30 Basic Accounting Terms, Acronyms and Abbreviations Every Business Owner Should Know

1. Core Financial Statements & Ledger Terminology

1. General Ledger (GL)

The General Ledger (GL) is the master record of all financial transactions completed across your business. Every sale at the POS, stock purchase, payroll run, or bank deposit ultimately records entries in your GL accounts.

Biashara ERP Automation: Instead of manual monthly journal entries, Biashara ERP automatically posts every front-office event (POS sales, M-Pesa payments, supplier GRNs) directly to the GL in real time.

2. Chart of Accounts (COA)

The Chart of Accounts (COA) is an organized listing of all financial accounts in your general ledger, categorized into Assets, Liabilities, Equity, Revenue, and Expenses.

3. Balance Sheet (BS)

A Balance Sheet (BS) provides a financial snapshot of your company at a specific moment in time. It calculates your net worth using the fundamental accounting equation: Assets = Liabilities + Owner’s Equity.

4. Income Statement / Profit & Loss (P&L)

The Income Statement (P&L) summarizes your total revenue earned and total expenses incurred over a specific period (monthly, quarterly, or annually) to show whether your business made a net profit or loss.

5. Trial Balance (TB)

A Trial Balance (TB) is an internal worksheet listing the debit and credit balances of all ledger accounts to verify that total debits equal total credits before preparing official financial statements.

2. Sales, Debtors & Cash Flow Concepts

6. Accounts Receivable (AR)

Accounts Receivable (AR) represents the total money owed to your business by customers who purchased goods or services on credit.

7. Accounts Payable (AP)

Accounts Payable (AP) refers to the money your business owes to suppliers, vendors, or contractors for inventory or services delivered on invoice credit terms.

8. Cash Flow (CF)

Cash Flow (CF) tracks the net amount of cash and cash equivalents moving into and out of your business bank accounts and cash registers.

9. Cashbook & Bank Reconciliation

The Cashbook logs all daily cash and electronic money receipts and disbursements. Bank Reconciliation matches cashbook lines against your actual bank statement CSV files to eliminate accounting discrepancies.

10. STK Push / C2B Payment Collection

In African retail & commercial trade, STK Push (Sim Tool Kit Push) initiates an automated payment prompt on a customer’s mobile phone (e.g., Safaricom M-Pesa), immediately updating the cashier’s till and AR ledger upon confirmation.

3. Costing, Stock & Profitability Metrics

11. Cost of Goods Sold (COGS)

COGS measures the direct cost of purchasing or manufacturing the inventory items sold to customers during a given period.

12. Gross Margin (GM) & Gross Profit

Gross Profit is Revenue - COGS. Gross Margin (%) expresses this value as a percentage of total sales, revealing how efficiently you price your inventory.

13. Net Margin & EBITDA

Net Margin is your bottom-line profit percentage after subtracting all operating expenses, interest, and taxes. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, serving as a key benchmark for operational performance.

14. FEFO & FIFO Stock Valuation

FEFO (First-Expired, First-Out) prioritizes selling items with nearest expiry dates (crucial for pharmaceutical & food retail). FIFO (First-In, First-Out) assumes older inventory items are sold first.

15. Landed Cost

Landed Cost includes freight shipping, customs duty, port clearance, and transit insurance added to the purchase price of imported stock items to determine true inventory value.

4. Local Tax & Statutory Compliance (Kenya & Africa)

16. KRA eTIMS (Electronic Tax Invoice Management System)

In Kenya, KRA eTIMS mandates digital transmission of tax invoice data to the Kenya Revenue Authority at checkout, outputting a fiscal QR code and control code on official customer receipts.

17. PAYE (Pay As You Earn)

PAYE is the statutory tax deducted directly from employee monthly salaries by employers and remitted to tax authorities.

18. NSSF (National Social Security Fund)

NSSF is the statutory pension contribution for workers in Kenya, calculated based on tier rates.

19. SHIF (Social Health Insurance Fund)

SHIF replaced NHIF in Kenya as the statutory healthcare contribution calculated as a percentage of gross pay.

20. Housing Levy

Housing Levy is the statutory payroll deduction (1.5% employee + 1.5% employer) remitted monthly to support affordable housing initiatives.

5. Accounting Mechanics & Governance

21. Double-Entry Bookkeeping (DR / CR)

The universal accounting principle where every transaction affects at least two accounts—one Debit (DR) and one Credit (CR)—ensuring balance sheet equilibrium.

22. Accrual vs. Cash Basis Accounting

Accrual Accounting records revenue and expenses when earned or incurred (regardless of cash flow). Cash Basis records transactions only when physical money changes hands.

23. Depreciation (DEP) & Amortization

The gradual reduction in the financial value of fixed assets (machinery, vehicles, computers) over their estimated useful lifespan.

24. Assets (Current vs. Fixed)

Current Assets (cash, inventory, AR) convert to cash within 12 months. Fixed Assets (buildings, plant machinery) are long-term capital holdings.

25. Liabilities (Current vs. Long-Term)

Current Liabilities (AP, short-term debt, statutory taxes) are due within one year. Long-Term Liabilities (bank mortgages, equipment loans) extend beyond one year.

26. Equity / Owner’s Equity (OE)

The residual interest in business assets after deducting all liabilities, representing owner investment and retained earnings.

27. Capital Expenditure (CapEx) vs. OpEx

CapEx purchases long-term assets (new store fixtures, vehicles). OpEx covers daily operational costs (rent, salaries, electricity).

28. Audit Trail

A chronological, immutable digital record detailing every user action, entry edit, invoice void, or payment reversal within your accounting software.

29. Return on Investment (ROI)

A performance ratio measuring the profitability of an investment relative to its cost: (Net Gain / Investment Cost) * 100.

30. Integrated ERP Accounting

Unlike standalone accounting spreadsheets, Integrated ERP Accounting unifies POS, inventory, procurement, CRM, and statutory payroll into a single real-time ledger engine.