Asset case

Balance sheet

How a business records its financial information

Bank reconciliation

Bank reconciliation involves comparing your financial records with your bank statements and identifying any differences

Bankruptcy

A legal process that can absolve people or corporations of some of their debts.

Basis of accounting

Determines when you formally count a sale as income

Break even point

Amount of revenue necessary to cover the total fixed and variable expenses

Capital

A company's financial resources, including stocks, bonds, and assets.

Capital gains

Profits made when assets are sold.

Capital loss

Losses incurred when certain assets are sold for less than their purchase price.

Cash accounting

Records revenues and expenses when the money involved in each transaction officially changes hands.

Cash flow statement

A financial report that shows where your money is coming from and where it’s going

Cash method

A method of accounting in which income is not counted until the payment is received

Chart of accounts

A master list of all accounts in an organization's general ledger

Cost of goods sold (COGS)

The cost of materials, work, and purchasing goods.

Current year tax

The amount of tax payable in the current year

Debt consolidation

The process of combining multiple debts into one.

Debt-to-income ratio

How much of a person’s monthly income is taken up by their debt

Deduction

An amount you can subtract from your gross income to lower tax

Dependent

An individual who is financially supported by another person

Depreciation

The decrease in the value or price of an asset

Direct tax

A tax paid by the person who owns the property or income being taxed

Dividend

A distribution of a company's earnings to its shareholders

Dividend imputation

The process of eliminating double taxation on payments

Due diligence

A systematic way to review and reduce risk from a business or investment decision

E-commerce

Any transaction that is conducted over the internet.

E-file

A system that enables income tax returns to be filed over the internet.

EBITDA

Earnings before interest, taxes, depreciation, and amortization.

Emergency fund

Money that’s set aside for unplanned and typically urgent or important expenses.

Employee savings plan

A pooled investment account into which workers deposit some of their pre-tax earnings

Equity

The value of an asset after any of the asset’s liabilities have been deducted.

Estate

A person’s net worth based on the assets they own minus the amount they owe

Estate tax

A tax assessed when a deceased person’s estate is distributed to the beneficiaries.

Estimated tax payments

These are made quarterly to tax authorities by people whose income is estimated from the previous year.

Excise tax

Exclusion tax

Income that taxpayers can leave out of their gross income

Fair market value

The price a willing buyer would pay for a home in an open market

Financial statement

A formal record of a business' financial activities and position

Fiscal year

A fiscal year is a 12-month period that a business uses for accounting and financial reporting purposes.

Fixed assets

Fixed assets are long-term, tangible resources that a business owns

Flat tax

A system in which all people pay the same tax rate regardless of their income.

Fractional ownership

Where a group of people all own a portion of an asset

Government bond

A form of security sold by the government that earns a fixed amount of interest

Gross income

The total earnings a person receives before they account for taxes and other deductions.

Gross profit

Gross profit (or gross income) defines the value of the products and services sold by a business before factoring in the cost of goods sold.

Gross profit margin

The amount of revenue in a given period after a company pays for workers and materials

Gross profit vs Net profit

Gross profit and net profit are both key measures of a business’s profitability

Health savings account (HSA)

A medical savings account in which people can set aside money

Household income

The total amount of money earned by every member in a household over the age of 15

Housing expense ratio

A person’s income before taxes when compared with their housing expenses

Income tax

Taxes that are charged against a person or company’s earnings

Indirect tax

A tax that is imposed on a transaction

Inventory

Describes assets (products) that a company intends to sell

Investment income

Money that someone earns when the value of their investments–such as stocks or property– increases.

Invoice

A formal document issued by a seller to a buyer that outlines the details of a transaction

Journal entry

The method used to record individual financial transaction

Key Performance Indicator (KPI)

A core metric used by a business to monitor its progress

Ledger balance

An account balance at the beginning of each day.

Leverage

When a company takes on debt in order to invest in more assets

Liability

Anything that a person or business owes money on.

Line of credit

Liquid assets

Anything that you or your company owns that can be instantly converted into cash

Liquidity

The ability or ease with which your assets can be converted into cash.

Living trust

A legal arrangement where a still-living person (trustor) gives assets to a trustee to manage

Load

A commission (fee) paid to a sales broker by an investor.

Margin

A broad term with multiple meanings depending on the context.

Margin vs Markup

Both refer to profitability but are calculated differently.

Maturity date

The date when an investment becomes due and is repaid to the investor

Mortgage

A loan to borrow a home.

Mutual fund

An investment that allows individuals to contribute money along with other investors.

Negative equity

A term used when the mortgage amount is higher than the current market value of the home.

Net income

The amount an individual or business makes after deducting costs, allowances and taxes.

Net profit

The amount of money left over after subtracting the cost of taxes and goods sold

Net worth

A measure of wealth calculated by the sum of all assets owned by a person or a company, minus any obligations or liabilities.

Non-liquid asset

An asset that can not quickly or easily be converted into cash

Note

A legal debt instrument where one party makes a promise in writing to pay

Operating margin

How much revenue a company retains after covering costs like payroll, taxes and materials.

Operating profit

The income a company earns from its core operations, excluding interest and taxes, reflecting operational efficiency.

Options

A contract in which an investor has the right to buy or sell a tradable asset at a specified price

Payroll records

Document employee compensation, including wages, bonuses, taxes and benefits.

Periodic rate

The interest rate charged over a certain number of time periods...

Private equity

A situation where investors pool money to acquire stakes in a company.

Profit and Loss Statement

Shows how much your business has spent and earned over a specified time

Property tax

Taxes paid by homeowners to help cover costs in their community

Purchase agreement

A document outlining the purchase price and other conditions associated with the transfer of title

Quantitative easing

The introduction of new money into the money supply by a central bank.

Quick Ratio

The ability of a company to pay current liabilities with current assets

Rebate

A partial refund or discount

Recession

A period of economic decline lasting more than a few months and affects every sector.

Refinance

Changing the terms of a loan, often by replacing your current loan with a new one.

Return on Assets (ROA)

A measure of how much profit a business is generating from its capital.

Return on Equity (ROE)

A measure of the profitability of a business.

Return on Investment (ROI)

The profit from a particular activity or period compared with the amount invested in it.

Revenue

The income that a business receives regularly, typically due to the sale of goods or services.

Risk

The possibility that a return on investment will be lower than what the investor is expecting.

Roth IRA

A Roth IRA allows you to invest cash after-tax, so you’ll pay taxes on any contributions before they go into the account.

S corporation

An S corporation lets shareholders file their taxes using the company’s income and losses as their own.

Safe harbor

Safe harbor provisions protect an entity from liability as long as it acted in good faith.

Schedules

Documents required by the IRS to record financial information.

Self-directed IRA

SDIRA allows you to invest in a wide variety of alternative assets

Self-employment tax

People who work for themselves are required to pay Social Security and Medicare taxes

Signature loan

A personal loan that only requires the borrower’s signature and a promise to pay as collateral

Sole proprietorship

A sole proprietorship is a business owned and operated by one individual, with no legal distinction between owner and business.

Stockbroker

A licensed professional with the authority to buy and sell stocks for investors.

Tax bracket

The range of incomes that are subject to a certain income tax rate.

Tax credit

The amount of money a taxpayer can subtract from their tax bill.

Tax deduction

An item you can subtract from your taxable income to reduce the amount of taxes you owe.

Tax deferral

When a taxpayer delays paying their taxes to some point in the future.

Traditional IRA

Allows you to invest cash pre-tax

Trial balance

A trial balance is a report of the balances of all general ledger accounts at a point in time.

Unearned income

Personal income that isn’t related to employment

Unsecured debit

Debt that is not secured by collateral that could be repossessed if the loan isn’t paid back.

Use tax

A tax on a purchase made outside a jurisdiction

Venture capital

A form of private equity and type of financing

Working capital

The total of the cash and the liquid investments a business has available

Year to Date (YTD)

the first day of the current calendar year or fiscal year up to the current date

Zero-rated

Products or services exempt from VAT or GST