.
Revenue earned but not yet billed or received, recorded as an asset; the mirror of accrued expenses.
The gradual writing-off of an intangible asset's cost, or a loan's principal, across time; the intangible-asset counterpart to depreciation.
Everything a business owns or controls that has economic value, from cash and receivables to equipment and property.
An independent examination of a business's financial statements to express an opinion on whether they are fairly presented.
The complete, sequential record of every financial transaction and modification, enabling any entry to be traced to its source.
B
A financial statement showing what a business owns, owes, and the owner's residual stake at a single point in time, built on Assets = Liabilities + Equity.
The process of matching a business's internal cash records against its bank statement to confirm both agree and surface any discrepancies.
The operational management of employee benefits such as health insurance, retirement plans, and FSAs, including the payroll deductions, employer contributions, and compliance filings they require.
The day-to-day recording and organizing of a business's financial transactions, the foundation every financial statement is built on.
The calculation of the sales volume at which total revenue equals total costs and the business makes neither profit nor loss.
A forward-looking financial plan of expected revenues, expenses, and cash over a period, used to allocate resources and to measure actual performance against.
The rate at which a business spends its cash reserves, typically used for pre-revenue or early-stage companies to measure runway.
The process of estimating the economic worth of a business using the income, market, or asset approach, with the result resting on judgment-heavy assumptions made by a credentialed valuator.
C
A standard corporation taxed separately from its owners at the corporate income tax rate; subject to potential double taxation on dividends.
Capital expenditure (spending on long-term assets, capitalized and depreciated) versus operating expenditure (day-to-day expenses, deducted immediately).
The profit from selling a capital asset for more than its cost basis; taxed differently from ordinary income depending on the holding period.
The number of days it takes a business to convert its investments in inventory and resources into cash from sales, calculated as days inventory outstanding plus days sales outstanding minus days payable outstanding.
The movement of money into and out of a business over a period, across operating, investing, and financing activities.
A financial statement tracking how cash moved through a business over a period, across operating, investing, and financing activities.
The organized list of every account a business uses to record transactions, grouped into assets, liabilities, equity, income, and expenses.
An account that reduces the balance of a related account such as accumulated depreciation reducing fixed assets, or allowance for doubtful accounts reducing AR.
The amount left from each sale after variable costs, available to cover fixed costs and then profit, calculated as sales price minus variable cost.
The original value of an asset for tax purposes, adjusted over time for items like improvements and depreciation, used to compute gain or loss on sale.
The direct costs of producing the goods or services a business sold during a period, subtracted from revenue to get gross profit.
Assets expected to be converted to cash or used up within one year, including cash, receivables, and inventory.
Current assets divided by current liabilities; a measure of whether a business can cover its short-term obligations with its short-term assets.
D
Total liabilities divided by total equity; a measure of how much a business relies on debt versus owner financing.
Money a business has received for goods or services it has not yet delivered, recorded as a liability until earned.
The accounting method that spreads the cost of a tangible fixed asset across its useful life rather than expensing it all at once.
The bookkeeping system where every transaction is recorded in at least two accounts as equal debits and credits, keeping the books in balance.
E
Earnings before interest, taxes, depreciation, and amortization; a measure of operating performance that strips out financing and accounting decisions.
The owner's residual claim on a business after liabilities are subtracted from assets; what would remain if everything were settled.
Quarterly IRS payments required for self-employed individuals and pass-through entity owners who expect to owe at least $1,000 in tax for the year.
A distinction under the FLSA between employees who must receive overtime pay (non-exempt) and those who do not (exempt), determined by both a salary threshold and a duties test, not by job title.
F
The formal reports summarizing a business's financial position and performance: the balance sheet, income statement, and cash flow statement.
The twelve-month period a business uses for accounting and tax reporting, which may or may not match the calendar year.
Long-term tangible assets a business uses in operations rather than sells, such as buildings, equipment, and vehicles.
Operating cash flow minus capital expenditures; the cash a business generates after maintaining and growing its asset base.
G
Generally Accepted Accounting Principles, the standard framework of US accounting rules issued through the FASB Accounting Standards Codification.
A court- or agency-ordered deduction from an employee's paycheck to satisfy a debt such as child support, a tax levy, or a creditor judgment, calculated under strict legal limits.
The master record holding every financial transaction across all accounts, from which the trial balance and financial statements are produced.
The assumption that a business will continue operating into the foreseeable future, underpinning how its financial statements are prepared.
Gross profit expressed as a percentage of revenue, showing how much of each revenue dollar remains after direct production costs.
Revenue minus the cost of goods sold, showing how much a business earns before operating expenses, interest, and taxes.
I
International Financial Reporting Standards, the accounting framework used in 140+ countries, the global counterpart to US GAAP.
A financial statement showing revenue, expenses, and profit or loss over a period of time; also called the profit and loss statement.
An independent, objective evaluation of internal controls, risk management, and governance within an organization, performed to assess effectiveness and recommend improvements.
Policies, procedures, and systems designed to prevent errors, detect fraud, and ensure reliable financial reporting.
The goods a business holds for sale or the materials it will use to produce them, recorded as a current asset until sold.
J
A cost-accounting method that accumulates direct materials, direct labor, and allocated overhead for each individual job, project, or batch.
The basic record of a single financial transaction, showing which accounts are debited and credited and by how much.
L
Everything a business owes to others, from supplier bills and loans to taxes and accrued obligations.
How quickly and easily a business can convert assets to cash to meet short-term obligations.
A limited liability company that combines liability protection with flexible tax treatment, taxed as a sole proprietor, partnership, S-corp, or C-corp depending on election.
M
The threshold at which an error or omission in financial statements is large enough to influence the decisions of those relying on them.
The recurring process of finalizing and reconciling all accounts at the end of each month to produce accurate financial statements.
N
What remains after all expenses, interest, and taxes are subtracted from revenue; the bottom line of the income statement.
The amount by which a business's deductible expenses exceed its taxable income in a given year, which can typically be carried forward to offset future taxable income.
Net income expressed as a percentage of revenue; the bottom-line measure of how much profit remains from every dollar of revenue after all costs.
A formal written obligation to repay borrowed money at a specified date and interest rate, recorded as a liability.
O
Cash generated by a business's core operations, before investing and financing activities; the most closely watched cash flow metric.
Operating income expressed as a percentage of revenue, measuring profitability from core operations before interest and tax.
Indirect costs that support operations but cannot be directly tied to a specific product or job, such as rent, utilities, and administrative salaries.
The process of assigning indirect costs to jobs, products, or departments using an allocation base or cost driver, since overhead cannot be traced directly.
Money a business owner withdraws from a sole proprietorship or partnership for personal use, reducing owner's equity.
P
Paid leave that employees earn and accumulate, covering vacation, personal, and sometimes sick time, which accrues as a liability and may have to be paid out at termination depending on state law.
A business structure whose income passes through to owners' personal tax returns, avoiding entity-level income tax.
The process of calculating and paying employee wages, withholding taxes, and remitting them to the appropriate authorities.
Taxes tied to employee wages, including Social Security, Medicare, and unemployment, split between employer and employee.
A small cash fund used to pay for minor business expenses, managed through an imprest system and periodically replenished.
Amounts paid in advance for goods or services not yet received, recorded as a current asset until the benefit is used.
A financial statement summarizing revenue and expenses over a period to show whether a business made a profit or loss; also called the income statement.
A formal document a buyer sends to a vendor authorizing a purchase, establishing the terms before an invoice is issued.
Q
Current assets excluding inventory and prepaid expenses, divided by current liabilities; a stricter liquidity test than the current ratio that uses only the most liquid assets.
R
The process of comparing two sets of records to confirm they agree and to identify and resolve any differences.
The cumulative net income a business has kept rather than distributed to owners; appears in the equity section of the balance sheet.
Net income divided by shareholders' equity; measures how effectively a business generates profit from its owners' investment.
The income a business earns from its primary operations before any expenses; the top line of the income statement, recognized when earned under ASC 606.
S
A corporation that elects pass-through taxation, with income and losses flowing to shareholders' personal returns; subject to limits on shareholders and share classes.
A tax on retail sales collected by the seller and remitted to the state, owed wherever the business has nexus through physical presence or by crossing a state economic-sales threshold.
A deduction of up to 20% of qualified business income for owners of pass-through businesses, computed on the personal return and limited at higher incomes by business type and wages paid.
The internal control principle that divides key financial tasks among different people to prevent a single person from committing and concealing fraud.
The self-employed equivalent of FICA, covering both the employer and employee shares of Social Security and Medicare, calculated on net self-employment income.
T
An expense the IRS allows a business or individual to subtract from taxable income, lowering the amount of tax owed.
The AP control that verifies a vendor invoice against the purchase order and the goods-receipt document before authorizing payment.
An internal report listing the ending balance of every account to check that total debits equal total credits before preparing statements.
V
The practice of comparing actual financial results to budgeted or standard amounts and breaking the difference down into its drivers to understand performance.
W
The IRS form an employer issues each employee reporting annual wages paid and taxes withheld.
The determination of whether a worker is an employee or an independent contractor, based on the substance of the working relationship rather than the label, with significant tax and legal consequences.
The difference between a business's current assets and current liabilities, a measure of short-term liquidity and operating cushion.
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