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Accounting Software and ERP Glossary

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A comprehensive glossary featuring key terms commonly used in accounting software, Enterprise Resource Planning (ERP), and related areas. This collection aims to provide accessible explanations for business owners, accountants, and professionals engaged in various aspects of financial management, ERP implementation, and management.


Accounting Equation: This equation states that a company’s total assets are equal to the sum of it’s liabilities plus its shareholders ’equity. It is also known as the Basic Accounting Equation or the Balance Sheet Equation. 

Accounting Period: An accounting period refers to a specific timeframe, usually a month, quarter, or year, during which a business records and summarises its financial transactions. This segmentation allows for organised financial reporting and analysis.

Accounting Software: Accounting software is a digital tool designed to streamline financial processes. It aids in recording transactions, generating financial statements, and tracking financial data efficiently.

Accounts Payable: Accounts payable encompasses the amount of money a business owes to its creditors or suppliers for goods and services received on credit. It represents short-term liabilities that need to be settled.

Accounts Receivable: Accounts receivable represents the money owed to a business by its customers for products or services provided on credit. It’s an essential aspect of managing cash flow.

Accrual Accounting: Accrual accounting involves recording income and expenses when they are earned or incurred, regardless of when the cash is exchanged. This method provides a more accurate depiction of a company’s financial health.

Accrual: An accrual is the recognition of income or expenses in financial records before the actual cash transactions occur. This practice ensures that financial statements reflect economic activities accurately.

Annual Report: An annual report is a comprehensive document that outlines a company’s financial performance, activities, and prospects over a fiscal year. It’s essential for transparent communication with stakeholders.

Assets: Assets are resources owned by a business that hold economic value and can generate future benefits. They are categorised as current assets (short-term) or non-current assets (long-term).

Automated Clearing House (ACH): A network facilitating electronic funds transfers, enabling direct payments and collections between banks and businesses.

ABC Analysis: ABC analysis, also known as Pareto analysis or the 80/20 rule, is a technique used to categorise items or tasks based on their level of importance. It helps prioritise efforts and resources by focusing on high-impact items.

Actual Cost: Actual cost refers to the real expenses incurred in producing goods or services. It includes direct and indirect costs, providing an accurate measure of the financial resources used.

Advanced Planning and Scheduling (APS): APS is a technology-driven approach to production scheduling that aims to optimise resources, capacities, and materials to meet demand efficiently. It enhances planning accuracy and reduces lead times.

Aging: Aging refers to the categorization of accounts receivable or payable based on the length of time the balances have been outstanding. It helps monitor and manage overdue payments or outstanding invoices.

Allocation: Allocation involves distributing resources, costs, or benefits to specific categories, projects, or entities. Effective allocation ensures optimal resource utilization and alignment with business objectives.

API (Application Programming Interface): An API is a set of protocols and tools that allow different software applications to communicate and interact with each other. It enables seamless integration and data exchange between systems.

Assemble-to-Order (ATO): ATO is a manufacturing strategy where products are partially assembled based on standard components, and final assembly occurs after receiving customer orders. It balances customization and efficiency.

ATP (Available-to-Promise): ATP calculates the quantity of products available for immediate delivery to customers based on current inventory levels, planned production, and existing orders.


Balance Sheet: A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It presents the company’s assets, liabilities, and equity, adhering to the formula: Assets = Liabilities + Equity.

Bank Reconciliation: Bank reconciliation is the process of comparing a company’s recorded account balance with its bank statement. Discrepancies are identified and adjusted, ensuring accurate financial records.

Basis of Accounting: Basis of accounting refers to the set of rules and principles guiding the recording of financial transactions. It influences when and how transactions are recorded in a company’s books.

Bookkeeping vs. Accounting: Bookkeeping involves recording and classifying financial transactions, while accounting involves analysing, interpreting, and summarizing these transactions for strategic decision-making.

Backflush: Backflushing is a production process where materials are issued from inventory only after the completion of the manufacturing process. It simplifies material tracking and reduces paperwork.

Backorder: A backorder occurs when customer orders exceed available inventory, requiring the fulfilment of orders once the products are back in stock.

Bar Code: A bar code is a graphical representation of data that can be scanned electronically. It’s used for inventory tracking, product identification, and data entry.

Bottleneck: A bottleneck is a stage or resource in a process that limits the overall capacity and flow. Addressing bottlenecks is crucial for optimizing operations.

BPR (Business Process Review): BPR involves analysing and redesigning business processes to enhance efficiency, reduce costs, and align with strategic goals.

Burden: Burden includes indirect costs associated with manufacturing, such as utilities, maintenance, and overhead. It’s factored into the total cost of production.


Capital: Capital encompasses the financial resources, both monetary and non-monetary, used by a business to generate income. It can be in the form of equity or debt.

Cash Accounting: Cash accounting records transactions only when cash is received or disbursed. This method provides a clear view of actual cash flow but may not accurately reflect a company’s financial health.

Cash Flow: Cash flow represents the movement of cash in and out of a business as a result of its operational, investing, and financing activities. Positive cash flow is essential for sustainable operations.

Cash Flow Management: Cash flow management involves monitoring, analyzing, and optimizing the inflow and outflow of cash within a business. It ensures that the company maintains sufficient liquidity to meet its obligations.

Cash Flow Statement: A cash flow statement is a financial report that provides insights into a company’s cash inflows and outflows during a specific period. It’s divided into operating, investing, and financing activities.

Chart of Accounts: A chart of accounts is a structured list of all accounts used by a company to classify and record financial transactions. It provides a systematic way to categorise financial data.

COGS (Cost of Goods Sold): COGS represents the direct costs incurred in producing goods or services sold. It’s calculated using the formula: COGS = Beginning Inventory + Purchases – Ending Inventory.

Cloud: Cloud computing refers to the delivery of computing resources, including storage, processing power, and software, via the internet. It offers flexibility and scalability.

Configure Price Quote (CPQ): CPQ is a software solution that enables businesses to configure complex products, calculate accurate pricing, and generate quotes quickly.

Credit: A credit is an accounting entry that increases a liability or sales account and decreases an asset or expense account. It will always be accompanied by a corresponding debit entry. 

CRM (Customer Relationship Management): CRM encompasses strategies, technologies, and practices for managing and nurturing customer relationships throughout the customer lifecycle.

Current Assets: Current assets are short-term assets that are expected to be converted into cash or used up within a year. They include cash, accounts receivable, and inventory.

Current Liabilities: Current liabilities are short-term obligations that need to be settled within a year. They include accounts payable, short-term loans, and accrued expenses.


Data Migration: Data migration involves transferring data from one system or platform to another. It requires careful planning and execution to ensure data integrity and accuracy.

Data Mining: Data mining is the process of analysing large datasets to discover patterns, trends, and insights that can inform business decisions.

Data Warehousing: Data warehousing involves collecting, storing, and managing data from various sources to support business intelligence and analytics.

Days Sales Outstanding (DSO): DSO measures the average number of days it takes for a company to collect payments from its customers. It indicates the efficiency of accounts receivable management.

Deadstock: Deadstock refers to inventory that has become obsolete or unsellable. Proper inventory management aims to minimise deadstock.

Debit: A debit is an accounting entry that increases an asset or expense account and decreases a liability or equity account. It will always be accompanied by a corresponding credit entry. 

Debt Financing: Debt financing involves raising capital by borrowing money from external sources, such as banks or investors. It creates an obligation to repay the borrowed amount along with interest.

Demand Forecasting: Demand forecasting involves estimating future customer demand for products or services. Accurate forecasting helps optimise inventory and production planning.

Depreciation: Depreciation is the gradual decrease in the value of a tangible asset over its useful life. It’s recorded as an expense on the income statement and reduces the asset’s book value.

Direct Costs: Direct costs are expenses directly attributable to producing a specific product or service. They include materials, labour, and other costs directly tied to production.

Direct Labour: Direct labour refers to the workforce directly involved in the production of goods or services. It excludes roles not directly tied to production, such as administrative positions.

Direct Materials: Direct materials are the raw materials and components directly used in the production of goods. They can be traced and allocated to specific products.

Distribution Requirements Planning (DRP): DRP is a system for managing the distribution of finished goods from manufacturing plants to warehouses and retailers. It ensures that inventory levels are aligned with demand.

Dividend: A dividend is a distribution of a company’s profits to its shareholders. It’s usually paid in the form of cash or additional shares.

Double Entry: An accounting method where every financial transaction has equal and opposite effects in at least two different accounts. It satisfies the Accounting Equation. 


E-commerce: E-commerce refers to the buying and selling of goods and services over the internet. It includes online retail, electronic payments, and digital marketing.

EDI (Electronic Data Interchange): EDI is the electronic exchange of business documents, such as purchase orders and invoices, between different companies’ computer systems.

Efficiency: Efficiency measures how well resources are utilised to achieve desired outcomes. It focuses on minimizing waste and maximizing output.

Enterprise Resource Planning (ERP): ERP is a software system that integrates various business processes, such as accounting, inventory management, and human resources, into a single platform.

Equity: Equity represents the ownership interest in a company. It’s calculated as the difference between a company’s assets and liabilities and is also known as net assets or shareholders’ equity.

ERP Implementation: ERP implementation involves installing and configuring an ERP system to meet a company’s specific needs. It includes data migration, training, and process alignment.

ERP Integration: ERP integration involves connecting an ERP system with other software applications to enable seamless data sharing and communication.

EVA (Economic Value Added): EVA is a measure of a company’s financial performance that considers the cost of capital. It assesses whether a company generates value above its required minimum return.

Expenditure: Expenditure refers to money spent by a company on various activities, such as production, marketing, and operations.

Expense: An expense is a cost incurred by a company to generate revenue. It’s recorded on the income statement and reduces net income.

External Audit: An external audit is an independent review of a company’s financial statements by external auditors to ensure accuracy and compliance with accounting standards.


FIFO (First-In, First-Out): FIFO is an inventory valuation method that assumes the first items purchased or produced are the first ones sold. It follows the chronological order of inventory flow.

Financial Statement: A financial statement is a formal record of a company’s financial activities and position. The main statements include the income statement, balance sheet, and cash flow statement.

Fixed Assets: Fixed assets are long-term assets with enduring value, such as buildings, equipment, and vehicles. They are not easily converted into cash.

Fixed Costs: Fixed costs are expenses that remain constant regardless of the level of production or sales. They include rent, salaries, and insurance.

Forecasting: Forecasting involves making predictions about future trends and events based on historical data and analysis.

Freight Forwarder: A freight forwarder is a company or individual that arranges and manages the transportation of goods on behalf of shippers.

Full Absorption Costing: Full absorption costing allocates all manufacturing costs, including direct materials, direct labour, and overhead, to the cost of goods sold.

Functional Currency: The functional currency is the primary currency in which a company conducts its business operations and maintains its financial records.

Fund Flow Statement: A fund flow statement is a financial report that tracks the inflow and outflow of funds within a business during a specific period.


GAAP (Generally Accepted Accounting Principles): GAAP refers to the standardised accounting principles, guidelines, and procedures used to prepare and present financial statements.

Gross Margin: Gross margin, also known as gross profit margin, is the percentage of revenue that exceeds the cost of goods sold. It measures a company’s profitability from core operations.

Gross Profit: Gross profit is the difference between total revenue and the cost of goods sold. It reflects the basic profitability before considering other expenses.

Gross Sales: Gross sales represent the total revenue generated from sales of goods or services before deducting any discounts, returns, or allowances.


Holding Cost: Holding costs refer to the expenses associated with storing inventory over a specific period. They include storage, insurance, and opportunity costs.

Human Resources Management (HRM): HRM involves managing an organization’s workforce, including recruitment, training, performance evaluation, and employee relations.


Income Statement: An income statement, also known as a profit and loss statement, shows a company’s revenue, expenses, and net income or loss over a specific period.

Indirect Costs: Indirect costs are expenses that are not directly tied to a specific product or service. They include overhead costs like rent, utilities, and administrative salaries.

Inventory: Inventory consists of goods and materials held by a company for production, resale, or use in operations. It’s categorised as raw materials, work-in-progress, and finished goods.

Inventory Turnover: Inventory turnover measures how many times a company’s inventory is sold and replaced over a specific period. It indicates the efficiency of inventory management.

Invoice: An invoice is a document sent by a seller to a buyer, detailing the products or services provided and the amount due for payment.

ISO (International Organization for Standardization): ISO is an independent organization that sets and publishes international standards for various industries and practices.


Job Costing: Job costing is a costing method that assigns costs to specific projects, jobs, or orders. It’s used in industries where each project or job is unique.


Kaizen: Kaizen is a Japanese term that means “continuous improvement.” It refers to the practice of making incremental improvements to processes, products, or systems over time.


Landed Cost: Landed cost includes all expenses associated with purchasing and receiving goods, including the cost of the product, transportation, customs duties, and handling fees.

Lead Time: Lead time is the duration between placing an order and receiving the goods. It’s an important factor in inventory management and production planning.

Liabilities: Liabilities are obligations or debts that a company owes to external parties. They can be current liabilities (short-term) or non-current liabilities (long-term).

LIFO (Last-In, First-Out): LIFO is an inventory valuation method that assumes the last items purchased or produced are the first ones sold. It may result in different cost calculations than FIFO.

Logistics: Logistics involves planning, implementing, and managing the efficient flow of goods, services, and information between the point of origin and the point of consumption.


Make-to-Order (MTO): MTO is a manufacturing strategy where products are produced based on customer orders. It reduces the need for maintaining large inventories.

Make-to-Stock (MTS): MTS is a manufacturing strategy where products are produced in anticipation of customer demand. It’s suitable for products with consistent and predictable demand.

Management Accounting: Management accounting involves providing internal financial information and analysis to aid in decision-making, planning, and control.

Margin: Margin refers to the difference between the selling price and the cost of production. It can be expressed as a percentage of the selling price or the cost.

Market Value: Market value is the current price at which an asset can be bought or sold in the open market. It’s influenced by supply, demand, and prevailing economic conditions.

Material Requirements Planning (MRP): MRP is a system that helps manage the production and inventory of materials needed to meet customer demand. It calculates quantities and schedules based on demand forecasts.


Net Income: Net income, also known as profit or net profit, is the amount by which total revenue exceeds total expenses. It’s a key measure of a company’s profitability.

Non-Current Assets: Non-current assets, also known as long-term assets, are resources that are not expected to be converted into cash within a year. They include property, plant, and equipment.

Non-Current Liabilities: Non-current liabilities are long-term obligations that are not due for settlement within a year. They include long-term loans and bonds.


Operating Income: Operating income, also known as operating profit, is the difference between operating revenue and operating expenses. It reflects the profitability of core business operations.

Opportunity Cost: Opportunity cost refers to the value of the next best alternative that is foregone when a decision is made. It’s an important consideration in decision-making.

Order-to-Cash (OTC): OTC is a business process that covers the entire order lifecycle, from receiving customer orders to cash collection. It involves order processing, fulfilment, and payment.


Payback Period: Payback period is the time it takes for an investment to generate enough cash flow to recover the initial investment cost. It’s used to evaluate investment decisions.

Payroll: Payroll refers to the process of calculating and disbursing employee salaries, wages, and benefits. It includes withholding taxes and other deductions.

P&L (Profit and Loss Statement): P&L is another term for the income statement, which shows a company’s revenue, expenses, and net income over a specific period.

Perpetual Inventory System: A perpetual inventory system tracks inventory levels in real-time using technology and updates records with each purchase, sale, or return.

Periodic Inventory: A system of valuing inventory where a physical count of the inventory is performed at specific intervals. The Cost of Sales Sold (COGS ) is then calculated using the updated inventory value. 

Process Costing: Process costing is a costing method used for continuous, mass production. It assigns costs to a specific production process rather than individual products.

Profit Margin: Profit margin is the ratio of net income to total revenue, expressed as a percentage. It measures the profitability of a company’s operations.

Purchasing: Purchasing involves acquiring goods or services needed for a business’s operations. It includes selecting suppliers, negotiating contracts, and managing supplier relationships.


Quality Control: Quality control involves monitoring and ensuring that products or services meet predetermined quality standards. It focuses on preventing defects and maintaining consistency.

Quick Ratio: The quick ratio, also known as the acid-test ratio, measures a company’s ability to cover its short-term obligations using its most liquid assets.


Raw Materials: Raw materials are the basic materials used in production. They are converted into finished products through manufacturing processes.

Receivables Turnover: Receivables turnover measures how many times a company’s accounts receivables are collected and replaced within a specific period. It indicates the efficiency of accounts receivable management.

Return on Assets (ROA): ROA is a profitability ratio that measures how effectively a company generates profits from its assets. It’s calculated by dividing net income by average total assets.

Return on Equity (ROE): ROE is a profitability ratio that measures a company’s ability to generate returns for its shareholders. It’s calculated by dividing net income by shareholders’ equity.

Revenue Recognition: Revenue recognition refers to the accounting process of recording revenue when it’s earned and realizable, regardless of when the cash is received.

Reorder Point: The reorder point is the inventory level at which a new order should be placed to replenish stock before it runs out, considering lead time and demand variability.


Sales Forecasting: Sales forecasting involves estimating future sales volumes based on historical data, market trends, and other relevant factors.

SaaS (Software as a Service): SaaS is a software delivery model where applications are hosted by a third-party provider and accessed via the internet on a subscription basis.

Scalability: Scalability refers to a system’s ability to handle increasing workloads and demands without compromising performance or efficiency.

Segment Reporting: Segment reporting involves presenting financial information about business segments within a company, such as product lines or geographical regions.

Shareholder Equity: Shareholder equity represents the residual interest in a company’s assets after deducting liabilities. It’s also known as net assets or book value.

SKU (Stock Keeping Unit): A SKU is a unique code or identifier used to track and manage individual items in inventory. It helps distinguish between different products.

Standard Costing: Standard costing involves setting predetermined costs for materials, labour, and overhead. It’s used for cost control and variance analysis.

Statement of Cash Flows: The statement of cash flows shows the inflows and outflows of cash from a company’s operating, investing, and financing activities.

Strategic Planning: Strategic planning involves setting long-term goals and determining the best approaches to achieve them. It guides a company’s overall direction and decisions.

Supply Chain Management: Supply chain management involves optimizing the flow of goods, services, and information from suppliers to customers. It aims to minimise costs and improve efficiency.


Throughput: Throughput refers to the rate at which a system produces and delivers its output. It’s a key metric in assessing the efficiency of production processes.

Total Cost of Ownership (TCO): TCO includes all costs associated with acquiring, using, and maintaining a product or system over its entire lifecycle.

Trial Balance: A trial balance is a list of all accounts and their balances in the general ledger. It’s used to ensure that debits and credits are balanced.

Turnover: Turnover can refer to inventory turnover (how often inventory is sold and replaced) or employee turnover (the rate at which employees leave and are replaced).


Unearned Revenue: Unearned revenue, also known as deferred revenue, refers to payments received in advance for products or services that have not yet been delivered.

Utilization Rate: Utilization rate measures how effectively resources, such as labour or equipment, are used in production. It’s expressed as a percentage of capacity.


Variable Costs: Variable costs are expenses that change in direct proportion to changes in production or sales volume. They include materials and direct labour.

Variance Analysis: Variance analysis involves comparing actual performance to budgeted or expected performance to identify differences and understand their causes.


WIP (Work in Progress): WIP refers to partially completed goods in the production process. It includes materials and costs incurred but not yet completed.

Working Capital: Working capital is the difference between current assets and current liabilities. It represents the funds available for day-to-day operations.


Yield: Yield refers to the amount of usable product obtained from a manufacturing process, often expressed as a percentage of the raw materials used.


Zero-Based Budgeting (ZBB): ZBB is a budgeting approach where all expenses must be justified from scratch for each budgeting period, rather than using prior budgets as a baseline.

Understanding the terms and concepts in this comprehensive Accounting and ERP Glossary Guide is crucial for professionals, business owners, and students navigating the complex landscapes of accounting, financial management, and ERP. This glossary serves as a valuable resource for clarifying terminology, fostering better communication, and enhancing knowledge in these areas. Whether you’re a seasoned accountant, a business executive making informed financial decisions, or a student mastering the basics, this guide is designed to be your go-to reference. Explore each term, comprehend its application, and empower yourself with the language of business and finance to succeed in your respective field.

If you have any accounting and ERP needs, don’t hesitate to contact Omni Accounts. Our team of knowledgeable and experienced professionals is ready to provide the support and solutions you need to thrive in today’s competitive business environment.