Accounting feels like it has its own language. Here, we'll explain the key accounting terms for ESOL learners. We'll cover basic accounting vocabulary such as assets, liabilities, equity, revenue, expenses, VAT, and profit and loss.
Why Accounting Vocabulary Matters for ESOL Learners
Accounting has always been known as a subject studied and practised by the acutely intellectual; as such, it comes with more than its fair share of intriguing, but often confusing terminology and ‘jargon’ that may be challenging for ESOL learners to grasp. You could be the best accountant in the world, but if you are unable to effectively communicate with the rest of the accounting community, which includes, but is not limited to, colleagues, academics, clients and management, then you won’t be able to put any of your talent to use in a practical way.
This might sound like a daunting prospect, but accounting vocabulary is part of the wider business English that learners can practise for professional communication.⁵ In this article, we’ll be having a look at some of the key accounting terms for ESOL learners and essential business English vocabulary, so that you can begin to navigate the world of professional accounting like a pro!
Essential Accounting Vocabulary for Beginners
We hope you learn something new that can help you develop your communication skills as a manager by reading this. To start with, let’s look at some essential financial terms explained in simple language, making this a useful guide to finance English for beginners. To some people, this term might just mean someone who’s good with numbers, or in television drama, an accountant is often portrayed as someone who waves their hand and makes financial troubles disappear.
In reality, an accountant is very skilled at recording/documenting financial transactions in all their forms, and is also necessarily skilled at communicating this information concisely to the clients they work for.
Being an accountant is a position of trust and responsibility, so learning bookkeeping vocabulary and English for accountants is essential for accurate reports, clear communication, and understanding common accountancy terminology.⁴ This is all the more reason to understand the terminology in the profession.
| Term | Simple meaning | Example in business English |
|---|---|---|
| Assets | Things a person or business owns that have value. | The company’s assets include cash, equipment, and inventory. |
| Liabilities | Money or obligations a person or business owes. | The loan is recorded as a liability in the accounts. |
| Equity | The value left after liabilities are subtracted from assets. | Owner’s equity increased after the business made a profit. |
| Revenue | Money earned from selling goods or services. | The business generated revenue from online sales. |
| Expenses | Money spent to run a business or earn revenue. | Rent, wages, and supplies are common business expenses. |
| Profit | The money left when revenue is higher than expenses. | The company reported a profit at the end of the year. |
| Loss | The result when expenses are higher than revenue. | The shop made a loss because costs were higher than sales. |
| VAT | A UK tax added to many goods and services. | The invoice includes VAT at the standard rate. |
| Ledger | A record of financial transactions. | The accountant entered the payment in the sales ledger. |
| Balance sheet | A report showing assets, liabilities, and equity at one point in time. | The balance sheet shows what the company owns and owes. |
| Income statement | A report showing revenue, expenses, profit, or loss over a period. | The income statement shows whether the business made a profit. |
| Inventory | Goods or materials a business holds for sale or production. | The retailer counted its inventory at the end of the month. |
Assets, Liabilities, and Equity
The work of an accountant is often spent focusing on assets, liabilities, and equity, which are core ideas in bookkeeping and accounting.¹⁰ Whether the client is a company or a person, assets are the entities, goods, or services a company owns that can increase equity.
Liabilities are what the client owes to other parties and decrease equity.
Equity is essentially the value of all the shares in a company, or an individual's own wealth. For simplicity, an individual can be thought of as owning the one and only share of their own company; this is often referred to as someone’s ‘net worth’.
Here's a table summarising the difference between assets, liabilities and equities:
| Assets | Liabilities | Equity | |
|---|---|---|---|
| Definition | Resources owned with value | Obligations or debts owed to others | The residual interest in the assets of the entity after deducting liabilities |
| Examples | Cash, investments, real estate | Loans, mortgages, credit card debt | Owner's investment in the business, retained earnings |
| Impact | Increase net worth | Decrease net worth | Can increase or decrease depending on changes in assets and liabilities |
| Ownership | Owned by individual or entity | Owed by individual or entity | Owner's or shareholders' claim on the assets |
| Role in Finances | Contribute to wealth accumulation | Require repayment or settlement | Represents the net value of assets once liabilities are settled |
Common Australian Tax Terms
GST is one of the most important Australian tax terms for learners because it appears on many prices and invoices for goods and services. GST stands for Goods and Services Tax and is generally charged at 10% on most goods and services sold or consumed in Australia.
There are also several other Australian tax terms that business owners, employees and accounting professionals commonly use. They are summarised below.
| Tax term | Simple meaning | Example in business English |
|---|---|---|
| GST | Goods and Services Tax, a tax generally added to many goods and services in Australia. | The price includes GST. |
| ATO | Australian Taxation Office, the Australian Government agency responsible for administering the tax system. | The business must lodge its tax return with the ATO. |
| Financial year | A 12-month period used for financial reporting. In Australia, it usually runs from 1 July to 30 June. | The company is preparing its accounts for the financial year. |
| Income year | The period used to calculate income tax. For most taxpayers, it is the same as the Australian financial year. | The accountant calculated the client’s income for the current income year. |
| Tax return | A form or online submission that reports income, deductions and other tax information. | The sole trader asked an accountant to prepare their tax return. |
| Taxable income | The amount of income on which a person or business pays tax after eligible deductions are subtracted. | The business calculated its taxable income for the year. |
| Tax deduction | An eligible expense that may be subtracted from assessable income when calculating taxable income. | The business claimed the equipment purchase as a tax deduction. |
| Invoice | A document that asks a customer to pay for goods or services. | The supplier sent an invoice for the completed work. |
| Tax invoice | An invoice issued by a GST-registered business that includes the information required for GST purposes. | Please keep the tax invoice so the business can claim a GST credit. |
| Business activity statement (BAS) | A form used by registered businesses to report and pay certain taxes, including GST and some PAYG amounts. | The bookkeeper prepares the company’s BAS every quarter. |
| PAYG withholding | Money an employer withholds from payments such as employees’ wages and sends to the ATO. | The employer reported the PAYG withholding amount on its BAS. |
| PAYG instalments | Regular prepayments towards the expected tax on business or investment income. | The sole trader pays PAYG instalments each quarter. |
| Company tax | Income tax paid by a company on its taxable income. | The accountant estimated how much company tax the business would need to pay. |
| eInvoicing | A digital system that sends invoice information directly between compatible accounting systems. | The supplier uses eInvoicing to send invoices directly to its customers. |
Businesses registered for GST generally need to lodge a business activity statement, or BAS, with the ATO. A BAS can be used to report GST, PAYG withholding, PAYG instalments and certain other taxes.
A regular invoice tells a customer how much they owe. A GST-registered business may need to provide a tax invoice, which includes GST information and other required details.
Revenue and Expenses
Two important accounting terms Australian learners will often see are revenue and expenses. Both are central to the business and accounting vocabulary used in Australia.
These words are also used outside accounting, but understanding their full professional meanings will help learners communicate more confidently in Australian workplaces.
Revenue is the income a business earns from its normal activities, such as selling goods or providing services. It may also be called sales revenue, business income or simply income, depending on the context.
Revenue is not the same as profit because the business’s expenses have not yet been deducted.
Expenses are the costs a business incurs while operating and earning revenue. Common expenses include wages, rent, electricity, insurance, advertising and office supplies.
In simple terms, profit can be calculated by subtracting expenses from revenue for the same accounting period:
Profit = Revenue − Expenses
If expenses are greater than revenue, the business makes a loss rather than a profit.
| Category | Revenue | Expenses |
|---|---|---|
| Definition | Income earned from business activities | Costs incurred while operating the business |
| Common sources or examples | Sales, services provided, fees, interest and royalties | Wages, rent, utilities, insurance and supplies |
| Effect on profit | Usually increases profit | Usually decreases profit |
| Business impact | Brings money into the business | Uses the business’s financial resources |
| Management | Can be increased through sales, pricing and marketing | Can be controlled through budgeting and cost management |
| Objective | Increase sustainable revenue to support profitability | Manage expenses carefully without harming business operations |
Examples in Australian Business English
- The company’s revenue increased during the financial year.
- Rent is one of the business’s largest expenses.
- The business earned $150,000 in revenue and incurred $110,000 in expenses.
- The accountant reviewed the company’s income and expenses before preparing its tax return.
- Higher sales revenue helped the business make a profit.
Debits and Credits
Debits and credits can be a tricky pair of concepts to wrap one's head around. In essence, they represent the flow of economic benefit in a transaction from a source to its destination.
Debits represent the inflow of economic benefit to a destination, i.e. an account. Which means that in an account of transactions, they are the positive side of each transaction and represent an increase in assets and a decrease in liabilities.
This can be confusing because outside of accounting contexts, we tend to think of transactions as simply money in and money out, but in the case of debits and credits, a purchase (money out) is, in fact, a debit, because a liability is being exchanged for an asset.
Credits instead represent the outflow of economic benefit from a source. Thus, they are the negative side of a balance sheet. You can try to understand credits by thinking of what happens when you use a credit card. Money is credited to the user’s account, but it’s a liability because it is money owed.
Debits and credits are two sides of every accounting entry. A debit usually increases assets or expenses, while a credit usually increases liabilities, equity, or revenue. For ESOL learners, the simplest way to remember them is not as “good” or “bad”, but as the two directions used to record where value goes and where it comes from.
If you’re still confused, check out this helpful video, which breaks down the details of debits and credits as simply as possible.
What are the 3 Basic Rules of Accounting?
In accounting, there are 3 basic rules that are the guiding principles for recording all financial transactions. They can be summarised as follows:
- The Accounting Equation: This rule states that assets equal liabilities plus equity.² In other words, all the resources owned by a business (assets) are financed by either debts owed to creditors (liabilities) or investments made by the owners (equity).
- The Revenue Recognition Principle: According to this rule, revenue should be recognised when it is earned, regardless of when the cash is actually received.⁷ This means that revenue is recorded in the accounting records when the goods are delivered, or the services are performed, and not necessarily when the payment is received.
- The Matching Principle: This principle requires that expenses be matched with the revenues they help generate. In other words, expenses should be recorded in the same period as the revenues they relate to, regardless of when the payment is made. This ensures that the financial statements accurately reflect the costs associated with earning the revenues.
Accrual accounting records revenue and expenses when they are earned or incurred, even if the money has not been received or paid yet. Cash accounting records them only when money actually enters or leaves the business. For ESOL learners, the simple difference is this: accrual focuses on when the business activity happens, while cash accounting focuses on when the payment happens.
Understanding Financial Reports and Terminology
Next up, we have some vocabulary and business terms specific to the work of an accountant. These terms are broadly used by accountants to communicate the results of their work and to show clients and other accountants relevant information.³
Balance Sheet
A balance sheet is a common financial document that accountants use to communicate a person or company's current financial situation, and it forms part of the annual accounts for UK private limited companies.⁶ It’s called a balance sheet because it balances the debits and credits that we explained earlier to represent the company's overall equity in terms of its assets and liabilities at a given point in time. Balance sheets are great for providing short-term insight into an organisation's financial status, but they often don’t account for more abstract factors like future opportunities and threats, since they can only reflect existing or pending transactions and assets or liabilities that are currently owned.
Assets = Liabilitities + Equity
Income Statement
Similar to a balance sheet, an income statement measures a person or company's financial situation. The key difference from an income statement is that it doesn’t deal directly with the subject's total equity, but rather with cash flow over a given period. This basically means that an income statement records the revenue, expenses and therefore net income over a specific time period. In the simplest terms, this is a record of how much money was made or lost over a certain time.
Revenue > Expenses = Profit
Revenue < Expenses = Loss
Profit and Loss Statement
The 'profit and loss statement' is the same as an income statement, but some accountants prefer it because it is a more technically comprehensive term for what such a statement shows.
Essentially, a profit and loss statement, or an income statement, is a financial report that shows how much money a business has made over a certain period. It lists all the money a business earns from selling goods or services (revenues) and subtracts all the costs and expenses incurred (e.g. rent, salaries, and supplies). The result is either a profit (when revenues exceed expenses) or a loss (when expenses exceed revenues).
It is important for new accountants to know that terms can vary between employers and clients, which is why tricky phrases like depreciation and amortisation should be explained clearly.¹ This is a further reason to put strong effort into learning and remembering as many terms as possible to avoid any confusion and miscommunication that might arise in the workplace.
Ledger
‘Ledger’ is a classic term in accounting, but with the advent of modern technologies, the term might actually refer to a few different things. In its most traditional sense, the ledger is a physical document or collection of documents used to manually record transactions, and accurate business records are especially important for tax and reporting.⁸
The concept of the ledger would vastly change as it became digitised. While a Ledger was previously a physical entity, these days a digital ledger is a piece of accounting software; examples include Xero, QuickBooks, and Sage.
This software offers countless advantages over traditional books, such as real-time updates, remote access, analysis tools, automated accounting tasks, and superior communication options between accountants and their co-workers or clients.
Inventory
In accounting, inventory refers to a list of assets, typically one of three kinds of material objects. Inventoried assets are physical property which a person or company owns and they can be used to create economic benefit.
| Raw Materials | Work in Progress | Finished Goods |
|---|---|---|
| Raw materials are goods extracted by primary economic activity, such as logging, mining, farming etc. It includes things such as metals, oil, organic produce, which don’t have inherent value to a consumer until they are processed into products. | Goods at this stage are in limbo since they take on the risks associated with manufacturing. This is because unfinished products have received investment, but until finished are worth even less than the raw materials because they can’t be sold to customers. This is why tracking these items in the inventory is particularly important in accounting. | These are the goods which are ready to be distributed to customers. These products no longer have the risks of manufacturing associated with them, but instead represent a financial risk if they aren’t able to be sold for a profit. It is a company’s priority to sell these items quickly to achieve a profitable ‘inventory turnover’. |
Understanding this process is key to having a comprehensive view of how a business operates and achieves profitability using its investments and resources.
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Now that you've seen the basics of accounting terminology, you may want to expand your business English skills by learning more about human resources vocabulary. While you’re at it, why not check out Superprof’s premier service, which is designed to help you get in touch with expert tutors with never-before-seen ease and efficiency. Have a look and see how easy it is to expedite your learning progress!
References
- ACCA. “Depreciation and Amortisation.” ACCA Global, May 2014, https://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2014/may/depreciation-amortisation.html. Accessed 13 May 2026.
- ACCA. “The Accounting Equation.” ACCA Global, https://www.accaglobal.com/gb/en/student/exam-support-resources/foundation-level-study-resources/fa1/technical-articles/accounting-equation.html. Accessed 13 May 2026.
- ACCA. “The Conceptual Framework for Financial Reporting.” ACCA Global, https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/strategic-business-reporting/technical-articles/conceptual-framework.html. Accessed 13 May 2026.
- Association of Accounting Technicians. “Key Accountancy Terminology: A Bitesize Glossary.” AAT Comment, 14 Aug. 2020, https://www.aatcomment.org.uk/audience/students/key-accountancy-terminology-a-bitesize-glossary/. Accessed 13 May 2026.
- British Council. “Business English.” LearnEnglish, https://learnenglish.britishcouncil.org/free-resources/business. Accessed 13 May 2026.
- The Open University. “What Are Assets, Capital and Liabilities?” OpenLearn, https://www.open.edu/openlearn/money-business/introduction-bookkeeping-and-accounting/content-section-2.3.1. Accessed 13 May 2026.
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