Finance & Accounting glossary from A to Z — Finance & Accounting

Finance & Accounting glossary — 142 definitions

Every term defined in the 29 sections of the guide, in alphabetical order.
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Assets: What the company owns and uses: fixed assets, inventory, trade receivables, cash.
Assets (balance sheet): What the company owns/uses: fixed assets, inventory, trade receivables, cash.
Discounting: Bringing a future value back to its present value, because one euro tomorrow is worth less than one euro today.
Depreciation / Amortisation: Spreading the loss of value of a fixed asset over its useful life (instead of a single charge).
Notes to the accounts: Document of the annual accounts that completes and comments on the balance sheet and income statement (methods, details, commitments).
Simplified notes: Reduced version of the notes for small businesses, proportionate to their size.
Foresight: Ability to detect a need or a cash shortfall in advance in order to deal with it in time.
Tax anticipation: Estimating in advance the taxes to be paid to prepare the cash position and avoid surprises.
Automation: Reducing manual tasks (data entry, calculations, declarations) through software, a source of reliability and time savings.
Trial balance: Table summarising all the accounts with the total debits, total credits and balance of each; a control tool.
Tax base: Amount (taxable profit) to which the tax rate is applied.
Financing need: Amount the company must find (credit, capital contribution) to cover a forecast deficit.
Working capital requirement (WCR): Cash tied up by the operating cycle (inventory + trade receivables − trade payables).
Balance sheet: Summary document presenting, at a given date, what the company owns (assets) and owes (equity & liabilities).
Management loop: Cycle of forecast → track → compare → correct, the heart of management control.
Budget: Quantified, forward-looking expression of the action plan (sales, expenses, investments) for an upcoming period.
Sales budget: Turnover forecast, the starting point of the budgeting process.
Business Intelligence: Tools (e.g. Power BI) automating the collection, analysis and visualisation of steering data.
Shareholders' equity: Resources belonging to the company/its partners (contributions, reserves, profit); measures its own wealth.
CFE / CVAE: Territorial economic contributions (France): local business taxes tied to the activity, independent of profit for the CFE.
Accounting chain: Sequence journal → general ledger → trial balance → summary documents (balance sheet, income statement).
Expenses: What the activity has cost: purchases, salaries, rents, depreciation, taxes…
Expenses / Income: Expenses = costs linked to the activity; income = revenue; their difference forms the result.
Staff costs: All the costs related to employees: gross salaries + employer social security contributions.
Fixed costs: Costs independent of the activity level (rent, insurance, fixed salaries).
Indirect costs: Costs that cannot be directly attached to a product (rent, administration), to be allocated via keys or ABC.
Variable costs: Costs proportional to the activity (raw materials, commissions).
Target: Objective value against which the indicator is compared to judge performance.
Account class: Large category of the chart of accounts (1 to 8), given by the first digit of the account number.
Reading keys: Minimum notions needed to understand the financial statements and indicators (balance sheet, result, margin, cash, WCR).
Year-end closing: All the end-of-period operations to close the books and prepare the financial statements.
Cloud accounting (online): Software accessible over the internet, connected to the bank, updated continuously.
Statutory auditor (France): Independent professional who audits and certifies the accounts (mandatory depending on size/legal form, distinct from the chartered accountant).
Accounting: System for recording and summarising the transactions of a business, expressed in monetary units.
Cost accounting: Management accounting, optional and free-form, serving internal use (costs, profitability, steering).
Payroll accounting: Accounting recording of salaries, social security contributions and amounts owed to employees and social bodies.
General accounting: Compulsory and standardised accounting producing the accounts intended for outside parties (tax authorities, banks, shareholders).
Income statement: Document that presents the period's income and expenses and computes the result (profit or loss).
Annual accounts: Summary documents produced at the end of the year: balance sheet, income statement and notes.
Balance sheet accounts: Classes 1 to 5 (equity, fixed assets, inventory, third parties, financial), shown on the balance sheet.
Income statement accounts: Classes 6 (expenses) and 7 (income), shown on the income statement.
Record retention: Obligation to keep invoices and accounting documents for a legal period (varying by document/country).
Budget control: Regular comparison between budget (planned) and actual, with variance analysis and corrective actions.
Social security contributions: Levies funding social protection: employee share (on the salary) and employer share (paid on top).
Full cost: Sum of all the costs (direct and indirect) attached to a product; the basis for setting a price that covers everything.
Cost to employer: Total cost of an employee for the company: gross salary + employer contributions (higher than the net received).
Marginal cost: Cost of producing one additional unit; useful for deciding whether to accept an extra order.
Variable cost (direct costing): Cost that only includes variable costs, to reason in terms of contribution margin (short-term decisions).
VAT credit: Situation where deductible VAT exceeds collected VAT; the State then owes VAT to the company.
Financial literacy: General ease with the company's figures, an asset for any manager.
Operating cycle: Sequence buys → inventory → production → sales → collections, the source of cash timing gaps.
Debit / Credit: The two columns of an account (left = debit, right = credit); their meaning depends on the type of account.
Time lag: Gap due to the delay between an accounting transaction and its actual passage through the bank (uncashed cheque…).
Informed decision: Choice supported by an understanding of the economic impacts (costs, margin, profitability, cash).
VAT return: Periodic document (monthly/quarterly) totalling collected and deductible VAT and calculating the balance.
Tax deduction: Removal of an element that is not taxable or already taxed (reduces the tax base).
Payback period: Time required for the gains to repay the initial investment; an indicator of time risk.
Payment terms: Customer terms (time to be paid) and supplier terms (time to pay) that directly influence the WCR.
Digitalisation: Moving documents and processes from paper to digital (invoices, records, archiving).
Social liabilities: Amounts owed to the social bodies (contributions to be remitted), recorded then paid when due.
Dialogue with finance: A manager's ability to talk on equal terms with finance people thanks to a numerical culture.
EBE: Gross operating surplus: pure operating profitability before depreciation and financing; a key cash indicator.
Budget variance: Difference between planned and actual; information that triggers analysis and reaction.
Tax deadline: Deadline for declaring and paying a tax, to be met under penalty of fines.
Journal entry: Recording of a transaction respecting double-entry (at least one balanced debit and credit).
Fundamental accounting equation: Assets = Equity & liabilities: everything the company owns has been financed by a resource.
Use / Source: Every transaction has a destination (a use, on the debit side) and an origin (a source, on the credit side).
Receipt / Payment: Money in (receipt: customer payment) or money out (payment: supplier payment, salary).
Gearing (leverage): Weight of financial debts relative to shareholders' equity; measures dependence on external funding.
Debits = credits: Absolute rule: in every entry, total debits equal total credits.
Excel (finance): The accountant's central spreadsheet for models, budgets, forecasts, dashboards and analyses.
Financial year: Period (often 12 months) over which the activity is measured and the accounts are prepared.
Chartered accountant (France): Professional who supports the company: keeping/reviewing the accounts, preparing the statements, advice, taxation.
E-invoicing: Issuing/receiving invoices in a structured format via platforms, increasingly mandatory.
Purchase invoice: Document recording a purchase; recorded as an expense (purchase), deductible VAT and supplier debt.
Sales invoice: Document recording a sale; recorded as a customer receivable, income (sale) and collected VAT.
Finance for non-financial people: The essential financial reading keys intended for managers and non-specialist professionals.
Business taxation: All the taxes and duties owed by the company (profit tax, VAT, local taxes…), varying by country.
Financial functions: Dedicated Excel functions (NPV, IRR, PMT…) for calculating profitability, loans and discounted values.
Working capital (WC): Excess of stable resources (shareholders' equity, long-term debt) over long-term uses; finances the WCR.
Legal form: Status of the company (sole trader, SARL, SAS…) which, together with its size, determines the extent of its obligations.
General ledger: Reorganisation of the entries by account: all the movements and the balance of each account.
Excl. tax / Incl. tax (HT/TTC): Amount excluding tax (HT) + VAT = amount including all taxes (TTC).
True and fair view: Principle requiring the accounts to honestly reflect the reality of the company (central role of the notes).
Relevant indicator: KPI aligned with the objectives and the levers of action, on which one can actually act.
IS: Corporate income tax (France): tax on the taxable profit of companies.
Journal (book of prime entry): Register recording transactions in chronological order, each entry balanced (debit = credit).
KPI: Key Performance Indicator: a numerical measure of an essential aspect of steering.
Reconciliation / substantiation: Verification that each account is correct and documented (matching receivables/payments, substantiating balances).
Tax return package: Set of accounting and tax documents submitted to the administration (in France).
Liquidity: Ability to meet short-term obligations (current assets relative to short-term debts).
Book of prime entry: Register in which all the company's transactions are recorded chronologically.
Accounting software: Tool automating the keeping of the accounts: entries, statements, declarations, invoicing, payroll, fixed assets.
Accounting/management software: Tool that keeps the accounts, produces the statements and manages payroll/invoicing (section 5.3).
Gross margin: Sales of goods − purchase cost of those goods (relevant for trading activities).
Contribution margin: Selling price − variable costs; what remains to cover fixed costs then generate profit.
Accounting obligations: All the legal duties regarding accounting (keeping books, annual accounts, retention).
Inventory operations: Closing entries that adjust the accounts to reality (depreciation, provisions, inventory, accruals).
Double-entry bookkeeping: Principle whereby every transaction is recorded twice: on the debit of one account and on the credit of another, for the same amount.
Stakeholder: Party interested in the accounts: manager, shareholders, banks, State/tax authorities, employees, suppliers, investors.
Liabilities & equity: Origin of the resources that finance the assets: shareholders' equity (contributions, profits) and debts.
Liabilities & equity (balance sheet): Origin of the resources: shareholders' equity (contributions + profits) and debts (loans, suppliers, State).
PCG: Plan Comptable Général: the French accounting framework (each country has its own; IFRS internationally).
Chart of accounts: Standardised list of numbered accounts used as a common framework for recording transactions.
Cash flow forecast: Forecast table of receipts and payments period by period, showing the cash balance to come.
Break-even date: Break-even point expressed in time: the date of the year when it is reached.
Power BI: Business Intelligence tool for automated and interactive dashboards (section 4.3).
Closing preparation: Organising the documents and keeping the accounts regularly in advance, for a smooth year-end closing.
Forecast (financial business plan): Projection of the future activity (turnover, expenses, result, investments, funding) over one or more years.
Planned / actual: Comparison between forecasts and real figures, to adjust the steering.
Prudence principle: Rule requiring not to overstate assets or profit and to anticipate the risks of loss.
Income: What the activity has earned over the period: sales, services, other income.
Provision: Recording, out of prudence, of a probable but not yet certain expense or loss (bad debt, dispute, impairment).
Bank reconciliation: Periodic comparison between the book balance of the bank account and the balance of the bank statement, to explain the differences.
Financial ratio: Ratio between two figures of the accounts producing an interpretable and comparable indicator.
Accrual principle: Principle attaching expenses and income to the period they actually relate to (accruals).
Simplified regime: Reduced accounting obligations for small businesses (cash-based record keeping, simplified accounts).
Reintegration: Adding back to profit an expense recorded but not deductible for tax (increases the tax base).
Bank statement: Document from the bank listing the transactions and balance of the account over a period.
Profitability: Ability to generate profit relative to the resources committed (economic and financial profitability, margins).
Result: Difference income − expenses: profit if positive, loss if negative.
Accounting profit: Profit arising from the income statement (income − expenses) under the accounting rules.
Operating result: Result of the ordinary activity (excluding financial and exceptional items); an indicator of core business performance.
Taxable profit: Basis for calculating the tax, obtained by adjusting the accounting profit according to the tax rules.
ROI: Return On Investment: a simple performance ratio (gain relative to the investment).
Meaning of account entries: Assets: debit = increase; Liabilities & equity: credit = increase (and vice versa).
Break-even point: Turnover at which the result is zero (neither profit nor loss); above it, the company makes money.
SIG: Soldes Intermédiaires de Gestion (intermediate management balances): breaking down the result into successive steps to analyse how it is formed.
Balance of an account: Difference between the total debits and the total credits of an account (debit or credit balance).
Settling a receivable/debt: Extinguishing a customer receivable (on receipt of payment) or a supplier debt (on payment made) against the bank.
Solvency: Ability of the company to meet its long-term obligations (e.g. financial autonomy).
Pivot table (TCD): Excel tool summarising large volumes of data into flexible analysis tables.
Management dashboard: Concise set of key indicators giving, at a glance, the state of the company and its activity.
VAT rate: Percentage applied (standard, reduced) varying according to the products/services and the countries.
Net cash: Money actually available: Cash = Working capital − Working capital requirement (WCR).
IRR: Internal Rate of Return: the project's rate of return, to compare with the cost of funding/capital.
VAT: Value Added Tax: a consumption tax collected by the company on behalf of the State.
VAT payable: Amount remitted to the State: collected VAT (on sales) − deductible VAT (on purchases).
Collected VAT: VAT invoiced to customers on sales, due to the State (on the credit side).
Deductible VAT: VAT paid to suppliers on purchases, recoverable from the State (on the debit side).
Added value: Wealth created by the company: output − external consumption (purchases and outside services).
NPV: Net Present Value: sum of the discounted future cash flows minus the initial investment; positive = the project creates value.