Accelerated Depreciation
A depreciation method that recognizes higher expense in the early years of an asset's life and lower expense in later years.
Accounting Equation
The fundamental rule that total assets equal total liabilities plus total equity on every balance sheet.
Accounts Payable
Money a company owes to its suppliers and vendors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a company by customers who have purchased goods or services on credit but have not yet paid.
Accrual Accounting
Recording revenue and expenses when earned or incurred, regardless of when cash is received or paid.
Accrued Liabilities
Expenses a company has incurred but not yet paid, recorded as current obligations on the balance sheet.
Accrued Revenue
Revenue earned but not yet received or recorded as cash.
Accumulated Deficit
A negative retained earnings balance indicating that cumulative net losses have exceeded cumulative profits since a company's founding.
Accumulated Depreciation
The total depreciation expense recognized on an asset since it was placed in service, shown as a contra asset on the balance sheet.
Additional Paid-In Capital
The amount investors paid for shares above their par value, recorded in the equity section of the balance sheet.
Allowance for Doubtful Accounts
A contra-asset estimating the portion of receivables that will not be collected.
Annual Report
A comprehensive yearly publication summarizing a public company's financial performance and strategy for shareholders.
Asset
Any resource with economic value owned or controlled by an individual or business.
Audit Committee
A board subcommittee overseeing financial reporting, internal controls, and external audits.
Financial Audit
An independent examination of a company's financial statements to verify their accuracy and compliance with accounting standards.
Auditor Opinion
The formal conclusion issued by an independent auditor on whether a company's financial statements are presented fairly in accordance with GAAP.
Bad Debt Expense
The cost recognized when accounts receivable are deemed uncollectible, matched to the period revenue was earned.
Balance Sheet
A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time.
Book Value
The net asset value of a company as reported on its balance sheet: total assets minus total liabilities.
Break-Even Analysis
A financial tool that identifies the sales volume at which total revenues equal total costs, yielding zero profit or loss.
Burn Rate
The rate at which a company spends its cash reserves, typically expressed as a monthly figure, used to assess financial sustainability.
CapEx
Funds used by a company to acquire, maintain, or improve physical assets such as property, equipment, or technology.
Capital Lease
A lease that transfers substantially all ownership risks to the lessee, requiring the asset and liability to be recorded on the balance sheet.
Capitalize vs. Expense
The accounting decision to record a cost as a long-term asset (capitalize) or charge it immediately to the income statement (expense).
Cash Basis Accounting
An accounting method that records revenues when cash is received and expenses when cash is paid, regardless of when they are earned or incurred.
Cash Flow Statement
A financial statement tracking cash inflows and outflows from operating, investing, and financing activities.
Common-Size Statement
A financial statement that expresses each line item as a percentage of a base figure, enabling comparison across companies and time periods.
Comparability Principle
The accounting requirement to use consistent methods so financial statements can be meaningfully compared across periods and companies.
Comprehensive Income
The total change in a company's equity during a period from all sources except transactions with shareholders, combining net income and other comprehensive income.
Conservatism Principle
An accounting guideline that directs companies to record losses and liabilities as soon as they are probable, but to delay recognizing gains until they are realized.
Consistency Principle
An accounting rule requiring companies to use the same accounting methods and policies from period to period unless a justified change is made and disclosed.
Consolidated Statements
Combined financial reports of a parent company and its subsidiaries, presenting them as a single entity.
Consolidation
The process of combining financial statements of a parent company and its subsidiaries into a single set of financial statements.
Contingent Liability
A potential obligation arising from a past event whose outcome depends on a future uncertain event, such as a pending lawsuit.
Contribution Margin
Revenue minus variable costs, representing the amount each unit sold contributes toward covering fixed costs and generating profit.
COGS
The direct costs attributable to producing the goods or services a company sells during a period.
Cost of Revenue
The total direct costs incurred to deliver a product or service, used primarily by service and technology companies.
CVP Analysis
A planning tool that examines the relationship between costs, sales volume, and profit to determine break-even points and profit targets.
Current Assets
Resources expected to be converted to cash or consumed within one year, listed at the top of the balance sheet.
Current Liabilities
Financial obligations due within one year, shown on the balance sheet below current assets.
CPLTD
The amount of a company's long-term debt that must be repaid within the next 12 months, reported as a current liability on the balance sheet.
Debt Covenant
A contractual condition in a loan agreement requiring the borrower to maintain specific financial ratios or behaviors.
Deferred Compensation
A portion of an employee's earnings set aside to be paid at a future date, typically at retirement, providing a tax deferral benefit.
Deferred Revenue
Cash received from customers before a company has delivered the corresponding goods or services.
Deferred Tax Asset
A balance sheet asset representing future tax savings from temporary timing differences.
Deferred Tax Liability
A balance sheet obligation representing taxes owed in the future because book income exceeds taxable income today.
Deferred Tax
The future tax consequence of temporary differences between a company's book income and its taxable income.
Depreciation Methods
The systematic approaches used to allocate the cost of a long-term asset over its useful life.
Depreciation
The cost of a long-lived asset spread over the years it is used. Amortisation is the same for intangible assets.
Diluted Shares
The total number of shares outstanding including all potentially dilutive securities, used to calculate diluted EPS.
Discontinued Operations
A business segment or component that has been sold, abandoned, or classified as held for sale, reported separately from continuing operations in financial statements.
Double-Declining Balance
An accelerated depreciation method that applies twice the straight-line rate to the asset's remaining book value.
EBT
A company's profit after all operating and interest expenses, but before income tax is deducted.
Earnings Management
The use of accounting discretion to influence reported financial results, either within or outside GAAP rules.
Earnings Quality
A measure of how accurately and sustainably a company's reported net income reflects its true economic performance.
Effective Tax Rate
Income tax expense as a percentage of profit before tax: the rate a company actually reports, as opposed to the statutory rate set by law.
Equity Method
An accounting approach used when an investor has significant influence over an investee, recognizing a proportional share of the investee's net income.
Equity
The residual ownership interest in an asset after all liabilities have been deducted.
Expense Recognition
The accounting principle governing when expenses are recorded in financial statements.
Extraordinary Items
Unusual and infrequent gains or losses that were formerly reported separately on the income statement under GAAP.
Fair Value Accounting
An accounting framework that measures assets and liabilities at their current market value rather than original cost.
Fair Value Hierarchy
A three-level classification system ranking the reliability of inputs used to measure the fair value of assets and liabilities.
FASB
The Financial Accounting Standards Board, the private-sector body responsible for establishing US Generally Accepted Accounting Principles (GAAP).
FIFO vs LIFO
Inventory costing methods that determine which unit costs flow to cost of goods sold: FIFO assumes oldest units sell first, LIFO assumes newest units sell first.
Financial Modeling
The process of building a mathematical representation of a company's financial performance to support analysis and decision-making.
Financial Statements
The four core reports — income statement, balance sheet, cash flow statement, and statement of changes in equity — that summarize a company's financial performance and position.
Fiscal Quarter
One of four three-month reporting periods that divide a company's fiscal year.
Fiscal Year
A 12-month accounting period used by a company for financial reporting purposes, which may differ from the calendar year.
Fixed Assets
Long-term tangible assets used in business operations, such as buildings and equipment, that are not expected to be converted to cash within one year.
Financial Footnotes
Disclosures attached to financial statements that explain accounting policies, estimates, commitments, and other details not visible in the main figures.
Full Disclosure Principle
An accounting rule requiring companies to disclose all information that could materially affect users' understanding of financial statements.
GAAP
Generally Accepted Accounting Principles — the standardized set of rules for financial reporting used by U.S. public companies.
Going Concern
The assumption that a company will continue operating for the foreseeable future, at least the next 12 months.
Goodwill Impairment
A non-cash charge recognizing that acquired goodwill is worth less than its book value.
Goodwill
An intangible asset recorded when a company acquires another for more than the fair value of its net identifiable assets.
Gross Profit
Revenue minus the cost of goods sold; the profit a company makes before operating expenses, interest, and taxes.
Hedge Accounting
An accounting method that allows gains and losses on a hedging instrument to be recognized in the same period as the risk being hedged, reducing earnings volatility.
Historical Cost
The original purchase price of an asset, used as its recorded value on the balance sheet regardless of subsequent market value changes.
Horizontal Analysis
A financial statement analysis technique that compares each line item across multiple periods to identify trends and growth rates.
IFRS
A globally adopted set of accounting standards developed by the IASB, used in over 140 countries outside the United States.
Impairment
A reduction in the carrying value of an asset on the balance sheet when its recoverable amount falls below its book value.
Income Statement
The financial statement that shows a company’s revenue, costs and profit for a period, from the top line to net income.
Income Tax Expense
The total tax charge recognized on a company's income statement, including both taxes currently due and deferred tax effects.
Intangible Assets
Non-physical assets with economic value, such as patents, trademarks, brand names, customer lists, and software.
Intercompany Transaction
A financial transaction between entities within the same parent company or corporate group.
Interest Expense
The cost incurred by a company for borrowed funds, recorded on the income statement before taxes.
Interim Financials
Financial reports covering a period shorter than a full fiscal year, most commonly quarterly (Q1, Q2, Q3) reports.
Internal Controls
Processes and procedures a company implements to ensure the accuracy of financial reporting, prevent fraud, and comply with laws.
Inventory Write-Down
A reduction in the carrying value of inventory when its market value or net realizable value falls below its recorded cost.
Inventory
The goods a company holds for sale or the raw materials and work-in-progress used to produce those goods.
Joint Venture
A business arrangement where two or more parties create a separate entity to pursue a shared objective.
Lease Accounting
The GAAP framework for recording lease agreements on financial statements, governed by ASC 842 for US companies.
Lease Liability
The present value of future lease payments that a lessee is obligated to make, recognized on the balance sheet.
Liability
A financial obligation or debt owed by an individual or business to another party.
Long-Term Debt
Borrowed funds that are due beyond one year, recorded as a non-current liability on the balance sheet.
Lower of Cost or Market
An inventory rule requiring write-down when market value falls below original cost.
MD&A
The section of an annual report where management explains financial results, risks, and outlook in their own words.
Mark-to-Market
The practice of revaluing an asset or liability to its current market price at the end of each reporting period.
Matching Principle
An accounting rule requiring expenses to be recognized in the same period as the revenue they helped generate.
Material Weakness
A deficiency in a company's internal controls over financial reporting significant enough that there is a reasonable possibility of a material misstatement going undetected.
Materiality
The threshold above which an omission or misstatement in financial statements could influence the decisions of a reasonable investor.
Minority Interest
The share of a subsidiary’s equity and profit that belongs to shareholders other than the parent company. IFRS calls it non-controlling interests.
Multi-Step Income Statement
An income statement format that separates operating and non-operating results into distinct subtotals for gross profit, operating income, and net income.
Net Assets
Total assets minus total liabilities, equivalent to shareholders' equity on the balance sheet.
Net Income
Profit for the period after all costs, financial items, income taxes and discontinued operations: the bottom line of the income statement.
NIM
A bank profitability metric measuring the difference between interest income earned and interest paid, relative to assets.
Net Operating Loss
A tax designation arising when a company's allowable deductions exceed its taxable gross income, creating a loss that can offset future taxable income.
Net Realizable Value
The estimated selling price of an asset minus costs to complete and sell it.
Non-Cash Expenses
Accounting charges that reduce net income but do not require an actual cash outflow in the period recognized.
Non-Current Assets
Long-term resources expected to provide economic value beyond one year, including property, equipment, and intangibles.
Non-GAAP Measures
Figures not defined in the accounting standards, such as adjusted operating profit or comparable EBITDA. In the EU they are called alternative performance measures (APMs).
Non-Operating Income
Revenue and gains arising from activities outside a company's core business operations.
Notes Payable
A formal written promise to repay a specific amount of money by a set date, recorded as a liability on the balance sheet.
Off-Balance-Sheet
Financing arrangements that allow a company to keep assets or liabilities off its main balance sheet, reducing apparent leverage.
Operating Cash Flow
Cash generated by a company's core business operations, before accounting for investing or financing activities.
Operating Cycle
The average time it takes a company to convert raw materials into cash from sales, flowing through inventory, production, and receivables.
Operating Expenses
The costs of running the business, from materials and salaries to rents and depreciation, deducted from revenue to arrive at operating profit.
Operating Income
Profit from the business itself, after all operating costs but before financial items and income taxes. Also called operating profit or EBIT.
Operating Lease
A short-term rental agreement where the lessee uses an asset without assuming ownership risks.
Operating Segment
A reportable component of a company whose financial results are reviewed separately by management.
OCI
Gains and losses excluded from net income that flow directly to equity, such as currency translation adjustments.
Par Value
The nominal face value assigned to a share of stock or a bond as stated in the corporate charter or bond indenture.
Pension Accounting
The accounting standards and methods governing how companies recognize and disclose defined benefit pension obligations and plan assets.
Percentage-of-Completion
A revenue recognition method that records income proportionally as a long-term contract progresses toward completion.
Performance Obligation
A promise in a contract to transfer a distinct good or service to a customer.
Prepaid Expenses
Payments made in advance for goods or services to be received in a future period, recorded as current assets on the balance sheet.
Prior Period Adjustment
A correction to a previously issued financial statement for a material accounting error.
Pro Forma
Financial statements or projections that exclude certain items or incorporate hypothetical assumptions to present a different view of performance.
PP&E
Long-term tangible assets used in business operations, recorded on the balance sheet at cost less accumulated depreciation.
Purchase Accounting
Acquisition accounting that records acquired assets and liabilities at fair value, recognizing goodwill for any excess price.
Purchase Price Allocation
The process of assigning an acquisition price to the identifiable assets and liabilities of an acquired company at fair value, with any excess recorded as goodwill.
Qualified Opinion
An audit opinion indicating that financial statements are fairly presented except for a specific, limited exception noted by the auditor.
Quick Assets
The most liquid current assets—cash, marketable securities, and net receivables—used to measure a company's ability to meet short-term obligations.
R&D Expense
The costs a company incurs to develop new products, technologies, or services, expensed as incurred under GAAP.
Realization Principle
The accounting rule that revenue should be recognized only when earned and collection is reasonably assured.
Realized vs. Unrealized Gains
The distinction between gains from assets already sold (realized, taxable) and gains on assets still held (unrealized, not yet taxable).
Reconciliation
The process of comparing two sets of records or figures to ensure they are consistent and identify any discrepancies.
Related-Party Transactions
Business dealings between entities with a pre-existing relationship, requiring disclosure due to potential conflicts of interest.
Restatement
The revision of previously published financial statements to correct errors, fraud, or misapplication of accounting standards.
Restricted Cash
Cash and cash equivalents that are not freely available for general use because they are reserved for a specific purpose.
Retained Earnings
The cumulative net income a company has kept rather than distributed to shareholders as dividends.
Revenue Recognition
The accounting principle that determines when and how revenue is recorded, governed by the five-step model under ASC 606.
Run Rate
An extrapolation of recent revenue data to estimate a company's full-year revenue as if current trends continued.
Revenue
The income a company earns from selling its goods and services in a period, before any costs are deducted. Also called sales, net sales or turnover.
ROU Asset
An asset representing a lessee's right to use leased property over the lease term, recognized on the balance sheet under ASC 842 and IFRS 16.
Runway
The amount of time a company can continue operating before exhausting its cash reserves, given its current burn rate.
Salvage Value
The estimated residual value of an asset at the end of its useful life, used as the basis for depreciation calculations.
Segment Reporting
Reporting revenue and profit separately for the parts of a business that management follows, such as business areas or regions.
SG&A
The combined costs of selling products and running the back-office, including salaries, marketing, rent, and executive compensation.
Short-Term Debt
Borrowings due within one year, classified as current liabilities and used to fund short-term working capital needs.
Retained Earnings Statement
A financial statement that reconciles the opening and closing retained earnings balance by showing net income earned and dividends declared.
Stock-Based Compensation
Employee compensation paid in the form of equity awards such as stock options and restricted stock units, recorded as an expense under GAAP.
Stockholders' Equity
The residual interest in a company's assets after deducting all liabilities; what shareholders theoretically own.
Straight-Line Depreciation
A depreciation method that allocates the cost of an asset evenly over its useful life in equal annual amounts.
Subsequent Events
Significant events occurring after the balance sheet date but before financial statements are issued.
Substance Over Form
The accounting principle requiring transactions to be recorded based on their economic reality rather than legal structure.
Tangible Assets
Physical, touchable assets with a definite monetary value, such as property, equipment, inventory, and cash.
Tax Provision
The estimated income tax expense recorded on a company's income statement for the reporting period.
Tax Shield
The reduction in taxable income — and therefore taxes paid — resulting from allowable deductions such as interest expense or depreciation.
Temporary Difference
A difference between an asset or liability's book value for financial reporting and its tax basis that will reverse over time.
TIE Ratio
A solvency ratio measuring how many times a company can cover its interest expense with operating earnings.
Treasury Stock
Shares a company has repurchased from the open market and holds rather than retiring or reissuing.
Unearned Revenue
Cash received from customers before the related goods or services have been delivered.
Unit-of-Production Depreciation
A depreciation method that allocates an asset's cost based on its actual output or usage rather than elapsed time.
Unqualified Opinion
An auditor's clean opinion that financial statements present fairly in conformity with GAAP.
Unrealized Gain/Loss
The paper profit or loss on an investment that has not yet been sold, reflecting the difference between current market value and original cost.
Useful Life
The estimated period over which a depreciable asset is expected to provide economic benefits, used to calculate periodic depreciation expense.
Variable Cost
A cost that changes in direct proportion to production volume or sales activity, such as raw materials and direct labor.
Variable Costing
A cost accounting method that treats only variable manufacturing costs as product costs.
Vertical Analysis
A financial statement analysis technique that expresses each line item as a percentage of a base figure within the same period.
Working Capital
Current assets minus current liabilities, measuring a company's ability to meet short-term obligations.
Write-Down
A partial reduction in the carrying value of an asset to reflect impairment or decline in fair value below book value.
Write-Off
The complete removal of an asset from the balance sheet when it is determined to have no remaining recoverable value.