Common Accounting Terms Explained

Even if you hire an accountant to handle the finances of your business, it’s still crucial to learn the basic jargon of accounting in order to ensure better communication with not only your employees but also your suppliers.

So here is a quick guide from us here at Aston Black to some of the most common accounting terms that you will come across.


Assets are resources that are purchased by a business with the expectation of providing future economic benefit. They can come in many forms, both tangible and intangible, including; cash, supplies, equipment, land, buildings, investments etc.


Revenue is the total amount of money received by a company for goods sold or services provided during a certain time period before any deductions have been made.

Cost of goods sold (COGS)

The total amount of money spent on the production of goods/services within a company, for example, the costs of any material used and any labour costs.

Gross profit

Gross profit is the company’s profit after deducting all costs involved in producing and selling their products and/or services. So gross profit is essentially COGS deducted from the total revenue.

Gross profit margin

The gross profit margin is a percentage that represents the amount of money that’s left over from the total revenue after taking into consideration the cost of goods sold.

Trade discount

Trade discount is the discount on retail prices that manufacturers will provide to resellers when selling products. For example, the manufacturer may offer a 30% discount on retail price to the reseller, who then sells the product to the consumer at the full retail price in order to make a profit.


Every business will have liabilities. Liabilities are financial obligations that decrease your economic benefit. This could include things such as accounts payable, wages payable, tax payable. They are essentially anything that a business owes to other parties in order to run.

Cash flow

Cash flow is a figure that represents the difference between money flowing in and out of the company. Businesses aim for a positive cash flow because this means that more money is flowing into the business than being taken out by costs.

Balance sheet

A balance sheet summarises the assets and liabilities of a company at a certain point in time, providing guidance on its current financial state, displaying what that business owes and owns.


Payroll is the general term used to describe anything that’s associated with paying the employees of a company. This includes the calculation and administration of paychecks, the records for each employee and how much they are due to be paid and documentation of the total earnings of all employees in the financial year.


Now you’ve got to grips with the basics, it’s time to leave the rest of your financial worries to one of our professionals. Contact us today about how we can help you with the finances of your company, we look forward to hearing from you.