Financial Glossary
Browse all 70 accounting and finance terms, defined with examples.
70 terms across 6 categories
Understanding financial terminology is the first step toward making confident business decisions. Whether you're reading a balance sheet for the first time, reviewing a loan agreement, or preparing for tax season, knowing exactly what terms like "accounts receivable," "accrual basis," and "depreciation" mean gives you the clarity to manage your money instead of guessing.
This glossary covers 70 financial and accounting terms organized alphabetically, with plain-language definitions, practical examples, and explanations of why each concept matters for small business owners and freelancers. Every definition is written for people running businesses, not for accountants studying for an exam.
A
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Amortization
The gradual reduction of a loan balance or spreading the cost of an intangible asset over its useful life.
ACH
Automated Clearing House — an electronic network for batched bank-to-bank transactions.
AR Aging
A report categorizing outstanding customer invoices by how long they have been unpaid.
Accounts Reconciliation
Ensuring account balances match between different records.
B
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Bookkeeping
The process of recording daily financial transactions including sales, purchases, payments, and receipts.
Bank Reconciliation
Matching bank statements with internal records to identify discrepancies.
Business Loan
A loan used to fund business operations, expansion, or asset purchases.
Burn Rate
The rate at which a company spends cash monthly.
Break-Even Point
The sales volume at which total revenue exactly equals total costs — neither profit nor loss.
C
Cash Accounting
An accounting method that records revenues and expenses only when cash is received or paid.
Chart of Accounts
A complete list of all accounts used by a business to record financial transactions.
Cost of Goods Sold
The direct costs of producing goods sold by a company, including materials and direct labor.
Current Liabilities
Obligations due within one year.
Cash Flow
The movement of money in and out of a business.
Cash Flow Forecast
A projection of expected cash inflows and outflows.
Cash Flow Statement
A financial statement showing cash movements from operations, investing, and financing.
Current Ratio
Current assets divided by current liabilities.
C Corporation
A standard for-profit corporation that is a separate legal entity taxed independently from its owners at the entity level.
D
E
F
Fixed Asset
A long-term tangible asset used in business operations, such as buildings, vehicles, or machinery.
Form 1099
IRS forms reporting various types of income other than wages.
Form W-2
Annual statement from employers showing employee wages and taxes withheld.
FICA
Federal Insurance Contributions Act taxes that fund Social Security and Medicare.
Free Cash Flow
Cash from operations minus capital expenditures.
Financial Statements
Reports summarizing financial performance and position.
Fixed Costs
Expenses that remain constant regardless of production.
G
I
L
N
O
P
Payroll Tax
Taxes withheld from employee wages for Social Security and Medicare, plus employer-side employment taxes.
Positive Cash Flow
When cash inflows exceed outflows in a period.
Pro Forma Invoice
A preliminary, non-binding invoice sent before goods are delivered or services completed.
Profit Margin
Net income divided by revenue, expressed as a percentage — the share of each revenue dollar kept as profit.
Profit and Loss
Another name for the income statement.
Q
R
Retained Earnings
Cumulative profits kept in the business since inception rather than distributed as dividends.
Revenue
Total income from sales of goods or services before any expenses are deducted.
Runway
The number of months a company can operate before running out of cash.
Recurring Invoice
An invoice automatically generated on a fixed schedule for ongoing services or subscriptions.
Return on Investment (ROI)
A measure of profitability comparing the net gain from an investment to its cost, expressed as a percentage.
S
Schedule C
IRS form used by sole proprietors to report business income and expenses.
Self-Employment Tax
Social Security and Medicare taxes paid by self-employed individuals on net earnings.
Sales Tax
A consumption tax charged on retail sales of goods and certain services.
Sole Proprietor
An unincorporated business owned and operated by one person with no legal separation from the owner.
S Corporation
A tax election that allows pass-through taxation while letting owner-operators split compensation between W-2 wages (subject to FICA) and distributions (not subject to SE tax).