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Accounting Terms and Ratios
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I have put together some simple Accounting Terms and Ratios that could help you get the hang of some of the terms and jargon in accounting. Hope this help any students.

Accounts Payable:

1. Bills that need to be paid as part of the normal business process.

Accounts receivable:

1. Any form of debt owed to your company due to services or products rendered.

Cost of sales:

1. The cost of producing a sale. This includes the cost to the business for delivering a product of sevice.

Coverage ratio:

1. Ratio of income used to cover specific debts as opposed to total company debts (Accounting).

Current ratio:

1. Analyzing of the current resources of a business in contrast to the current debts to determine the short term stability of the business (Accounting).

Fiscal year:

1. In accounting: Allows the financial period to begin in any month.

Gross margin percentage:

1. The gross margin divided by sales. Shown as a percentage.

Receivable turnover ratio:

1. Index of the scope of credit that a business gives compared its sales as an assessment of its collection efficiency.

2. Sales on credit for an accounting period that is divided by the average accounts receivable balance.

Solvency ratio:

1. Ratio of loans taken by a business compared to its capital that is used to assess financial stability.


1. An amount entered into an accounting record indicating a sum that is owed.

2. To remove (money) from a customers account.

3. Debit card: a card allowing the holder thereof to transfer money electronically from one bank account to another when a purchase has been made.

Direct debit:

1. Direct transfer of funds from one bank to another.

2. A payment method where the payer permits the payee to take money from directly from his bank account.

Debit balance:

1. Balance of a debt, negative sum in a bank account.

Long term liabilities:

1. Column in a ledger that details the debts that a business will have to pay off in the coming years (Accounting).

Short term liabilities:

1. Clause in a statement which lists the debts that a business must repay during the current year (Accounting).

Current liabilities:

1. Section of a balance statement which details the debts that a business must repay during the current year (Accounting).

Account limitation:

1. Account restriction, placing of restrictions on a bank account that had insufficient funds to cover checks.

Account localization:

1. Obtaining information concerning a specific bank account.

Account statement:

1. Detailed list of bank account activity (withdrawals, deposits, etc.).

Accounts department:

1. Department of a bank responsible for managing accounts.

Accounts payable:

1. Account which shows the current debts of a business.

Assigned account:

1. Bank account offered by the borrower as a guarantee that he will repay his loan.

Beneficiary account:

1. Bank account set up for the benefit of someone else.

Current account:

1. Continuous or current bank account, checking account.

2. international transactions of a country that arise from current flows.

Current accounts multiplier:

1. One of the components of the rate of liquidation that banks must maintain against money deposited into accounts.

Current maturities:

1. Portion of long term loans that a business must repay in the current accounting period (Accounting).

Financial audit:

1. Official investigation of a business accounts by an auditor.

Financing expenses:

1. (Accounting) raising money or taking out loans to cover business expenses (including interest and linkage differentials).

Income Statement:

1. A company statement showing net income or loss for a financial period.

Payroll burden:

1. This includes payroll taxes and benefits, the burden rate is used as a percentage and added to the payroll amount.

General audit:

1. Investigation of financial records by an outside agency.


1. A concept in accounting and tax that estimates the loss of asset value over time. Cars for example depreciate over time.

Accumulated depreciation:

1. Depreciation reduces the book value of assets. The value of assets are depreciated each month by a predetermined amount.

Return on assets:

1. Net profit that gets divided by total assets. This is a good measure of a profitable business.

Asset turnover:

1. Sales divided by total assets. Can be used to compare business performance and compare a business to others on the same industry.

Current Assets:

1. Any assets that can be quickly converted into cash. This includes stock and debtors on book. Also called liquid assets.

Net working capital turnover:

1. (Accounting) index of a companys debt compared to the current assets (used to assess efficiency)

Total current assets:

1. (Accounting) sum of all current cash and cash equivalents (accounts receivable, securities, etc.)

Fixed Assets:

1. Includes your fixed and immovable assets. Like property, machinery, and equipment. These cannot be easily converted into cash.

Trial balance:

1. Table used to concentrate balances of various business accounts (Accounting).

Net cash flow:

1. Cash balance remaining in a business possession (Accounting).

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