The Accounting Equation

This is the fundamental formula that underlies the entire double-entry bookkeeping system. It shows the relationship between a company’s assets, liabilities, and owner’s equity.

Accounting Standards for Private Enterprises (ASPE)

This is referred to as  accounting rules and standards designed specifically for private companies in Canada to prepare their financial statements. It provides a simplified framework compared to IFRS, tailored to the needs of stakeholders in privately held entities.

Accrual accounting

This is a method of accounting where revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid.

Arm’s length

This is referred to business deal or transaction in which both parties act independently and in their own best interest, without pressure or relationship bias.

Amortization

Amortization is the process of spreading out the cost of an intangible asset or loan over a period.

Accounts Payable (AP)

This is the amount a business owes to suppliers or vendors for goods and services that have been received but not yet paid for. This is a current liability on a company's balance sheet.

Accounts Receivable (AR).

 This represents the money owed to your business by customers who have purchased goods or services on credit and have not yet paid. This is a current asset on the balance sheet.

Audit Trail

This is a detailed, chronological record of all the transactions and changes made in a system or accounting records. It provides a traceable path from the original entry to the final financial statements

Bad debt

refers to amounts owed to a business that are unlikely to be collected—typically because the customer cannot or will not pay.

Balance sheet

Is one of the core financial statements that provides a snapshot of a company’s financial position at a specific point in time

Bank reconciliation

This is the process of comparing your company's internal financial records (like your cash account) with the bank statement from your financial institution. The goal is to ensure both records match and to identify and resolve any differences.

Break-even point (BEP)

is the level of sales at which total revenues equal total costs

Bookkeeping

This is the process of recording, organizing, and maintaining a company’s financial transactions daily. It’s the foundation of accounting.

Business Number (BN)

Is a nine-digit identifier issued by the Canada Revenue Agency (CRA) to businesses and legal entities. It serves as a unique tax ID when interacting with federal, provincial, and municipal governments.

Cash accounting

Refers to a simple accounting method where revenues and expenses are recorded only when cash is received or paid.

Cash Flow

This is the movement of money in and out of your business monthly or over a given period including cash and cash equivalents

Closing entry

This is when an accounting journal entry is made at the end of an accounting period to transfer the balances of temporary accounts (like revenues, expenses, and dividends) to permanent accounts (usually retained earnings or capital accounts).

Credit note

This is a document issued by a seller to a buyer to acknowledge a reduction in the amount owed by the buyer, often due to returns, overcharges, or billing errors.

Customer Aging (Accounts Receivable Aging)

Is a report or analysis that categorizes your outstanding customer invoices based on how long they have been unpaid.

Debit note

This is a document issued by a buyer to a seller to request a credit or adjustment for goods or services that were returned, damaged, incorrect, or overcharged.

Electronic Funds Transfer.

It’s the electronic movement of money from one bank account to another without the use of paper checks or cash.

Employer Health Tax (EHT)

is a payroll tax that some governments (notably certain Canadian provinces like Ontario, British Columbia, Quebec) impose on employers to help fund public health care.

Employment Insurance (EI)

This is a government program that provides temporary financial assistance if you lose your job.

Equity

represents the owner’s interest or claim in a business after all liabilities (debts) have been deducted from the assets. (Equity= Asset- Liabilities)

Financial statements

This is a formal record that summarizes the company’s financial performance and position. It provide critical information to owners, investors, creditors, and other stakeholders about the business’s performance and health.

Generally Accepted Accounting Principles.

It’s a set of accounting rules, standards, and procedures companies in the U.S. (and many other countries with some variations) must follow when preparing financial statements.

GST (Goods and Services Tax)

GST is a value-added tax levied on most goods and services sold for domestic consumption. It’s collected by businesses on behalf of the government. The rate is 5%

GIC (Guaranteed Investment Certificate)

A GIC is a low-risk investment product commonly offered by banks and financial institutions, especially in Canada.

Harmonized Sales Tax,

Is a combination of the federal Goods and Services Tax (GST) and the provincial sales tax (PST) into a single, blended tax in certain Canadian provinces. (Ontario, New Brunswick, newfoundland & Labrador, Nova scotia and Price Edward Island) usually between 13% to 15%

Input Tax Credit (ITC)

Allows a business to recover the GST/HST (Goods and Services Tax / Harmonized Sales Tax) paid on purchases and expenses related to its commercial activities to prevent tax on tax

Invoice

This is a commercial document that a seller issues to a buyer to request payment for goods or services provided. It details what was sold, how much is owed, and when payment is due.

Journal

This is the first place a financial transaction is recorded. It’s often called the book of original entry.

Line of Credit (LOC)

Is a flexible loan arrangement between a borrower and a lender (usually a bank), where the borrower can access funds up to a set limit as needed only paying interest on the amount used, not the entire limit.

Provincial Sales Tax (PST)

Referred to as sales tax levied by certain Canadian provinces on the sale of goods and some services within that province (usually between 6% to10%). Quebec has a similar sales tax called QST- Quebec Sales Tax

Pensionable and Insurable Earnings Review. (PIER)

It’s a review conducted by the Canada Revenue Agency (CRA) to ensure that employers have deducted and remitted the correct amounts of CPP (Canada Pension Plan) and EI (Employment Insurance) contributions for their employees during the year.

Prepaid expenses

Payments made in advance for goods or services that will be received or used in future accounting periods. They are recorded as assets on the balance sheet until the benefit is used up.

Principal

This is the original amount of money that is invested, loaned, or borrowed, excluding interest.

Purchase Order (PO)

A formal document issued by a buyer to a seller that authorizes a purchase of goods or services at agreed-upon terms. It serves as a binding contract once accepted by the seller.

T1

This is the individual income tax return form used by Canadian residents to file their personal income taxes with the Canada Revenue Agency (CRA) each year.

T2

This is the Corporation Income Tax Return that must be filed by all incorporated businesses in Canada including non-profits and inactive corporations with the Canada Revenue Agency (CRA).

T3010

This is the Registered Charity Information Return that Canadian registered charities must file annually with the Canada Revenue Agency (CRA).

T4 slip (Statement of Remuneration Paid)

This is a tax form used in Canada to report employment income and deductions for an employee for a given tax year.

T4A slip

is an official Canadian tax form used to report various types of income other than regular employment wages. It’s often called the Statement of Pension, Retirement, Annuity, and Other Income.

Tax bracket

Refers to the range of income that is taxed at a specific rate in a progressive tax system. In Canada (and many countries), your income is divided into brackets, and each portion of your income is taxed at the rate for that bracket.

Term deposit

This is a type of fixed investment where you deposit money with a bank or financial institution for a fixed period (term) at a guaranteed interest rate.

Term loan

This is when a business borrows a specific amount of money upfront and agree to repay it over a fixed period with regular payments (monthly, quarterly, etc.), usually including interest.

Trial balance

Is an accounting report that lists all the general ledger accounts and their balances at a specific point in time. Its main purpose is t.

Vendor Aging (Accounts Payable Aging)

Is a report that categorizes your outstanding bills or amounts owed to vendors/suppliers based on how long they’ve been unpaid.

Workers’ Compensation Board

It’s a government agency in Canadian provinces that provides workplace injury insurance, benefits and compensation to workers injured on the job and support for rehabilitation and return to work.

Year to Date (YTD)

Refers to the period starting from the beginning of the current calendar year (January 1) up to the current date. It’s commonly used in accounting, finance, and payroll to track performance, earnings, or expenses over that time frame.