Cost of Goods Sold (COGS)
COGS includes purchase cost, direct labor, and other direct costs, and it is deducted from revenue to determine gross profit.
OpenFinancial Dictionary
Accounting & Finance Terms (English)
Accounting and Finance Terms Explained
Explore accounting, finance, auditing, taxation, and economics terms explained in clear English. Each entry provides a definition, a detailed explanation, practical uses, and examples where available.
Use the search box below to find a term by its name, definition, application, or related financial concept.
CPAs (Certified Public Accountants)
CPAs are licensed professional accountants who pass the CPA exam and meet education/experience requirements; they often provide audit, assurance, tax, and advisory services.
OpenCredit Sales
Credit sales are sales made on account where the customer pays later; they create accounts receivable and require credit control, invoicing, and collection follow-up.
OpenCryptocurrency Assets
Cryptocurrency assets are digital assets held by an entity and recognized on the balance sheet, subject to accounting standards and valuation rules.
OpenCurrent Account
A current account can mean a bank checking account used for daily transactions, and in accounting it may also refer to a running partner/current account tracking balances between partners and the busi...
OpenCurrent Assets
Current assets are resources expected to be converted to cash, sold, or consumed within the normal operating cycle or within 12 months (e.g., cash, receivables, inventory).
OpenCurrent Ratio
The current ratio equals current assets divided by current liabilities; it measures short-term liquidity and the ability to cover obligations due within the next year.
OpenCurrent- Non Current Method
The current/non-current method translates current assets and current liabilities at the current exchange rate, while non-current items use historical rates; used in translating foreign operations for ...
OpenCybersecurity Costs
Cybersecurity Costs are expenditures incurred to protect systems, networks, and data from cyber threats, including prevention, detection, response, recovery, training, and compliance—classified as ope...
OpenData Analytics in Accounting
Data Analytics in Accounting is the use of analytical techniques to examine accounting and operational data to identify trends, detect errors or fraud indicators, improve forecasting, and support bett...
Opendebt to total asset ratio
Debt-to-total-assets ratio equals total liabilities divided by total assets; it indicates how much of the asset base is financed by debt and reflects leverage and financial risk.
OpenDeferred revenue
Revenue received before providing the related goods or services.
OpenDeferred Tax
Deferred tax represents future tax effects of temporary differences between accounting carrying amounts and tax bases, resulting in deferred tax assets or liabilities.
OpenDeferred tax
Deferred tax is income tax payable or recoverable in future periods arising from temporary differences and carryforwards.
OpenDeferred tax asset
Income tax recoverable in future periods.
OpenDeferred tax liability
Income tax payable in future periods.
Opendenominator
The denominator is the bottom number in a fraction; it represents how many equal parts the whole is divided into and is used as the divisor in ratio calculations.
Opendepletion
Depletion is allocating the cost of natural resources (e.g., mines, oil) over the periods benefited as the resource is extracted and reduced, similar in concept to depreciation for tangible assets.
Opendepletion expense
Depletion expense is the periodic charge recognized in profit or loss to reflect the portion of a natural resource cost consumed in the period; it is commonly accumulated in an accumulated depletion c...
OpenDEPOSIT
A deposit can mean money placed with a bank, a security amount held to guarantee performance, or an upfront installment paid when purchasing an asset; terms should clarify whether it is refundable.
OpenDeposits in Transit
They usually arise from differences in processing or cut-off times. In a reconciliation starting from the bank statement balance, they are added to that balance. Supporting deposit records and subsequ...
OpenDepreciation
The allocation of the cost of a tangible asset over its useful life.
OpenDepreciation
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects wear, usage, or reduction in value of assets such as equipment, vehicles, and buildings. Dep...
OpenDepreciation
Depreciation reflects wear and tear or consumption of economic benefits and is recorded as an expense while reducing the carrying amount of the asset.
OpenDepreciation
Depreciation is the systematic allocation of the depreciable amount of a long-term asset over its useful life, reflecting consumption of economic benefits and matching cost with revenue.
OpenDerivative instrument
A financial instrument whose value is derived from an underlying asset.
OpenDetection risk
Detection risk is the risk that audit procedures will not identify existing material misstatements.
OpenDigital Assets
Digital assets exist in electronic form only and include cryptocurrencies, tokens, and other blockchain-based assets.
OpenDigital Tax
Digital tax refers to taxes designed to capture value created through digital services and online business models (e.g., platforms, advertising, marketplaces). These rules often focus on where users a...
OpenDirect Debit
Collections may be fixed or variable within the mandate’s terms. Unlike a standing order, the collection is initiated by the payee. The mandate authorizes the payment process; the invoice or underlyin...
OpenDisclaimer of opinion
A disclaimer of opinion is issued when the auditor cannot obtain sufficient appropriate audit evidence.
OpenDouble-Entry Bookkeeping
A bookkeeping system where every entry to an account requires a corresponding entry to a different account.
OpenDouble-Entry Bookkeeping
Double-Entry Bookkeeping is an accounting method where every transaction affects at least two accounts with equal total debits and credits, ensuring the accounting equation remains balanced and improv...
OpenE-invoicing
E-invoicing is issuing, transmitting, receiving, and storing invoices in a structured electronic format (often integrated with ERP/accounting systems). It improves compliance, reduces manual errors, e...
OpenEarned Surplus
Earned surplus (retained earnings) represents accumulated profits kept in the business after dividends/distributions; it increases equity and can be used to fund operations or expansion.
OpenEarnings per Share (EPS)
Earnings per share (EPS) shows profit attributable to ordinary shareholders per share. It enhances comparability and is based on weighted-average shares (basic and diluted).
OpenEconomic event
An economic event is any transaction or occurrence that measurably affects the accounting equation (assets, liabilities, equity) and is recognized/recorded when it meets recognition criteria.
OpenEconomic substance
Economic substance rules require certain entities to have adequate people, premises, and activities in the jurisdiction to support the income they earn from relevant activities.
OpenEquity
Equity represents the residual interest in a company's assets after deducting its liabilities. It reflects the owners' share in the business and includes capital, retained earnings, and reserves. Equi...
OpenEquity
Equity represents the owners’ claim on the business and includes capital contributions, retained earnings, and reserves.
OpenEquity Method
The equity method is used for investments with significant influence (often 20%–50%); the investor recognizes its share of the investee’s profit or loss and adjusts the investment carrying amount acco...
OpenEquity-settled share-based payment
A transaction where an entity receives goods or services in exchange for equity instruments.
OpenEscrow
Escrow is money held by a third party in a separate account for a specific purpose (e.g., taxes, property transactions) and released only when agreed conditions are met.
OpenESG Reporting
ESG reporting discloses information on environmental, social, and governance factors to assess a company’s sustainability and ethical performance.
OpenEthics
Ethics involves applying moral principles to decisions affecting stakeholders; in business it supports integrity, objectivity, confidentiality, and responsible professional behavior.
OpenExempt Supply
Exempt supplies typically restrict input VAT recovery related to those supplies, and special apportionment rules may apply.
OpenExpected credit loss
Expected credit loss (ECL) is a probability-weighted estimate of credit losses over a period under IFRS 9, reflecting default risk and forward-looking information.
OpenExpense
An expense is a cost incurred by the company to operate the business or generate revenue. Expenses reduce equity and include items such as salaries, rent, utilities, and depreciation. Expenses are rec...
OpenExpense
Expenses include costs such as salaries, rent, utilities, and depreciation, and they reduce profit during the reporting period.
OpenExternal Audit
External auditors provide an opinion on whether financial statements are presented fairly, enhancing credibility for stakeholders such as investors and regulators.
Open