Glossary
Clear, precise definitions for the terms finance, accounting, and treasury teams use to run reconciliation, close, and cash operations.
Accrued expenses are costs a business has incurred but has not yet paid, often before the supplier invoice has been received or recorded. Under accrual accounting, the business recognizes the expense in the period it belongs to and records a liability for the unpaid amount.
Balance sheet reconciliation checks the closing balances of asset, liability and equity accounts against their supporting records at a defined date. Differences are investigated: errors are corrected, while valid reconciling items remain documented with a reason and an owner.
Bank reconciliation is an accounting control that compares a company's internal cash records against the bank statement for the same period, so any transaction that appears in one but not the other can be found, explained, and corrected before the books are closed.
Cash application is the accounts receivable process of assigning a customer payment that has already been received to the open invoice or invoices it is intended to settle. The process establishes how much of each receivable has been paid and identifies any amount that still requires review.
Cash concentration is a treasury technique that transfers funds from several bank accounts into a central account. The company uses the consolidated funds according to its liquidity needs, account restrictions and transfer arrangements.
Cash equivalents are short-term, highly liquid investments that can be readily converted into known amounts of cash and carry an insignificant risk of changes in value. The criteria in IAS 7 must work together, so a liquid investment is not automatically a cash equivalent.
Cash posting is the act of recording a cash movement in the ledger, through the entry that brings a customer receipt into the books. That entry debits cash or bank for what arrived, credits the receivable for the amount settled, and records supported fees or approved adjustments separately. An unexplained shortfall remains open; an unidentified allocation can use a temporary account under the accounting policy. Cash application is a different step: it decides which open invoice a payment settles.
Credit card reconciliation is the process a company uses to check that the card sales it recorded match what its acquirer reports and what reaches its bank account. It is a business control over merchant card sales, not the personal task of checking a consumer card statement against receipts.
A debit memo is an accounting adjustment document whose effect depends on who issues it. Most commonly, a seller issues a debit memo to increase a customer's amount due and the seller's accounts receivable for an additional charge or correction linked to an earlier transaction. In some accounts payable workflows, a buyer issues a debit memo to record a credit that reduces the amount payable to a supplier.
Deferred revenue, also called unearned revenue, is a liability for customer consideration received before related goods or services are delivered. It represents remaining performance, not earned revenue or profit. In formal contract-liability accounting, the liability can also arise when payment becomes unconditionally due before performance, so cash receipt is not the only possible trigger.
Financial close is the periodic process of completing the accounting records, recording necessary adjustments, reviewing balances and preparing financial statements. The reporting date defines the period; later documents may still support an adjustment to that period, depending on the underlying event and the stage of the close.
Financial consolidation combines the financial statements of a parent and its controlled subsidiaries into a single set of group statements. It aligns reporting policies, combines the figures and removes intragroup effects so the group is presented as one economic entity.
Financial reconciliation is the controlled process of comparing financial data from two or more sources, investigating and resolving differences, and documenting the resulting balance or status. The goal is a supported conclusion about what the numbers represent at a defined date or period.
A general ledger is the central accounting record that contains an organization's accounts, transactions, and running balances. Journal entries and other approved source postings flow into the affected ledger accounts, where the classified amounts support the trial balance and financial statements.
General ledger reconciliation is the control of comparing a GL account balance and activity for a defined period with the corresponding subledger or supporting records. The reconciliation explains differences with evidence and separates errors requiring correction from valid reconciling items.
Intercompany accounting is the process of recording and managing financial transactions between separate legal entities that belong to the same corporate group. Because each entity keeps its own books, an internal transfer creates a receivable in one set of books and a payable in the other, and the two positions have to agree before the group reports consolidated results.
Intercompany eliminations are the entries recorded at consolidation that remove the financial effect of transactions between entities of the same group. They clear reciprocal balances, cancel internal revenue against the internal cost recorded on the same goods or services, and take out any margin the group has not yet realized, so the consolidated statements do not report results the group produced by trading with itself.
An intercompany journal entry records one entity’s side of a transaction with another legal entity in the same group. Each entity posts to its own ledger. Reciprocal amounts should agree for the same transaction and period on a comparable currency basis.
Intercompany reconciliation is the control that confronts the reciprocal balances between entities of the same group and confirms that both sides agree in amount and in period. It covers the receivable of one entity against the payable of the other, internal sales against internal purchases, and internal loans, interest and dividends. It is not the elimination that neutralizes those balances at consolidation, which comes after the pair agrees.
Intercompany transactions are transactions between two entities that belong to the same corporate group, such as a parent and its subsidiary or two subsidiaries of the same parent. Each entity records its own side in its own ledger, and the transaction creates no new revenue or expense for the group as a whole, because the group is trading with itself rather than with an outside party.
Invoice matching compares a supplier invoice with the purchase records that support it before payment approval. Two-way matching checks the purchase order, three-way matching adds receipt evidence, and four-way matching also considers inspection or acceptance records. Differences follow the company’s tolerance and exception policy.
Yes. Accounts receivable is a financial asset because it represents an unconditional right to consideration from a customer. It often arises after a credit sale and exists before cash is collected. Its presentation as current or noncurrent and its net carrying value are separate accounting assessments.
A journal entry is the first formal record of a financial transaction in accounting, a dated entry showing which accounts a business transaction affects and the debit and credit amounts posted to each, before those amounts are summarized in the general ledger.
Month-end close is the accounting process used to review and finalize a company's records for a completed monthly reporting period. It brings recorded activity, account reconciliations, supported adjustments, review, and financial statements together so the period can be reported under the organization's close policy.
An overpayment is a payment above the amount owed. When a customer pays more than the open balance, the excess remains an identifiable customer credit until it is applied to another obligation, treated as an advance or returned under the agreed process.
Payment terms are the agreed conditions that specify how and when a buyer must pay a seller. They can define the amount and currency, the event that starts the payment period, the due date or number of days allowed, accepted payment methods, installments, and any conditional early-payment discount. A payment term sets the obligation; it does not prove that cash was received or applied.
Prepaid expenses are payments made before the related good or service is received or consumed. Until the benefit is used, the unexpired amount is generally tracked as an asset; the consumed portion is recognized as expense over the applicable period, subject to the entity's accounting framework and policy.
Prepaid insurance is the part of a paid insurance premium that relates to coverage still available at the reporting date. It is recorded as an asset, then recognized as insurance expense as the coverage is used, reducing the prepaid balance.
Reclassification in accounting moves an amount already recorded to a different account, category or accounting distribution so the record reflects the supported classification. It corrects where an amount is reported; its effect on expense, profit or other totals depends on the accounts involved.
Reconciliation is the process of comparing two records of the same financial or business activity, identifying differences, and determining whether each difference reflects timing, missing information, an error, or a valid adjustment. The records may agree after supported adjustments, while documented outstanding differences can remain open for follow-up.
Record to report (R2R) is the accounting operating process that captures business transactions, records and validates them, closes the books, and turns the resulting balances into financial and management reports. It connects day-to-day entries with the information stakeholders use to understand performance and financial position.
Remittance is money sent to another party to pay an obligation. In finance operations, a remittance record may also carry identifiers that explain what the payment covers. The payment instruction, remittance advice, bank confirmation, and later application to invoices are separate records or stages; none should be assumed from another.
A remittance advice is a document or electronic notice from a payer explaining which invoices a payment covers, the amount allocated to each and any stated deductions. It communicates the intended allocation; the bank record confirms the funds received, and the supplier separately reviews deductions.
Revenue recognition is the point at which the revenue from a transaction enters the financial statements, and that point is set by the obligation to the customer rather than by the invoice or the payment. A company recognizes revenue when it satisfies what it promised, either as the work progresses or when control of the good or service passes to the buyer. Accrual accounting gives the general rule that places a transaction in its period; revenue recognition fixes the moment the revenue may be recorded. The balance that waits when a customer pays first is deferred revenue, a different object.
A rollforward is an accounting schedule that explains how one account balance changed from the opening to the closing balance of a period. It adds the additions, subtracts the reductions and records adjustments, so the ending balance opens the next period.
A short payment is a payment below the amount due, leaving a receivable balance to resolve. It may result from a deduction, disputed charge, billing error or payment error. An agreed installment follows a scheduled payment arrangement and should be distinguished from an unexplained shortfall.
A subledger is a detailed accounting record for a defined account, process or group of counterparties. Its transactions roll up to a related control account in the general ledger, which presents the summarized balance.
A suspense account is a temporary general-ledger account for an amount whose final classification is unresolved. It keeps the item visible while the accounting team investigates the evidence, then moves the amount to the supported account once the uncertainty is resolved.
Transaction reconciliation is the matching and verification of individual transactions between two records that describe the same activity, so that each line is confirmed and not only the total. The name also serves as the umbrella label for the reconciliation types that work at this same level. What defines it is the level of the comparison rather than the object compared, and the documents behind a line depend on what is being matched.
Treasury operations is the function inside a company that governs its cash and its relationship with the banks. It establishes the cash position, moves collections and payments through its accounts, keeps the banking relationship, and confirms what the banks report against what the company recorded. It belongs to a company, not to a bank's dealing desk or a state treasury. The work is daily, and payments are authorized under the company's own rules.
An unapplied payment is money already received that has not yet been allocated to an open invoice or other item. The payer may be known while the intended allocation remains unclear. The receipt stays identifiable until evidence supports its application.
Variance analysis in accounting is the process of comparing an actual financial result with a named baseline, such as a budget, forecast, or prior period, then investigating and documenting why the difference occurred. It measures the gap, separates supported drivers, and determines whether follow-up is needed.
Why this glossary
Finance, accounting, and treasury teams work faster when everyone uses the same definitions for close, matching, and control processes.