A
Account: It's a record used to classify and summarise transactions related to a specific financial category, such as assets, liabilities, equities, income, or expenses.
Accounting: The process of checking, recognising, recording and summarising transactions. It helps a business understand its financial position by tracking income, expenses, assets, and liabilities, so it can make informed decisions.
Accounting Cycle: The basic steps a business follows to keep track of its money. It helps make sure all financial activities are handled properly so they can be included in reports like the financial statements.
Accounting Equation: It's the foundation of double-entry bookkeeping and represents the relationship between a company's assets, liabilities and equities. This equation must always balance, meaning: Assets = Liabilities + Equity. (See Double-Entry Method).
Accounting Period: A specific time frame used for financial reporting. An accounting period (or reporting period) is often 12 months, but can also be monthly and quarterly depending on the business task. Also see Financial Year, Calendar Year, Interim Period.
Accounts Payable (account): It records bills or invoices from suppliers for purchases made on credit. It shows the amount owed to a creditor for delivered goods or completed services. This control account is a key component of a company's balance sheet. (Current Liability)
Accounts Receivable (account): It records money owed by debtors (customers) for sold goods or services rendered. This control account is a key component of a company's balance sheet. (Current Asset)
Accruals: Revenues earned or expenses incurred but not yet recorded in the books. E.g. An estimated expense for a plumber's service not yet invoiced. It's a Current Liability. Also see Accrual Accounting.
Accrual Accounting: Method where revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid. It follows the Matching Principle.
Accumulation:
Accumulated Depreciation: The total depreciation expense recorded for an asset from when it was placed in service to the date of the financial statement or tax return. It is recorded in a contra asset account, which offsets the related asset account on the balance sheet.
Accumulated Earnings: Profits that are not paid out as dividends but are instead added to the company’s capital base.
Accumulated Interest: Interest that has built up on a loan or investment but hasn’t yet been paid or received.
Adjusted Trial Balance: A trial balance prepared after all adjusting entries have been recorded and posted to the accounts. It should have equal credit and debit totals.
Adjustment Credit: An accounting entry used to decrease the amount owed by a customer or to a supplier. Example: Correcting an overcharged invoice by reducing the amount payable or receivable. {{ it seems the same as credit note so I've asked Kenneth for clarification}}
Adjustment Debit: An accounting entry used to increase the amount owed by a customer or to a supplier. Example: Correcting an undercharged invoice by adding the missing amount. {{Asked Kenneth}}
Amortisation: The process of gradually writing off the cost of a capitalised intangible asset over its useful life, systematically reducing its book value over time. This approach provides a more accurate picture of annual profits by following the matching principle in accounting.
Annual VAT Account: A regular nominal account used to track all transactions related to VAT returns. It records both automatic postings (such as VAT calculated during the VAT return process) and manual entries (such as payments made to or refunds received from the VAT department). This account helps monitor the net VAT payable or receivable over time.
Asset: What a business owns or controls which is expected to bring future benefits. These benefits come from past transactions or events.
Audit: A professional and independent examination of a company’s tax returns, financial statements, internal processes, or operations by a qualified accountant or audit team, to determine whether the financial data are presented fairly.
Auto-Balanced Journal: A contra entry generated automatically by the system against the 'Journal Auto Balancing' account. It's triggered by the Journal Auto Balancing setting and applies to authorised users for each day the journal does not balance to zero.
B
Balance Sheet: Provides a snapshot of the company's assets, liabilities, and shareholders' equity at a specific point in time. To simplify, it shows what the company owns and owes.
Bank SEPA Type: this determines how euro transfers are processed, ensuring the bank account aligns with the bank’s supported payment methods and infrastructure.
Bonds: Similar to loans but raised directly from the public, often with lower interest rates but less flexibility. (Non Current Liability)
C
Calendar Year: An accounting period that runs from January 1 to December 31. See Accounting Period.
Cash Flow Statement: Details the cash inflows and outflows from operating, investing, and financing activities over a period. Basically it helps to understand the business financial health and cash management.
Cash Return: It's a refund given when a customer returns goods paid for via cash or immediate payment. The customer receives their money back instantly.
Cash Sale: A sale where the customer pays immediately using cash, card, or any instant payment method.
Capitalisation: The process of recording a cost as fixed asset in the balance sheet rather than an expense in the income statement. It allows businesses to spread the cost over time and reflect long-term assets (tangible or intangible) ownership.
Capital Contribution: The money that an owner or shareholder puts into a business to help fund its operations or growth. (Equity)
Credit (entry): An accounting entry that increases liabilities, equity, or revenue and decreases assets or expense. Also see Debit (entry).
Creditors Account: See Accounts Payable.
Credit Note: It's used to adjust the amount you owe to a supplier or is owed to you by a client due to returns, pricing errors, or other corrections. No immediate refund is issued and the credited amount is applied to future events or outstanding sales or purchase invoices.
Current (asset or liability): When assets or financial obligations are expected to be converted into cash, sold, or settled within a year.
D
Debit (entry): An accounting entry that increases assets or expenses and decreases liabilities or equity. Also see Credit (entry).
Debtors Account: See Accounts Receivable.
Deferred Income Tax: Taxes owed in the future due to timing differences between accounting and tax rules. (Non Current Liability)
Depreciation: The process of reducing the financial value of a fixed tangible asset due to: use, wear and tear, the passing of time and obsolescence.
Dividend: Profits distributed to shareholders. (Equity). Also see Withdrawal.
Dividend Income: Money earned from dividends on investments in other companies. (Other Income)
Direct Expenses: They're the direct and variable costs of doing business, which are directly related to the products you've sold or the services you've provided (cost of sales or services).
Double-entry method: An accounting method where every transaction is recorded in at least two accounts: once as a debit and once as a credit, ensuring the accounting equation (Assets = Liabilities + Equity) stays balanced.
Drawing: Withdrawal by sole proprietors. (Equity). Also see Withdrawal.
E
Equity: Equity is the residual value of an entity's assets after deducting all its liabilities. It also represents the net funds invested into a business by its owners. Involved into preparing the Balance Sheet for your business.
Expense: A cost incurred by a business to operate and generate revenue, recorded on the income statement and used to calculate profit.
Expense Account: Used to track and record all the costs and expenses a business incurs during its operations, whether they're tied or not to the core business activities. Expense accounts are involved into preparing the Income Statement (Profit & Loss). Also see Operating Expenses and Other Expenses.
F
Financial Statement:
Financial Year: A 12-month accounting period that may or may not align with the calendar year (e.g., April 1 to March 31). See Accounting Period.
Fixed Indirect Expenses: They tend to remain the same and they aren't correlated to the sales your business has made.
G
Goodwill: Amount paid for a company over its fair value.
Gross Profit:
H
I
Income Account: Used to keep track of the money a business makes from selling products or services (operating income). They help measure the business's profitability and facilitate decision-making. Income accounts are involved into preparing the Income Statement (Profit & Loss). Also see Operating Income and Other Income.
Income Statement: Shows the company's revenues and expenses during a particular period, highlighting the net profit or loss. In other words it shows the profitability of a business.
Indirect Expenses: They're the indirect costs of running the business, which can't be directly linked to making products or providing services. They can be fixed or variable. The term often overlaps with Overhead Expenses. If you’re thinking about cost allocation for production, you call them indirect expenses. If you’re thinking about keeping the business running, you call them overheads.
Intangible Asset: Non physical asset like intellectual property, patents, and goodwill. (Non Current Asset)
Interest Income: Money earned from interest on investments or savings. (Other Income)
Interim Period: A shorter accounting period within a fiscal year, often quarterly or monthly, used for interim financial reporting. See Accounting Period.
Invoice: It's a formal request for payment issued to a client or by a supplier. It details the products or services sold or bought, their quantities, prices, and the total amount due. An invoice issued to a client is called sales invoice, whether an invoice issued by a supplier is called purchase invoice.
J
K
L
Liability: What a business owes to third parties in the future. These obligations arise from past transactions or events and are used to buy assets or provide services to other entities. A liability can be current and non current.
Long-term Debt: Loan and other financial obligations due after one year. (Non Current Liability)
Long-term Investment: Investment held for more than a year. (Non Current Asset)
M
Matching Principle: If expenses contribute to generating revenue in a given period, they should be recorded in the same period as the revenue they help generate. E.g. Revenue from July and costs involved (e.g. salaries) recorded in July, even if paid in August.
Mortgage: Loans secured by property. (Non Current Liability)
N
O
Operating Expenses: Costs that are directly related to the core operations of the business but not part of producing goods or services. They are necessary for day-to-day functioning. Some of them tend to remain the same (E.g. Rent, Insurance costs etc.) while others are variable (E.g. Advertising costs, Utilities, etc). Also check Expense Account.
Other Expenses: Costs that are not related to the core business operations. These are typically non-operating, non-recurring, or incidental. (E.g. Interest expense, Loss on sale of assets, etc.). Also check Expense Account.
Operating Income: The profit a company earns from its core business operations, excluding any income from investments, interest, or non-operating activities. Formula: Operating Income = Gross Profit – Operating Expenses. See Sales Revenue and Service Revenue.
Other Income: Income that comes from non-core business activities, often irregular or incidental. It does not relate to the company’s main operations. See Interest Income, Rental Income and Dividend Income.
Overhead Expenses: these are ongoing business costs required to run operations, regardless of production (e.g. rent, utilities, insurance, depreciation etc.). The term often overlaps with Indirect Expenses. If you’re thinking about cost allocation for production, you call them indirect expenses. If you’re thinking about keeping the business running, you call them overheads.
Owner's Equity: Money invested by the sole proprietor. (Equity). Also see Capital Contribution.
P
Partner Contributions: Money invested by partners in a partnership. (Equity). Also see Capital Contribution.
Partner Drawing: Withdrawal by a partner. (Equity). Also see Withdrawal.
Pension: Obligation to pay retirement benefits to employees. (Non Current Liability)
Profit & Loss Statement: See Income Statement.
Purchase Return: it's a refund given in cash by your supplier when returning goods that you paid for via cash or immediate payment. You'll receive your money back instantly, reversing the original purchase and adjusting the business’s expense and cash balance.
Q
R
Reconciliation:
Rental Income: Money earned from renting out property or equipment. (Other Income)
Retained Earnings: Accumulated profits held for future use (investments into the business or withdrawal for personal use). (Equity)
Reversal: It can refer to a transaction, a reconciliation or a VAT return. It essentially means to create an opposite entry which will cancel the original one. This allows you to start over again keeping track of all the actions taken through time, for auditing purposes.
Reverse Charge: This mechanism is a compulsory VAT regulation that transfers the responsibility for paying VAT from the supplier to the customer. This rule applies when the supplier is not based in the country where the VAT is owed or when the transaction is susceptible to fraud or evasion.
S
Sales Revenue: Money earned from selling products. (Operating Income)
Service Revenue: Money earned from selling products. (Operating Income)
Shareholder's Equity: Money invested by shareholders in a corporation. (Equity). Also see Capital Contribution.
T
Tangible Asset: Physical assets like land buildings, and equipment. (Non Current Asset)
Transaction:
U
V
VAT Liability Account: See Annual VAT Account.
VAT Return:
W
Withdrawal: Removal of business funds or assets by the owner for personal use. (Equity)
X
Y
Z
Glossary from melting pot (TO CHECK AND ADD ABOVE ☝️ WHEN SOMETHING IS MISSING)
Glossary from melting pot (TO CHECK AND ADD ABOVE ☝️ WHEN SOMETHING IS MISSING)
Nominal Ledger
Sales Ledger
Purchase Ledger
Chart of Accounts: Accounts List: create a grid with the explanation of each account type
VAT Return
Reconciliations
Posting: what does it mean to Post?
Manual Journal (section): Nominal Account (?)
Auto Balance Journal (section)
Bank Journal (section)
Cash Journal (section)
Batch Journal (section)
Opening Balances (section)
My Work (section)
Audit Trail (section)
Financial Years
Currencies
Dimensions (section in Financial Settings)
%VAT (section in Financial Settings)
Tifd: TIFD stands for Tax Index of Financial Data and represents a listing of items commonly reported on balance sheets and income statements. The TIFD is a structured approach for the presentation of financial statement information that accompanies the tax return. It is a list or index, of balance sheet and income statement items that are used to create a unique financial statement combination.
The TIFD is a TAX index of financial statement information that is intended to regulate the reporting requirements for tax purposes. It provides a new way to collect financial information in a structured format that supports electronic filing. Having financial information in an ordered format allows the Office of the Commissioner for Revenue (CFR) to process returns more quickly and enhances the development of tax policies and legislation by the Ministry for Finance.
What is a Tenant? Difference between Tenant and Company?
Going Concern: The assumption that a business entity will be in operation for the foreseeable future.
Accruals: The assumption that the financial effect of the transactions and events are recognised as they occur, and not, when cash is received or paid.
It can be considered an Asset (e.g. Unpaid invoice from a client) as it is something owed to you.
It can also be considered a Liability (e.g. you purchased something but did not get the invoice yet from the supplier) as it is something you owe to someone.
Current (REFERRED TO ASSETS, LIABILITIES): that has to be covered in 1 year or less (whether it is generation of income or debts payment)
Non Current (REFERRED TO ASSETS, LIABILITIES): that can be covered in more than 1 year (whether it is generation of income or debts payment)
Assets: [what a company OWNS and based on which it generates revenue]:
- Current Assets (e.g cash at bank, cash in hand, inventory (what the company produces and and the material it uses have a value that has to be considered)). The resources that a business owns and expects to use or sell within a year.
- Trade receivables (or accounts receivable) (debtors; money that clients or customers owe to the business. for example you give the possibility to the clients to pay the invoiced amount in x days)
- Fixed assets (or Non Current assets) (property, vehicles, machinery, equipment)
- Intangible assets (trademarks (marchi registrati), patents (brevetti), licenses, copyrights (diritti d'autore)) ---> Still Non Current Assets
Liabilities [what a company OWES to external parties]
- Trade payables (money that the company owes to its suppliers and service providers)
- Business tax (VAT, Corporation Tax, PAYE [pay-as-you-earn] payments due) [Current Liability]
- Bank loans and mortgages [Non Current Liability]
- Directors' loans [Non Current Liability]
Equity [Net Assets (less) Liabilities] attivo meno passivo
- Share capital (capitale sociale): the amount of money shareholders have invested in shares at the company creation. A company's net worth (net asset) and it is equal to the total dollar amount that would be returned to the shareholders if the company must be liquidated and all its debts are paid off.
- Additional paid-in-capital (share premiums)
-Retained profit brought forward
- Current year's profit/loss
Retained Earnings (or Retained profits) (Utili trattenuti): Earned earnings in any particular year which are not distributed between the shareholders but kept for future investments for the business or to fund future assets. Basically they are accumulated profits that are not given to shareholders through dividends.
Dividend: it is a portion of a company’s earnings that is paid to a shareholder. Dividends are typically paid according to how many shares you have. If you own 100 shares of a company that is trading at $1 a share and paying a dividend of 25%, you would be paid $25.
Inventory: A company's goods and products that are ready to sell, along with the raw materials that are used to produce them
Trademarks: Intellectual property that helps to protect a brand by distinguishing it from competitors. It is used to protect the name, logo or slogan associated with a product or service from being uses by others without permission.
Trademarks vs Copyright: Copyright protects creative work, trademarks apply to brand names, phrases and logos.
PAYE: Method that tax and revenue agencies (of many countries) employ to ask the employer to deduct taxes directly from paychecks and remit them to the government with regular paychecks as they are earned.
Income Statement: it shows a company's revenues, expenses and profitability over a period of time (also called profit-and-loss [P&L) statement or earning statement). It shows your: revenue from selling products or services. expenses to generate the revenue and manage your business.
Financial Performance: identifies how well a company generates revenues and manages its assets, liabilities, and the financial interests of its stakeholders and stockholders.
Financial Position: - serves as a status snapshot, providing the most comprehensive picture of an organization's financial situation taking into consideration assets, liabilities and equities
Cash Flow Statement: summarizes the amount of cash and cash equivalents entering and leaving a company. (flusso di cassa). [income -(less) expenses in a specific time frame]. If incoming flows > outgoing flows --> Positive Cashflows
Net Profit (utile netto): Synonymous with net income, net profit is a company's total earnings after subtracting all expenses. Expenses subtracted include the costs of normal business operation as well as depreciation and taxes. Net profit is commonly referred to as a company's “bottom line” and is a true indicator of a company's profitability.
[Tangible Asset] Depreciation (deprezzamento di un asset tangibile): Asset depreciation refers to the use of an accounting method to allocate the cost of a tangible business asset over its useful life instead of in the period of time it was purchased. This allows the business to earn revenue from the asset immediately since the expense is spread out over time. (e.g. laptop cost 1000$; life span of the laptop is 5 years. This means I can generate revenue through this laptop for 5 years before it breaks. Thus I spread the expense over the 5-year-life span of the laptop. So 200$ per year expense against the revenue I generate through them)
[Intangible Asset] Amortisation (ammortamento di un asset intangibile): the accounting practice of spreading the cost of an intangible asset over its useful life. Intangible assets aren't physical but they're still assets of value. They can include patents, trademarks, franchise agreements, copyrights, costs of issuing bonds to raise capital, and organizational costs.
Deferred income (revenue) (risconto passivo): Money received in advance for products or services that are going to be performed in the future. Rent payments received in advance or annual subscription payments received at the beginning of the year are common examples of deferred revenue. In other words, it refers to money that your company receives for goods or services that haven't been delivered to your customer. (invoice before delivering the service/good)
Accrued income (revenue) (ratei attivi): income that a company will recognize and record in its journal entries when it has been earned – but before cash payment has been received (invoice after delivering the service/good).
Deferred Expense (revenue) (risconto attivo): it refers to expenses that have been paid but not yet incurred by the business. Examples of deferrals: Insurance premiums. Subscription based services (newspapers, magazines, television programming, etc.) Prepaid rent.
Accrued Expense (revenue) (ratei passivi): Accrued expenses are expenses that a business incurs, but hasn't yet paid yet. For example, a company might receive goods or services and pay for them at a later time. It’s a similar concept to buying something with a credit card. You receive the item immediately, but you'll pay for it later and need to account for it in your budget.
Journal (journal entry): A Journal Entry is the initial step in the accounting cycle, recording the financial transactions of a business. It follows the double-entry bookkeeping system, where each transaction has an equal debit and credit entry in the company's accounts.
Account (in ledgers): an account is a record in the general ledger that is used to sort and store transactions.
Operating Expense: An operating expense is an expense that a business incurs through its normal business operations. They include rent, equipment, inventory costs, marketing, payroll, insurance, and funds allocated for research and development.
Operating Income: Operating income refers to the adjusted revenue of a company after all expenses of operation and depreciation are subtracted.
Operating Income = Gross Income – (Operating Expenses + Depreciation)
Regular Cash Account: where only cash transactions like cash sales , cash purchases, income received through cash, expenses paid in cash, are recorded.
Regular Bank Account: where all bank related transactions like , goods purchased or sold expenses paid or income received through cheque or bank draft, are recorded.
Regular Annual VAT Account: where VAT returns a recorded. The VAT period typically allocated to a person registered under Article 10 would be a period of 3 calendar months. Exceptions apply where a tax period may be of more or less than 3 months. A 12 month VAT period applies where the value of sales made does not exceed the relevant ‘Exit Threshold’ as specified in the 6th Schedule to the VAT Act.
Set Off: a counterbalancing debt or claim, especially one that cancels an amount a debtor owes.
Regular Set Off Account: Here you create set-offs between the on account payments/credit invoices and debit invoices. You can also set-off customer invoices against supplier invoices, when one company is both a customer and a supplier.
Regular Retained Earnings Account: where to record Retained Earnings
Regular Yearly Profit/Loss Account: where to allocated records for Income Statement??? {chiedere}
Control Account: any summary account in the nominal ledger. There are other names for control accounts, like adjustment account or controlling account. Control account details are found in their corresponding subsidiary ledgers.
Control accounts are meant to keep a company’s nominal ledger clean of details. They still need to have the correct financial information needed to prepare the company’s financial statements. Control accounts are clean entries that match overall amounts in more detailed ledgers.
Control Sales Account: All the individual transactions posted to your customer ledger cards so invoices, credit notes and receipts are reflected in this account. A control account is used to double check the totals that appear in the balance sheet and in particular financial reports.
Control Stock Account: it depicts the total value of the stock items. The balance of every stock item in the ledger account should equal the total list of stock items. These stock item lists are derived from subsidiary ledger accounts of an individual stock item.
Control Purchases Account: it shows the total amount that is payable to suppliers, but it does not show the amount owed to individual suppliers. This information is provided by the purchases ledger which contains an account for each individual supplier.
Control VAT Account: The Value Added Tax control account is used by businesses that are registered for VAT. The account records all the VAT on both sales (outputs) and purchases (inputs) so that the balance on the account shows the amount that should be paid to (or claimed from) the Revenue Authority.
Discount Account: Discount account can be the indirect income (if received) or indirect expenses (if paid) of a business and hence, they are classified as nominal accounts.
Gain Account: for recording gains such as gains on disposal of assets or on sale of marketable securities. These accounts are treated like revenue accounts and are closed into the fund balance account at year end.
Loss Account: for recording losses such as losses on disposal of assets or on sale of marketable securities. These accounts are treated like expense accounts and are closed into the fund balance account at year end.
Marketable securities: Marketable securities (e.g. bonds, stocks, treasury bills etc.) are liquid financial instruments. They can be converted into cash quickly and at a reasonable price. The reason that marketable securities are highly liquid is that the maturities tend to be less than a year. Also, the rates at which they can be sold or bought don’t have much of an effect on the prices. This would include stocks and fixed-income securities that have a maturity period of longer than a year.
Marketable securities tend to be reported under the cash and cash equivalents accounts on the balance sheet of a company. This would be in the current assets section.
Bank Charge Account: used to record Bank service charges (operating expense). They can typically be classified as 'Banking and Credit Card Fees' if they are charges levied by the bank for services rendered. This would include charges such as monthly account fees, ATM fees, and foreign transaction fees.
Reconciliation: it refers to the process of comparing two sets of records or financial information, such as bank statements, nominal ledger accounts or other relevant records, to ensure their accuracy and consistency.
The primary objective of reconciliation is to identify and resolve any discrepancies between the two sets of records. This helps preserve the integrity of financial statements and identifies errors or fraudulent activities.
Bank reconciliation: Comparing the transactions and balances in a business's bank statement with the entries in the cash book or nominal ledger
Nominal ledger reconciliation: Reconciling various nominal ledger accounts to make sure that the recorded transactions and balances are complete and accurate
Glossary | Aha! (TO CHECK AND ADD ABOVE ☝️ WHEN SOMETHING IS MISSING)