Accounting Software Glossary
Accounts payable
Money that a business owes to vendors, suppliers and creditors.
Accounts receivable
Money owed to a business for goods and services rendered.
Accrual accounting
More complex method of accounting that lists income and expenses on the dates when they were actually invoiced. Also see cash accounting.
Amortization
The depreciation of an asset over a fixed period of time.
Assets
Equipment, buildings, investments and money that a business owns or is due.
Balance sheet
An accounting statement listing business assets, liabilities and equity (the difference between assets and liabilities).
Capital
Money put into a business for growth, as opposed to money earned by the business.
Cash flow
Accounting statement that shows the flow of money in and out of the business over a period of time.
Cash accounting
Simpler method of accounting that lists income and expenses when they were actually received or paid. Also see accrual accounting.
Depreciation
The amount or percentage decline in an asset over a period of time.
Double-entry accounting
Accounting method that lists each transaction twice - once as a debit and once as a credit.
Draw
Money taken out of a business by its owner for personal use. This is different than wages paid to employees and officers.
EBIT
Earnings before interest and taxes have been deducted.
EBITA
Earnings before interest, taxes and amortization have been deducted.
EBITDA
Earnings before interest, taxes, depreciation and amortization have been deducted).
Equity
The value of a business, which is the difference between assets and liabilities. Also called net worth.
Expenses
Goods and services purchased by a business for its operation.
Income
Money received by a business from its activities.
Invoices
Written statements of a business transaction submitted to customers when requesting payment. Also called bills or statements.
Liabilities
Money owed by the business to vendors and suppliers.
Net income
Gross income minus expenses or the profit of a business.
Profit and Loss statement (P&L)
Accounting statement comprised of revenue and expenses, which shows the profit or loss of a business.
Wages
Payments made to the employees of a business for their work. These are classified as expenses for the business.
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