Accounting glossary
Plain-English explanations of the accounting terms behind the API — what each one means, how it is recorded, and what it looks like in the ledger.
Fundamentals
What Is Double-Entry Bookkeeping? With Journal-Entry Examples
How double-entry bookkeeping works, why every transaction posts equal debits and credits, and what that buys you — with worked journal-entry examples.
Debits and Credits Explained: The Rules, With a Cheat Sheet
Which accounts increase with a debit and which with a credit, why the bank statement seems backwards, and a cheat sheet that makes the rules mechanical.
What Is a General Ledger? Structure, Examples, and How Software Models It
What the general ledger is, how accounts, transactions and entries fit together, and how modern accounting software models a ledger as data.
What Is a Chart of Accounts? With EU and Lithuanian Template Examples
What a chart of accounts is, how account codes and hierarchies work, how EU countries differ, and what the standard Lithuanian chart looks like in practice.
What Is a Journal Entry? Types and Worked Examples
The anatomy of a journal entry, the main types — standard, compound, adjusting, closing, reversing — and worked examples with real account codes.
What Is a Trial Balance? What It Catches and What It Misses
What a trial balance shows, how to read one, which bookkeeping errors it exposes — and the whole class of errors it cannot see.
The Accounting Equation Explained: Assets = Liabilities + Equity
Why assets always equal liabilities plus equity, how every transaction preserves the identity, and how income and expenses fit into the expanded equation.
Bookkeeping vs Accounting: What's Actually the Difference?
Where bookkeeping ends and accounting begins, what each involves day to day, and how automation has redrawn the line between them.
Cash Basis vs Accrual Accounting: Which One, and When You Must Switch
How cash and accrual accounting differ, what each gets right and wrong, who is allowed to use cash basis in the EU, and the signals that it's time to switch.
What Is an Accounting Period? Fiscal Years, Period Locks, and Closing the Books
How accounting periods structure the books, what closing a period actually involves, and why locking closed periods is what makes reported numbers trustworthy.
What Are Adjusting Entries? Accruals, Deferrals, and Cut-Offs
The period-end entries that align the books with economic reality — accruals, deferrals, depreciation and provisions — with worked examples of each.
Single-Entry vs Double-Entry Bookkeeping: Why Ledgers Won
What single-entry bookkeeping is, where it still survives, what it structurally cannot do — and why every serious system settled on double-entry ledgers.
Financial statements
What Is a Balance Sheet? How to Read One, Line by Line
What a balance sheet shows, how assets, equity and liabilities fit together, and what each line means — with a worked example and the ratios that matter.
The Income Statement (P&L) Explained
What the profit and loss statement shows, how each line is built from the ledger, and how to read it — with a full worked example and the margins that matter.
What Is a Cash Flow Statement? Direct vs Indirect Method
How the cash flow statement explains the gap between profit and money in the bank, the three activity sections, and how the direct and indirect methods differ.
What Are Retained Earnings?
What retained earnings are, how the roll-forward from opening balance to closing balance works, why they are not cash, and the EU legal limits on distributing them.
What Is Working Capital? Formula and Examples
The working capital formula, what the current and quick ratios actually tell you, how the cash conversion cycle works, and how to read the numbers from your ledger.
Gross Profit vs Operating Profit vs Net Profit
The three profit levels explained — what each one measures, which costs sit between them, what the margins diagnose, and where EBITDA fits.
Receivables, payables and documents
What Is Accounts Receivable? With Aging and Collection Basics
What accounts receivable is, how the ledger records the invoice-to-cash cycle, how to measure collection performance with DSO and aging, and where the risk hides.
What Is Accounts Payable? And Why It's Not Just "Bills"
What accounts payable really is — a control function over approval, matching and payment timing — with the ledger entries, the three-way match, and the risks it manages.
What Is an Invoice? Required Fields Under EU VAT Law
The mandatory particulars an invoice must carry under Article 226 of the EU VAT Directive, when a simplified invoice is allowed, the exact wordings required, and what ViDA changes in 2030.
Proforma Invoice vs Invoice: When Each One Counts
What a proforma invoice is and is not, why it creates no VAT liability and no ledger entry, and when to use it instead of an invoice or an advance invoice.
What Is a Credit Note? When to Issue One, With Examples
What a credit note does, why you never delete or edit an issued invoice, the ledger and VAT effects, and worked examples for returns, discounts and errors.
What Is an Aging Report? Reading AR/AP Aging Buckets
How aging reports split receivables and payables into overdue buckets, what each bucket actually means, and the reading mistakes that hide real problems.
What Is Bad Debt? Write-Offs, Provisions, and VAT Relief
The three separate steps behind an uncollectible invoice — impairment allowance, write-off, and VAT relief — with the entries, the EU rules and how member states differ.
What Is Dunning? Payment Reminder Levels That Actually Get Invoices Paid
What a dunning process is, a four-level escalation ladder that works, the legal backing behind late-payment claims in the EU, and how to run it from your ledger.
What Is Bank Reconciliation? A Step-by-Step Walkthrough
Why the ledger and the bank statement disagree, a worked reconciliation from statement to ledger, and how automated matching handles most of it.
What Is a Purchase Order? PO vs Invoice and the 3-Way Match
What a purchase order commits you to, how it differs from an invoice, and how the three-way match against goods receipts catches what would otherwise be overpaid.
What Is Payment Reconciliation? Matching PSP Payouts to the Ledger
Why a Stripe payout never equals your invoices, how to decompose a settlement into sales, fees and refunds, and how the ledger entries actually work.
Assets and inventory
Depreciation Explained: Methods, Schedules, and Journal Entries
Why assets are expensed over time rather than at purchase, the four main methods compared, a full schedule and the monthly journal entries behind it.
Depreciation vs Amortization: The Difference With Examples
Tangible versus intangible assets, why goodwill is treated differently, how each is presented, and the third meaning of amortization that causes most of the confusion.
What Is FIFO? Inventory Valuation Methods Compared
How FIFO layers work, a worked comparison against weighted average, why LIFO is banned in the EU, and how a perpetual FIFO engine consumes cost layers.
What Is COGS? Cost of Goods Sold Explained
What belongs in cost of goods sold and what doesn't, the periodic formula versus perpetual posting, and why the classification decision moves your gross margin.
What Are Landed Costs? Freight, Customs, and True Unit Cost
Why the invoice price is not the cost of your stock, which charges must be capitalized, how allocation by value and by quantity differ, and what happens to units already sold.
What Is a Fixed Asset Register?
What a fixed asset register records, why it must reconcile to the general ledger, the capitalization threshold decision, and how a register is maintained in practice.
Revenue
What Is Accrued Revenue? And Accrued Expenses, Its Mirror
Revenue earned before it is invoiced, expenses incurred before they are billed, the entries for both, and how they reverse when the document finally arrives.
Deferred Revenue vs Unearned Revenue vs Deferred Income
Three names for the same liability — what it is, why it is not revenue, how it is released, and the small differences in how each term is actually used.
MRR and ARR Explained: How Subscription Revenue Is Actually Measured
What MRR and ARR measure, the movement bridge that makes them useful, why they are not accounting revenue, and the mistakes that inflate them.
Tax and EU payments
What Is VAT? How It Actually Works, From Invoice to Return
How value added tax flows through a supply chain, why businesses are collectors rather than payers, the entries at each step, and how the return is assembled.
Reverse Charge VAT Explained, With Invoice Examples
When the buyer accounts for VAT instead of the supplier, the self-assessment entries that usually net to zero, what the invoice must say, and the domestic cases.
What Is a VAT Return? What Goes in Each Box
How a VAT return is structured, what belongs in the output, input and cross-border boxes, why net amounts and tax amounts are reported separately, and how the return is derived from the ledger.
Intra-Community Supply and Acquisition: EU Cross-Border VAT Basics
How goods move between EU member states without VAT, the four conditions for zero-rating, the acquisition entries on the buyer's side, and the evidence that protects the exemption.
What Is VIES? Validating EU VAT Numbers
What the VIES system does and doesn't confirm, why validation is a substantive condition for zero-rating, how to handle outages, and what evidence to keep.
What Is an E-Invoice? Peppol, Formats, and Who Must Use Them
Why a PDF is not an electronic invoice, how EN 16931 and Peppol work, the national clearance systems, and what ViDA makes mandatory in 2030.
What Is SEPA? Credit Transfers (pain.001) vs Direct Debit (pain.008)
How the Single Euro Payments Area works, the difference between pushing and pulling money, the ISO 20022 message formats, and what mandates require.
What Is an EPC QR Code? Scan-to-Pay on Invoices
The European Payments Council QR standard for SEPA credit transfers — what the payload contains, why it removes payment errors, and where it is used.
What Is Withholding Tax? When It Applies in the EU
Tax deducted at source on cross-border payments, which payment types it hits, how treaties and EU directives reduce it, and the entries on both sides.
Ledger tech
What Is an Immutable Ledger? Audit Trails and Why Deleting Entries Is a Bug
Why posted accounting entries must never be edited or deleted, how corrections work in an append-only ledger, and what period locks and audit logs actually guarantee.
What Is Idempotency? Why Accounting and Payment APIs Need It
How a retried request creates a duplicate invoice, what an idempotency key guarantees, the failure modes it must handle, and how to implement it correctly.
Subledger vs General Ledger: How Real Systems Are Layered
Why detail lives outside the general ledger, how control accounts and subledgers must reconcile, and what breaks when someone posts directly to a control account.
Multi-Currency Accounting: Realized vs Unrealized FX Gains and Losses
How foreign-currency transactions are recorded and revalued, the difference between realized and unrealized differences, and why you must store both currencies.
What Is a Cost Center? Analytic Dimensions Beyond the Chart of Accounts
Why the chart of accounts should not encode departments or projects, how analytic dimensions work instead, and the combinatorial explosion they prevent.
What Is Consolidation? Multi-Entity Accounting Explained
How several companies become one set of accounts — the three consolidation methods, currency translation, eliminations, and non-controlling interests.