Mastering accounting vocabulary is crucial for effective communication in the business world.
Whether you’re a non-native English speaker or a professional looking to refine your skills, this lecture will help you understand and use key accounting terms confidently.
Let’s break down 10 essential accounting words with definitions, examples, and practical scenarios.
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Also, why not pick up a SPECIAL OFFER for the Business English Accounting Course at:
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1. Account
Definition: A record used to track and organise financial transactions for a specific type of asset, liability, income, or expense. It helps businesses monitor finances and make decisions.
Example Sentences:
- The company kept a detailed record in their account to track all income and expenses.
- Paul set up a new account specifically for tracking project expenses.
Scenario:
John and Mark, working in the accounting department, review monthly expenses to ensure all entries are correctly recorded.
- Mark: “I noticed a large payment in the expenses account this month. Do you know what it is?”
- John: “Yes, that was for the new office equipment. I made sure it was recorded under the correct account.”
2. Accounting
Definition: The process of recording, organising, and analysing a company’s financial activities like income and expenses to understand its financial health and make informed decisions.
Example Sentences:
- I’m learning accounting to help track our company’s income and expenses better.
- Good accounting is essential for understanding where money is going each month.
Scenario:
Jim and Ian discuss how learning accounting basics can help their small business manage finances better.
Ian: “Makes sense. Good accounting can really improve decision-making.”
Jim: “I’m focusing on how to track our income and expenses more accurately.”
3. Accrual
Definition: Recording income and expenses when they happen, even if the cash hasn’t been received or paid yet. This method provides a more accurate financial picture.
Example Sentences:
- The company uses accrual accounting to record sales as soon as they happen, even if payment hasn’t been received.
- The accrual for this month includes expenses we’ve recorded but haven’t paid yet.
Scenario:
James and Peter review financial reports and discuss accrual entries.
- Peter: “I noticed a few entries in the report that aren’t actual cash payments. Why is that?”
- James: “Those are accruals. We record income and expenses when they occur, not necessarily when cash is received or paid.”
4. Accrued
Definition: Income or expenses that have been recorded but not yet received or paid. It represents money owed or expected in the future.
Example Sentences:
- The accrued expenses for this month include bills we haven’t paid yet.
- We have accrued income from clients who haven’t completed their payments.
Scenario:
Tom and Alex prepare financial statements and review accrued entries.
- Tom: “Did you check the accrued expenses for the utilities?”
- Alex: “Yes, I updated them this morning. We had an additional charge, so I added it to the accrued expenses.”
5. Amortisation
Definition: Gradually paying off debt or spreading out the cost of an asset over time. It shows how much of a loan or expense has been paid and how much is still owed.
Example Sentences:
- The company uses amortisation to spread the cost of its new equipment over several years.
- Monthly amortisation payments are included in the budget to reduce the loan balance gradually.
Scenario:
John and Mike discuss how to handle a loan for office renovations.
- Mike: “How are we handling the loan for the renovations in the accounts?”
- John: “We are using amortisation. We’ll pay off the loan gradually over the next five years.”
6. Appreciation
Definition: An increase in the value of an asset over time, often used for property or investments.
Example Sentences:
- Due to appreciation, the land we purchased is now worth more than we paid.
- The appreciation of our office building has increased its value over time.
Scenario:
David and John review financial statements and notice asset appreciation.
- John: “The appreciation of our real estate holdings has significantly boosted our asset values.”
- David: “We should consider revaluing these assets to reflect their current market value.”
7. Asset
Definition: Anything valuable that a company owns or controls, expected to provide future economic benefits.
Example Sentences:
- Investing in new technology can become a significant asset for our operations.
- The company’s balance sheet lists cash and inventory as current assets.
Scenario:
David and John ensure all newly acquired assets are accurately recorded before the quarterly review.
- David: “Can we double-check that all the new assets we acquired last quarter are reflected here?”
- John: “Absolutely. I believe every asset has been updated.”
8. Audit
Definition: A detailed review or check of financial records to ensure accuracy and compliance with rules.
Example Sentences:
- The audit revealed minor errors in the financial statements, which were quickly corrected.
- The company undergoes an audit every year to ensure all financial records are accurate.
Scenario:
Ian and Liam prepare for the company’s annual audit.
- Ian: “What do we need to prepare for the audit?”
- Liam: “We need to gather essential documents like invoices, receipts, and bank statements.”
9. Balance
Definition: The amount of money remaining in an account after all transactions.
Example Sentences:
- After recent expenses, the account balance is lower than expected.
- We need to check the balance at the end of each day to ensure accurate records.
Scenario:
Mike and Alex review financial accounts and notice a lower balance.
- Mike: “Did we have any large expenses recently?”
- Alex: “Yes, we had a big payment for office equipment.”
10. Bank
Definition: The organisation where money is deposited, withdrawn, and tracked for financial transactions. As a verb, it means to deposit money into a bank account.
Example Sentences:
- The company’s funds are held in a local bank, which manages all transactions.
- After receiving payment, Sarah went to bank the cash.
Scenario:
Tom and Jake discuss depositing client payments.
- Tom: “When should I bank the money?”
- Jake: “By the end of the day. Just take it to our branch around the corner.”
Why not pick up a SPECIAL OFFER for our Business English Accounting Course at:
https://toomeybusinessenglish.com/accounting-business-english/
Watch the Video Lesson
For a deeper understanding of the 10 Essential Business English Accounting words, watch our video lesson on YouTube below:
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