Basic Accounting Terminology for College Students

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People who are new to an accounting degree program usually start to encounter a lot of unfamiliar accounting terminology. Whether you're running into industry titles and acronyms or finance terminology you haven't yet covered in your coursework, you don't want to let all this new language create confusion and anxiety. Some initial familiarity with basic accounting terms — especially those referring to the industry and career opportunities you hope to pursue after obtaining your degree — can help you focus on the work at hand.

While you'll probably cover much of this common accounting terminology at some point while pursuing your degree, we've put together a quick-reference list of some of the basic terms you may want to familiarize yourself with prior to Accounting 101.

Bookkeeping Terminology

Bookkeeping and accounting are technically different, but you'll still need to be familiar with these key terms:

  • Accounts Payable – Outstanding payments the company currently owes to suppliers, vendors, and creditors — essentially any bills the company still has yet to pay.1
  • Accounts Receivable – Outstanding payments the company is currently owed by all customers or clients. Basically, this is anything the company bills out.1
  • Balance Sheet – A financial document that reconciles all the company's assets with their liabilities and equity.1
  • Costs of Goods Sold – The total money spent to produce goods and services, including production, labor, storage and material costs.2
  • Current Assets – Capital that has immediate value (typically that which will be used within one year), including cash, sellable products or accounts receivable.2
  • Equity – All capital currently invested in the company, including any profits that have been re-invested as retained earnings.2
  • Expenses – Any additional money spent operating the company that's not associated with the production of sellable products and services. Examples of expenses include office supplies, lease for the place of business and employee wages.1
  • Fixed Assets – Assets with long-term value, such as land and property, tools and machinery, or vehicles.2
  • General Ledger – Record of all financial transactions across all of a company's accounts, which is maintained continuously for the entire life of the company.1
  • Income Statement – All outstanding debts owed by the company. This could include accounts payable, loans, liens on property or other long-term investments.2
  • Liabilities – Outstanding payments the company is currently owed by all customers or clients. Basically, this is anything the company bills out.2
  • Net Income – The company's total profit (or loss, if negative) once costs and expenses are subtracted from revenue.1
  • Revenue – All incoming money from selling products and services or generated through a company's additional assets, before expenses are taken into account. Also referred to as "gross income."1

Terminology Used in Calculations

  • Credit – An entry on a balance sheet that decreases asset values and/or increases liability and equity values.2
  • Debit – An entry on a balance sheet that increases asset values and/or decreases liability and equity values (or incoming payments).2
  • Return on Investment (ROI) – Used to determine how much of the money spent producing goods and services was recouped in profits. You find ROI by calculating a ratio of a business’s net income to total assets.2
  • Present Value (PV) – The amount a future sum of money is currently worth today.2 Because a company can invest existing funds in order to collect interest or ROI in the future, a particular sum of money may not be worth the same thing now as it will be in the future. Accountants may use present value calculations to determine the true value of sales to be paid in the future, or to aid in investment decisions.

Types of Accountants

  • Auditors – Auditors evaluate a company's financial records for accuracy, check for mistakes and discrepancies, and some may issue evaluations of profitability.3 Auditors may be internal or external (independent) of the company being audited.3
  • Management Accountant – Management accountants work on a company's internal financial records and processes to aid in business planning, cost/revenue analysis and management of financial operations.3
  • Public Accountant – Public accountants — who by and large must earn Certified Public Accountant, or CPA, status — may work with individuals or large corporations to prepare all relevant tax and financial documents required by the IRS.3

Learn More About Accounting at AIU

Jobs for accountants and auditors are expected to grow at a faster-than-average pace through 2026,3 making now a great time to start working toward entering the field. Want to learn more about the accounting degree programs at American InterContinental University? You can get started right now by requesting information online.


1 “Terminology.” Ask the Bookkeeper. Retrieved from: http://www.askthebookkeeper.com.au/terminology/ (Visited 10/22/18).
2 “Accounting Terminology Guide - Over 1,000 Accounting and Finance Terms.” New York State Society of CPAs. Retrieved from: https://www.nysscpa.org/professional-resources/accounting-terminology-guide (Visited 10/22/18).
3 “Accountants and Auditors.” Occupational Outlook Handbook. Bureau of Labor Statistics. Retrieved from: https://www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm (Visited 10/22/18). Conditions in your area may vary.

This program is not designed to prepare students for the CPA or CMA examination or any other certification exam, but covers the knowledge areas of the uniform CPA and CMA certification. AIU cannot guarantee employment or salary. For important information about the educational debt, earnings and completion rates of students who attended these programs, go to www.aiuniv.edu/disclosures.
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