Vocabulary for Accounting: Exercise
If you find it difficult, do not forget to visit our accounting vocabulary list.
Vocabulary for Accounting
Do not forget to do our test on accounting vocabulary.
A statement: A formal document summarizing financial transactions or other relevant information.
Example: The monthly bank statement shows all deposits, withdrawals, and fees for the account.
To issue: To release or distribute something officially, such as invoices, shares, or financial statements.
Example: The finance department will issue invoices to customers at the end of each month.
Balance sheet: A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing assets, liabilities, and equity.
Example: The balance sheet reveals that the company's total assets exceed its liabilities, resulting in a strong equity position.
A debit: An entry that represents an increase in an asset or expense account and a decrease in a liability or equity account in double-entry accounting.
Example: To record the purchase of equipment, you would make a debit entry to the equipment account.
A credit: An entry that represents a decrease in an asset or expense account and an increase in a liability or equity account in double-entry accounting.
Example: When a customer pays an invoice, you would make a credit entry to the accounts receivable account.
Fixed assets: Long-term assets, such as buildings and machinery, that are not intended for sale in the normal course of business.
Example: The company's fixed assets include a factory, vehicles, and office equipment.
Liabilities: Debts or obligations a company owes to external parties, including loans, accounts payable, and bonds.
Example: The company's current liabilities include outstanding vendor invoices and short-term loans.
Tangible: Physical assets or items that have a material existence and can be touched or seen.
Example: Machinery, equipment, and inventory are examples of tangible assets.
Intangible: Assets that do not have a physical presence but represent value, such as patents or copyrights.
Example: Patents, trademarks, copyrights, software licences or customer lists are examples of tangible assets.
Income statement: Also known as a profit and loss statement, it summarizes a company's revenues, expenses, and profits over a specific period.
Example: According to the income statement, the company achieved a net profit of $500,000 in the last quarter.
Cash flow statement: A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.
Example: The cash flow statement indicates that the company had a positive cash flow of $100,000 for the year.
Net cash flow: The difference between cash inflows (incomings) and cash outflows (outgoings) during a specific period.
Example: Positive net cash flow indicates that a company is generating more cash than it is spending.
Amortization: The gradual reduction of an intangible asset's value over time, similar to depreciation for tangible assets.
Example: The software development costs are amortized over five years to reflect their ongoing benefit to the company.
Depreciation expense: The annual allocation of a tangible asset's cost to reflect its declining value over time.
Example: The depreciation expense for the building was $10,000 for the year, in line with the asset's expected lifespan.
To wear out: To become unusable or lose value over time due to wear and tear.
Example: The machinery has started to wear out and requires regular maintenance.
Cash Equivalents: Highly liquid assets that are easily convertible to cash and have a short-term maturity of typically three months or less.
Example: Treasury bills and money market funds are common examples of cash equivalents that provide quick access to funds for short-term needs.
Equity: The portion of a company's value that belongs to its owners (shareholders), calculated as assets minus liabilities.
Example: Shareholders' equity increased significantly after a successful round of funding.
Dividend: A payment made by a corporation to its shareholders, typically from its earnings.
Example: The company's board of directors approved a dividend payment of $0.50 per share to be distributed to shareholders.
Retained earnings: The portion of a company's profits that are reinvested in the business rather than distributed to shareholders as dividends.
Example: The board of directors decided to allocate a portion of the profits to retained earnings for future expansion.
Audit: An independent examination of a company's financial statements and internal controls by an external auditor to ensure accuracy and compliance.
Example: The annual audit revealed no material discrepancies in the company's financial records.
GAAP (Generally Accepted Accounting Principles): A set of standardized accounting principles, standards, and procedures used in the United States.
Example: Adhering to GAAP ensures consistency and comparability in financial reporting among U.S. companies.
IFRS (International Financial Reporting Standards): A set of accounting standards developed by the International Accounting Standards Board (IASB) used globally in many countries.
Example: The company follows IFRS for its international subsidiaries to maintain uniform financial reporting practices.
Cost accounting: The process of tracking and analyzing the costs associated with producing goods or services.
Example: Cost accounting helps the company determine the most cost-effective way to manufacture its products.
Incomings: Refers to money received by a business, such as revenue, sales, or other sources of income.
Example: The incomings from the new product launch exceeded our expectations.
Outgoings: Refers to money spent or expenses incurred by a business.
Example: It's essential to monitor outgoings to ensure the company remains profitable.
Accounts Payable: Money owed by a company to its suppliers for goods or services.
Example: The company had $10,000 in accounts payable to various vendors at the end of the month
Accounts Receivable: Money owed to a company by customers or clients for goods or services provided on credit.
Example: The accounts receivable balance of $15,000 represents outstanding invoices that are expected to be collected from customers within the next 30 days.
Revenue recognition: The process of determining when and how to record revenue from sales of goods or services.
Example: Revenue recognition policies dictate that subscription revenue is recognized monthly over the subscription period.
Debt-to-equity ratio: A financial ratio that measures a company's relative proportion of debt and equity in its capital structure.
Example: The debt-to-equity ratio indicates that the company relies more on equity financing than debt to fund its operations.
Fiscal year: The financial year of a company, which may not necessarily follow the calendar year.
Example: The company's fiscal year runs from April 1st to March 31st to align with its industry's seasonality.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance, often used to assess profitability.
Example: EBITDA provides a clearer picture of the company's core operating performance without the impact of non-operating expenses.
Accrual: The accounting method that records revenue and expenses when they are earned or incurred, regardless of when cash is exchanged.
Example: The company uses the accrual method to recognize revenue when it delivers products, even if the customer hasn't paid yet.
Cash basis accounting: An accounting method that records revenue and expenses when cash is actually received or paid.
Example: Small businesses often use cash basis accounting because it simplifies financial record-keeping by focusing on actual cash transactions.
Depreciation: The gradual reduction in the value of an asset over time due to wear and tear, obsolescence, or other factors.
Example: The company calculates depreciation on its machinery to account for its declining value on the balance sheet.
Accumulated depreciation: The total depreciation expense recorded against an asset since its acquisition.
Example: The accumulated depreciation for the machinery is $50,000, reflecting its decreasing value over the years.
Trial balance: A list of all general ledger accounts and their balances used to ensure that debits equal credits.
Example: The trial balance showed a discrepancy, prompting a thorough review of the accounting entries.
Ledger Accounts: Detailed records in an accounting system that track individual transactions for specific categories, such as assets, liabilities, income, or expenses.
Example: The Accounts Receivable ledger account keeps a record of all customer invoices and payments received by the company.
General ledger: A centralized accounting record that contains all financial transactions of a business, organized by accounts.
Example: The accountant updated the general ledger with the latest sales and expense data.
Cost of capital: The rate of return required by an investor or a company to invest in a particular project or asset.
Example: The company evaluated the cost of capital before deciding to undertake a significant expansion project.
Internal controls: Procedures and policies within a company to safeguard its assets, ensure accuracy in financial reporting, and prevent fraud.
Example: Implementing strong internal controls helps prevent unauthorized access to sensitive financial data.
Liquidity: The ability of a company to meet its short-term financial obligations with its current assets.
Example: Maintaining adequate liquidity is crucial to ensure the company can pay its suppliers and cover its operating expenses on time.
Reconciliation: The process of comparing two sets of records to ensure they are in agreement, such as bank statement reconciliation.
Example: The accountant performed a reconciliation of the bank statement and the company's cash ledger to identify any discrepancies.
Accounting period: A specific timeframe for which financial transactions and activities are recorded and reported, typically on a monthly, quarterly, or annual basis.
Example: The company's accounting period for the current fiscal year ends on December 31st.
Goodwill: In accounting, it represents the intangible value of a business, such as its reputation, customer base, and brand recognition.
Example: The acquisition of the competitor brought significant goodwill to our company due to their strong customer relationships.
Cost of goods sold: The direct expenses incurred in producing or purchasing the goods or services sold by a company.
Example: The cost of goods sold for the quarter increased due to rising raw material prices.
Operating profit: The profit a company generates from its core business operations, calculated by subtracting operating expenses from revenue.
Example: Despite increased competition, the company managed to achieve a healthy operating profit this year.
Total value: The overall sum or worth of an asset, investment, or financial item.
Example: The total value of the company's assets is estimated at $5 million.
To decline in value: To decrease in worth or market value over time.
Example: Real estate properties in that area have been declining in value due to economic downturns.
Double-entry bookkeeping: An accounting system that records each financial transaction with equal and opposite entries, ensuring that debits and credits are balanced.
Example: Double-entry bookkeeping helps maintain accuracy and integrity in financial records.
Advance / down payment: Money paid in advance by a customer to secure goods or services before delivery.
Example: The customer made an advance payment of 30% of the total project cost.
Bad debt: A debt that is unlikely to be collected because the debtor is unable or unwilling to pay.
Example: The company had to write off a significant amount of bad debt this year due to economic challenges.
Deferred tax: Income tax that is postponed and recognized on the balance sheet until a future period.
Example: Deferred tax assets and liabilities can have a significant impact on a company's financial statements.
Input tax: The value-added tax (VAT) paid by a business on its purchases of goods and services.
Example: The company can offset input tax against its output tax to calculate the net amount owed to the tax authorities.
Output tax: The VAT collected by a business on the sale of goods and services to customers.
Example: The business must remit the output tax to the tax authorities on a quarterly basis.
Actual basis: Accounting and financial reporting based on real transactions and events rather than estimates or projections.
Example: The financial statements are prepared on an actual basis, reflecting the company's true financial position.
To record: To document or make an official entry of a transaction or event.
Example: The accountant will record the sale of inventory in the ledger.
To keep a record: To maintain a documented history of transactions or events.
Example: It's essential to keep a record of all financial transactions for auditing purposes.
To be due: When an obligation or payment is expected or owed at a specified time.
Example: The rent for the office space is due on the first day of each month.
To pay off: To settle a debt or obligation by making a payment.
Example: The company plans to pay off its outstanding loans within the next five years.
To write off: To remove a non-collectible debt or asset from the financial records as a loss.
Example: The company had to write off a substantial amount of inventory that was damaged in a warehouse fire.
To run off: To quickly produce or print multiple copies of a document or report.
Example: The office staff needed to run off additional copies of the presentation for the meeting.
Past Simple vs. Present Perfect + Exercise
Past Simple
I spoke ("_ed" ending or 2rd column of the irregular verb list).
Negative: I DIDN'T speak (short for DID NOT, main verb is infinitive -1st column-).
Question: DID you speak?
It's used for actions you did once in the past, often saying WHEN you did them.
It usually comes with the following adverbs:
This morning, yesterday, last + night/week/month/summer/year, ...
In + any period of time in the past: In January, in 2010, in the 90s, ...
Also commonly used in relative clauses (= small phrase within a longer sentence).
Present Perfect
I HAVE spokEN ("_ed" ending or 3rd column of the irregular verb list).
Negative: I HAVEN'T spoken (short for HAVE NOT).
Question: HAVE you spoken?
It's used for actions you've EVER done in your life. We don't say WHEN exactly we did them.
It usually comes with the following adverbs:
Never, for, already, not yet, since, twice, many times, until now ...
Also commonly used for breaking news or making announcements.
Examples
I told you last time we met (WHEN?: last time we met).
I'VE told you many times (not saying exactly WHEN).
She lived in India in the 90s (WHEN?: in the 90s).
She'S lived in India since the 90s (saying HOW LONG but not WHEN).
Exercise on Past Simple and Present Perfect
Use the verb in brackets to fill the blanks using the right tense. Key answers below.I think I __________ (see, never) any of his films.
We __________ (not talk) to each other since we __________ (have) that argument.
I __________ (be) to Italy a couple of times, once to Rome and once to Milan.
Unfortunately, we __________ (not find) a nice apartment yet.
Arthur __________ (do) a road trip all across Thailand last summer.
I __________ (go) shopping on Sunday, but all the shops __________ (be) closed.
How many times __________ (I tell) you to clean the tub after you have a shower?
When __________ (be) the last time you __________ (do) something crazy?
Ms Richards __________ (found) the company in the early 2000s.
I __________ (join) the team in September, but __________ (not play) any game yet.
The alarm __________ (go) off when the burglars __________ (break) into the shop.
I __________ (live) in France five years ago, but I __________ (not speak) French ever since.
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Answers to the exercise
I think I have never seen any of his films.
We haven't talked to each other since we had that argument.
I've been to Italy a couple of times, once to Rome and once to Milan.
Unfortunately, we haven't found a nice apartment yet.
Arthur did a road trip all across Thailand last summer.
I went shopping on Sunday, but all the shops were closed.
How many times have I told you to clean the tub after you have a shower?
When was the last time you did something crazy?
Ms Richards founded the company in the early 2000s.
I joined the team in September, but haven't played any game yet.
The alarm went off when the burglars broke into the shop.
I lived in France five years ago, but I haven't spoken French ever since.
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