Essential English for Accounting Terms and Courses [With Quiz]

If you’re an accountant or bookkeeper, or planning to become one soon, you’re going to need some English for accounting.

With this lesson in accounting terms, you’ll expand your business English vocabulary and boost your confidence in working with English speakers. After learning the terms, you can take a quiz to test your knowledge.

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Financial Statements and Reporting

1. Assets

Everything a company owns, including cash, accounts receivable (money a company is going to receive, see below), property and goods.

The company’s assets were easy to calculate, but it was difficult to quantify the value of the employees’ expertise.

2. Liabilities

Everything that a company owes to others, like loans and mortgages.

Liabilities are recorded on the right side of the balance sheet, while assets are listed on the left.

3. Balance Sheet

A document that records a company’s assets and liabilities at a certain moment in time. If we’re talking about a public company, it also shows the shareholders’ equity (how much the shareholders own). See #30 for the definition of “shareholder.”

The balance sheet is based on the accounting equation:

assets = liabilities + owner’s equity

The balance sheet is important for potential investors because they can see how the company is doing.

We studied the balance sheet carefully to see if the assets exceeded the liabilities and shareholders’ equity.

4. Cash Flow

Money coming in (inflows) and going out (outflows) of a company.

They had a cash flow problem due to their very high financing costs.

5. Financial Statements

Documents that show the financial situation of a company. They include the balance sheet (showing assets, liabilities and shareholders’ equity), the income statement (showing revenues and expenses) and statement of cash flows (showing cash flow fluctuations in a certain accounting period).

The accountants were all busy working on the financial statements as the company was planning to refinance its loans.

6. Accounting Period

The time period over which financial statements are produced, usually a year.

The accounting period the investors were interested in was longer than a financial year because they wanted to get the big picture of the company’s profitability.

7. Income Tax

Money that individuals and companies owe to the government, based on the income they make.

She was a sole proprietor and she hired an accountant to file her income tax return every year.

8. Value Added Tax (VAT)

A tax that consumers pay on most products and services, except most food and drugs. Not all countries have a VAT system. In the US, most states have something similar, called a sales tax.

The bookkeeper had to calculate the Value Added Tax in order to issue the invoice.

9. Return on Investment (ROI)

The profitability ratio of a certain investment. The return on investment is calculated as the benefit gained from the investment divided by the cost of the investment.

As their return on investment hit the lowest point in the last 5 years, they decided to stop investing in our company.

Accounts and Transactions

10. Debit

An entry that shows what a company spends. Debits are recorded on the left side of an account.

She recorded the purchase of the new laptops as a debit entry.

11. Credit

An entry that shows how much money a company receives. Credits are recorded on the right side of accounts.

She realized that the total debits didn’t equal the total credits, so she had to check each entry all over again.

12. Payroll

A list of all a company’s employees and their salaries. Payroll also refers to the total amount of money paid by a company to its employees.

They have a lot of employees on their payroll, so they employ quite a few payroll accountants to calculate employee earnings.

13. Double Entry

An accounting system in which each transaction is recorded as both a credit and a debit, an asset and a liability.

Double entry bookkeeping gives you a better perspective than single entry bookkeeping because it helps you make sure each transaction is accurately recorded.

14. Accounts Receivable

Money a company is owed for goods or services it has sold. For example, if a customer buys something from you and promises to pay you next month, that’s an account receivable.

Once they collect the total accounts receivable, they’ll be able to invest in a new marketing campaign.

15. Accounts Payable

Money a company owes for goods and services. If your company buys something but doesn’t pay immediately, it has an account payable.

Once they pay all their accounts payable, they’ll be able to invest in new equipment.

16. Audit

A formal inspection of a company’s accounts. Companies are sometimes audited to make sure that they are following the correct accounting procedures.

The company had an external firm come in to do the audit and make sure their accounts were in order.

17. Bookkeeping

The activity or occupation of keeping records of the financial affairs of a company.

They hired a new person to do the company’s bookkeeping, as the workload was getting too much for the existing staff.

18. Gross

An amount of money before taxes are deducted. This is also an adjective and is therefore used before a noun such as “income.”

Her gross income exceeded his, but they still couldn’t afford to get the house they’d been dreaming about for such a long time.

19. Profit

The money a business is left with after deducting all the expenses.

In order to decide if the company was worth investing in, they wanted to look at the profit it had been making over the previous year.

20. Revenue

The total amount of money a company receives from the services or products it sells. The revenue is higher than the profit because the profit is the revenue minus the expenses.

Our company has experienced a decrease in revenue due to the financial crisis.

21. Appreciation

The increase in the value of a company’s assets. Appreciation can be the result of an increase in demand for a product or service. The verb form is “to appreciate.”

Although their balance sheet didn’t look very promising, the company seemed worth investing in because of an anticipated appreciation in the value of their product.

22. Depreciation

The decrease in the value of products or services a company offers. Depreciation can be due to a high supply of similar products or services offered by competitors. The verb form is “to depreciate.”

Because the company had almost no competitors just a year ago, nobody would have thought that their products would depreciate so much.

23. Overhead

All the expenses a company needs to pay for, like the costs of advertising, labor, bills and taxes.

Their overhead expenses were so high that they had been making very little profit, so they decided to cut back on marketing.

24. Owner’s Equity

A part of a company’s assets that the owner has. It’s calculated as assets minus liabilities.

Unfortunately, in his company’s case, the owner’s equity didn’t amount to much: they had a lot of liabilities and not enough assets.

Roles and Practices in Accounting

25. Auditor

A person whose job is to evaluate accounting records in order to make sure they have been done properly and to check if the company is being run efficiently.

When the auditors asked for additional information about the financial statements, our accountants complied without delay.

26. Bookkeeper

A person whose job is to record daily transactions, issue invoices and complete payrolls. Bookkeepers are usually supervised by accountants. Bookkeepers don’t need a degree in accounting and can have less experience than accountants.

She was training to become an accountant, but in the meantime she had a part-time job as a bookkeeper.

27. Chartered Accountant

An accountant who has a certain amount of experience and who has passed certain exams that qualify them to be a member of an institution, such as the Institute of Chartered Accountants in the UK. In the US a similar title is that of Certified Public Accountant (CPA).

She’s been studying to become a chartered accountant for a few years now, but she just couldn’t manage to pass the final exam.

28. Creative Accounting

An accounting practice that tries to present an improved image of a company’s financial situation by highlighting mainly the aspects that are favorable. Creative accounting is considered to be legal, but is often seen as unethical.

As soon as our potential investor realized we had done some creative accounting, they decided to hire an auditor.

29. Share

A unit of ownership in a company. The person or organization who owns shares (the shareholder) is entitled to dividends (usually cash), but they also share the responsibility if there are losses.

He decided to invest in shares of a very profitable company instead of considering a savings account, because he was sure he could make money fast and he enjoyed taking risks.

30. Shareholder

A person or organization (company or any other institution) that owns shares in a company. Shareholders are, in a way, the owners of a company. If the company is doing well, the value of the shares goes up. If, on the contrary, the company isn’t profitable, the value of its shares decreases.

Because he was a shareholder, he had to attend annual General Meetings in order to keep up with the latest news and to vote for new members of the Board of Directors.

Common Phrases and Idioms

31. In the red

When a company is in “red ink,” it means they’re operating at a loss. In other words, they’re spending or owe more money than they’re earning.

Their company has made a profit before, but now they’re in the red.

32. In the black

“In the black” refers to a business’s financial status, typically its most recent accounting period. When a business is in the black, it means it’s profitable, solvent and not in debt.

We’ve been in the black ever since we launched our new product line.

33. Write off

To “write off” means to reduce the value of an asset to zero because it’s no longer recoverable or worth its original value.

The company had to write off bad debts from several clients.

34. Balance the books

“Balance the books” means to ensure that all financial records, such as debits and credits, are accurately calculated and that the total amounts are equal, indicating that the accounts are correctly managed.

You’ll have to stay late to balance the books before the end of the financial year.

35. Crunch the numbers

“Crunch the numbers” means to perform complex calculations or analyze a large amount of numerical data, often to make financial decisions.

Before we decide on the budget for next year, we need to crunch the numbers to see where we can cut costs.

Quiz on English Accounting Terms

Look at the following sentences and choose the correct answer to test your understanding of the terms you just learned. If you want to retake the quiz or start over, just refresh the page. 

Courses on English for Accounting

To learn more English for accounting, check out one of these highly-rated courses:

• English4Accounting: This is a great resource because it offers a variety of activities to practice accounting vocabulary in context: reading exercises, multiple choice questions, listening comprehension exercises, spelling and recognition questions and teacher-graded speaking and writing activities. 
• “Mastering English for Accounting: Grammar Rules and Examples”: This course on Udemy will teach you how to use various English verb tenses and grammar rules with an accounting context. It’s for intermediate English learners with previous knowledge of accounting.
• “Tax & Accounting English Masterclass”: This is another course offered on the Udemy platform. You’ll learn how to pronounce essential accounting terms, general tax terms, frequently used verbs in the accounting profession and more. It’s for students with a basic level of general English and previous knowledge of accounting and taxes.

Now that you’ve learned and practiced all these terms, the only thing left is to incorporate them into your speaking and writing!

With this new knowledge and some resources for additional learning, you’re well on your way to doing business in English with ease.

Download: This blog post is available as a convenient and portable PDF that you can take anywhere. Click here to get a copy. (Download)

And One More Thing...

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