Accounting Terminology Made Easy
by Sally Hu, Writing Consultant
(printable version here)

You will often have to write documents and messages to an audience who is not familiar with accounting terminology. Consequently, you will have to find a way to explain complex jargon and concepts that will be easily understood by anyone. Here are some examples that can help you:

For accounting statements:

• Balance sheet: summary of a company's financial status, including assets, liabilities, and equity
• Income statement: a summary of income and expenses
• Cash flow: a summary of cash received and disbursed
• Shareholder equity: the capital and retained earnings in an entity attributed to the shareholders

General accounts:

• Asset: property with a cash value that is owned by a business or individual
• Liability: something owed to creditors, vendors
• Revenue: total income before expenses
• Expense: money spent

Debts and Credits:

• Balance the financial information in a company
• Total debits must equal total credits
• Every debit must be matched by a credit, and vice versa
• Rules of recording debits and credits for each account:

Other Important Terms:

• Accounts payable: money owed to creditors, vendors, etc
• Accounts receivable: money owed to a business
• Amortization: gradual reduction of amounts in an account over time, either assets or liabilities
• Auditors: third party accountants who review an entity's financial statements for accuracy and provide a statement to that effect
• Depreciation: decrease in the value of an asset due to age and use
• Dividends: amounts paid to shareholders out of current or retained holdings
• Goodwill: an intangible asset reflecting the value of an entity of its tangible assets
• Invoice: the original billing from the seller to the buyer, outlining what was purchased and the terms of sale, payment, etc.
• Liquid asset: cash or other property that can be easily converted to cash
• Net income: money remaining after all expenses and taxes have been paid
• Retained earnings: the amount of net profit retained and not paid out to shareholders over the life of the business
• Write-off: an accounting entry that reduces the value of an asset due to an impairment of that asset
  

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