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Tax & Accounting Glossary

Understand Tax & Accounting Better.

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1099 -

An IRS form used to report income received outside of wages, such as contract work or freelance earnings, for individuals who are not traditional employees.

Accrual -

An accounting method that records income and expenses when they are earned or incurred, regardless of when the related cash transactions occur.

Amortization -

The systematic allocation of the cost of intangible assets, like patents or trademarks, over their estimated useful life.

Audit -

An in-depth examination of a company’s financial records, transactions, and systems by an independent auditor to verify accuracy, compliance with regulations, and financial health.

Audited Financials -

Financial statements reviewed and verified by an independent auditor for accuracy, compliance, and transparency.

Balance Sheet -

A financial statement presenting a snapshot of a company’s assets, liabilities, and shareholders’ equity, offering insight into its financial position at a given time.

Bookkeeping -

The systematic recording, organizing, and classifying of financial transactions, forming the foundation for accurate financial statements and decision-making.

Capital Expenditure -

Money spent on acquiring or improving long-term assets, such as buildings or equipment, which benefit the company for an extended period.

Capital Gains -

The profit realized from the sale of assets, such as stocks, real estate, or other investments, and is subject to specific tax rates.

Cash Flow -

The movement of money into and out of a business over a specific period, indicating its ability to generate and manage cash.

CPA -

A Certified Public Accountant is a licensed professional who provides accounting, tax, audit, and financial advisory services to individuals, businesses, and organizations.

Deduction -

An allowable expense or reduction in taxable income, which results in a lower tax liability for individuals and businesses.

Dependent -

An individual, typically a child or relative, who relies on another taxpayer for financial support and may qualify for certain tax benefits.

Depreciation -

A method used in accounting to allocate the cost of tangible assets over their useful life, reflecting their gradual wear and tear or obsolescence.

EBITDA -

Earnings Before Interest, Taxes, Depreciation, and Amortization represents a company’s operating profitability before considering non-operating expenses.

FIFO -

First-In, First-Out is an inventory valuation method that assumes the first items purchased or produced are the first to be sold or used.

Financial Statement -

A formal record summarizing a company’s financial activities, including balance sheet, income statement, cash flow statement, and statement of changes in equity.

GAAP -

Generally Accepted Accounting Principles are a set of standard accounting rules and guidelines that provide a consistent framework for financial reporting, ensuring transparency and comparability.

IRS -

The Internal Revenue Service is the federal agency in the United States responsible for enforcing tax laws, collecting taxes, and administering tax-related programs.

Payroll -

The process of managing employee compensation, including wages, salaries, bonuses, and taxes withheld, ensuring compliance with labor laws and tax regulations.

Payroll Tax -

Taxes withheld from employee wages, including income tax, Social Security tax, Medicare tax, and unemployment taxes.

ROA -

Return on Assets measures a company’s efficiency in generating profit from its total assets.

Tax Deductible -

Expenses that can be subtracted from taxable income, reducing the amount of tax owed, potentially resulting in lower overall tax liability.

Tax Return -

A document filed with tax authorities that reports a taxpayer’s income, deductions, and tax liability for a specific period, enabling the calculation of taxes owed or refunds due.

Taxable Income -

The portion of an individual’s or company’s income subject to taxation after accounting for allowable deductions and exemptions.

TDS -

Tax Deducted at Source is a system used in some countries to collect income tax at the time of payment, ensuring timely revenue collection for the government.

W-2 -

A Wage and Tax Statement issued by employers to employees, reporting their annual wages and taxes withheld for income tax purposes.

Withholding -

The process of deducting income taxes and other obligations from employee paychecks, which are then remitted to the tax authorities on their behalf.