Glossary of Accounting Terms
Absorption costing A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base (see also Allocation base).
Account An explanation or report in financial terms about the transactions of an organization.
Accountability The process of satisfying stakeholders in the organization that managers have acted in the best interests of the stakeholders, a result of the stewardship function of managers, which takes place through accounting.
Accounting A collection of systems and processes used to record, report and interpret business transactions.
Accounting equation The representation of the double-entry system of accounting such that assets are equal to liabilities plus equity.
Accounting period The period of time for which financial statements are produced – see also Financial year.
Accounting rate of return (ARR) A method of investment appraisal that measures the profit generated as a percentage of the investment – see also Return on investment.
Accounting standards See International Financial Reporting Standards (IFRS).
Accounting system A set of accounts that summarize the transactions of a business that have been recorded on source documents.
Accounts ‘Buckets’ within the ledger, part of the accounting system. Each account contains similar transactions (line items) that are used for the production of financial statements. ‘Accounts’ is also commonly used as an abbreviation for financial ...