Glossary: Accounting fundamentals

This glossary brings together the key accounting concepts required to understand how a company’s transactions are recorded, structured and presented in its accounts.

Supplier invoice

A document issued by a supplier to formalise the sale of goods or services. It constitutes evidence of a liability for the company, recorded in Accounts Payable and must be retained for at least six years, in line with HMRC requirements, although longer retention periods may apply depending on specific circumstances.

Customer invoice

A document issued by a company to record a sale. It constitutes evidence of a receivable from the customer, recorded in Accounts Receivable and must be retained for at least six years in line with HMRC requirements, particularly for VAT and corporation tax purposes, although longer retention periods may apply in specific circumstances.

Credit note

A corrective document used to cancel or reduce an original invoice. It is typically issued in cases of error, returned goods or commercial adjustments and serves to amend previously recorded accounting entries.

Pro forma invoice

A non-accounting document used for informational or commercial purposes. It corresponds to a detailed quotation without the legal status of an invoice and does not generate any accounting entry until the sale is completed.

Deposit invoice

An invoice issued to record a partial payment before the full delivery of goods or services. It helps secure the transaction and involves specific rules, particularly regarding VAT.

Debit and credit

Fundamental principles of double-entry bookkeeping. Each transaction affects at least two accounts: one is debited, the other credited, ensuring the balance of entries and overall consistency of the accounts.

Accounting entry (journal entry)

The recording of an economic transaction in the company’s accounts. Each entry consists of debit and credit lines and is supported by source documentation, ensuring traceability and compliance.

Accounting journal

A record in which accounting entries are recorded chronologically. It provides a complete history of transactions and is a key component of the audit trail.

General ledger

A document that consolidates all accounting entries by account. It provides a detailed view of movements affecting each account and facilitates analysis and control.

Trial balance

A summary of accounts showing debit and credit balances for each account. It is a key tool for verifying the accuracy of entries and preparing financial statements.

Chart of accounts

A structured framework that organises accounts. It defines the rules for classifying and recording transactions, ensuring consistency and comparability of financial information.

IFRS (International Financial Reporting Standards)

An international set of accounting standards designed to harmonise the presentation of financial statements. They aim to improve transparency, clarity and comparability of financial information across organisations worldwide.

This glossary brings together terms related to accounting processes and day-to-day operations. It helps to understand how invoices and financial workflows are processed, controlled and monitored within an organisation. 

Accounting process

A set of steps used to record, process and control an organisation’s financial transactions.

Accounting cycle

A sequence of operations carried out over a given period, including the recording of entries, controls and the preparation of accounts.

Financial close

The process of closing the accounts at a given date in order to produce reliable financial information.

Monthly close

Closing the accounts at the end of each month to ensure regular monitoring of business activity.

Year-end close

Closing the accounts at the end of the financial year, forming the basis for statutory obligations and financial statements.

Accounts payable

All operations related to processing supplier invoices, from receipt through to approval, accounting entry and preparation for payment.

Purchase order

A document formalising a commitment to purchase from a supplier.

Goods receipt note

A document confirming receipt of the goods ordered.

Invoice receipt

The stage corresponding to the receipt of invoices, their capture via various channels and their initial recording in the system.

Invoice dispute

A situation in which an invoice is contested, suspending its processing.

Payment processing

All operations required to execute payment of approved invoices.

Accounts receivable

All operations related to issuing, recording and monitoring customer invoices, through to payment collection and reconciliation.

Bank reconciliation

A comparison between accounting records and bank statements to verify their consistency.

Accounting control

All checks carried out to ensure the accuracy and compliance of data.

Sub-ledger accounting

Detailed accounting records, organised by individual third parties, in particular customers or suppliers.

Management accounting

A method used to analyse costs by activity, product or responsibility centre, in order to assess profitability and support operational decision-making.

Procurement management

All processes used to manage supplier-related expenditure, from purchase order through to payment.

Budget management

The process of planning and monitoring expenditure in line with the company’s financial objectives.

Expense monitoring

The analysis and control of incurred expenditure in order to manage costs.

Accounting dashboard

A monitoring tool used to visualise key indicators related to accounting and financial activity.

Role of the accountant

A professional responsible for recording, controlling and ensuring the reliability of accounting operations, complying with legal obligations, as well as analysing data and supporting decision-making.

IBAN (International Bank Account Number)

An international bank account identifier used to secure and automate financial transactions.

SWIFT code (or BIC)

A code used to identify a bank in international transactions.

This glossary brings together key concepts related to financial analysis, performance management and regulatory compliance. It helps explain how accounting information is used to support decision-making, anticipate risks and ensure compliance.

Cash flow

The movement of money into and out of a business. It is generated through business operations and is used to support investments, fund business activities, and cover operational expenses.

Working capital requirement (WCR)

The amount needed to finance the time gap between cash inflows and outflows arising from operations, including receivables, payables and inventory.

Balance sheet

A financial statement presenting the organisation’s financial position at a given point in time, distinguishing between assets and liabilities.

Self-financing capacity

Internal resources generated by the company, reflecting its ability to finance investments, repay debts and distribute dividends without relying on external funding.

Break-even point

The level of activity at which the company covers all its costs and from which it begins to generate profit.

Miscellaneous expenses

All costs incurred by the organisation in the course of its operations that do not fall into a specific category.

Output VAT

VAT charged to customers, which the company must remit to the tax authorities.

Input VAT

VAT paid on purchases, which the company can reclaim from the tax authorities.

Management control

A set of methods and tools used to analyse company performance, monitor variances and support decision-making.

Financial health of a company

An overall assessment of a company’s economic situation, based on the analysis of its results, cash position and financial structure, reflecting its profitability, liquidity and solvency.

Accounting cost reduction

All actions aimed at reducing the costs associated with accounting processes, particularly through process optimisation and automation.

Accounting obligations

All legal requirements governing bookkeeping, the preparation of financial statements and their retention.

Tax compliance

Adherence to applicable fiscal regulations, particularly regarding the declaration and payment of taxes.

Invoice retention period

The legal period during which invoices must be kept, generally set at 6 years in the UK (for HMRC purposes), although some companies retain them longer for audit or legal reasons.