Accounting Glossary: Key Terms Explained with IFRS References and Examples

Every subject has its own vocabulary, and accounting has more than most. Introductory textbooks usually end each chapter with a glossary of key terms; this page does the same for the foundations of accounting, but goes further. Each definition is written for practical use, shows the equivalent IFRS terminology (because many textbooks use US terms such as “owner’s equity” or “income statement”), adds a real-world example — often from a Bangladesh context — and points to the relevant standard or framework.

Use the A–Z links or the search box to jump to a term. If you are new to the subject, start with the accounting equation section below, which shows how assets, liabilities, equity, revenues and expenses work together.

1. The accounting equation in one picture

Every transaction affects at least two items, and the equation must always balance. The table follows six simple transactions for a new service business.

2. Glossary of key terms (A–Z)

Terms in brackets show the IFRS or alternative name; the blue tag shows the related standard or framework.

No terms match. Try a shorter word.

A

Accounting Conceptual Framework

The process of capturing an organisation’s financial activity, organising it consistently and turning it into reports that owners, managers, lenders and regulators can rely on when they make decisions.Example: A garment factory identifies a fabric purchase, records it in the ledger and reports it in monthly management accounts.

Accounting information system AIS Internal control

The people, procedures, controls and technology used to capture transaction data and turn it into financial information.Example: SAP FICO, Tally or an Excel-based ledger, plus the approval and reconciliation controls around them.

Accrual basis of accounting Conceptual Framework

Recording the effects of transactions in the period in which they occur, not when cash is received or paid.Example: December electricity used but billed in January is accrued as a December expense.

Assets Conceptual Framework

Present economic resources controlled by the entity as a result of past events — rights that have the potential to produce economic benefits.Example: Cash, receivables, inventory, machinery, a right-of-use asset for a leased warehouse.

Auditing External audit ISA 700

An independent examination of financial statements by a qualified auditor, leading to an opinion on whether they are presented fairly in accordance with the applicable framework.Example: In Bangladesh, statutory audits are performed by chartered accountancy firms under ICAB and FRC oversight, applying International Standards on Auditing (ISA).

B

Balance sheet Statement of financial position (IFRS) IAS 1 / IFRS 18

A snapshot of what the entity owns (assets), what it owes (liabilities) and the owners’ remaining interest (equity) on one particular date.Example: Prepared “as at 30 June 2026” — a snapshot, not a period.

Basic accounting equation Conceptual Framework

Assets = Liabilities + Equity. Every transaction keeps both sides in balance.Example: Buying a machine on credit raises assets and liabilities by the same amount.

Bookkeeping

The day-to-day task of entering transactions — sales, purchases, receipts, payments — into journals and ledgers so that nothing is missed or duplicated.Example: Posting supplier invoices and bank receipts daily. Accounting goes further: analysis, judgement and reporting.

C

Conceptual Framework Conceptual Framework (2018)

The IASB document that sets out the objective of financial reporting, the qualitative characteristics of useful information and the definitions of the elements. It guides standard-setting and judgement.Example: Used when no standard specifically applies to a transaction.

Convergence IFRS / US GAAP

The effort to reduce differences between national standards (such as US GAAP) and IFRS so that results are more comparable across countries.Example: IFRS 15 and the US revenue standard were developed jointly and are largely aligned.

Corporation Company (limited company) Companies Act

A business that is a separate legal entity from its owners, with ownership divided into transferable shares and owners’ liability usually limited.Example: A private limited company registered with RJSC in Bangladesh.

D

Drawings Owner withdrawals Equity

Money or goods an owner takes out of a sole proprietorship or partnership for private purposes. Drawings lower equity, but they are not a business expense and never appear in profit or loss.Example: A sole trader takes BDT 20,000 from the shop’s cash for family expenses.

E

Economic entity assumption Reporting entity Conceptual Framework (reporting entity)

Treat the business as its own accounting unit: only its transactions go into its books — never the owner’s personal affairs or another business’s dealings.Example: The owner’s personal car loan is not recorded in the company’s books.

Equity Owner’s equity / shareholders’ equity Conceptual Framework

The residual interest in assets after deducting all liabilities.Example: Share capital, retained earnings and other reserves.

Ethics IESBA Code

The values and professional rules that guide accountants to act with integrity and in the public interest — especially when no accounting rule gives a clear answer.Example: Professional accountants follow the IESBA Code: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Expanded accounting equation

Assets = Liabilities + Owner’s capital − Drawings + Revenues − Expenses. It shows how profit and owner transactions change equity.Example: Useful for checking the effect of each transaction before preparing statements.

Expenses Conceptual Framework

Decreases in assets or increases in liabilities that reduce equity, other than distributions to owners.Example: Salaries, rent, depreciation, utilities, interest.

F

Fair value IFRS 13

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.Example: Investment property and many financial instruments may be measured at fair value.

Faithful representation Conceptual Framework

A fundamental quality of useful information: it depicts the substance of what it claims to represent and is complete, neutral and free from error.Example: Recording a sale-and-repurchase deal as a loan, not a sale, because that is its substance.

Financial accounting

Accounting for outsiders: preparing general-purpose financial statements for investors, lenders, regulators and other external users, following accounting standards.Example: Annual audited financial statements under IFRS.

Financial Accounting Standards Board (FASB) US GAAP

The private body that sets US GAAP. It is the US counterpart of the IASB.Example: Relevant for subsidiaries reporting to US parent companies.

Financial Reporting Council (FRC), Bangladesh Bangladesh

The statutory regulator established under the Financial Reporting Act 2015 that oversees financial reporting, accounting and auditing standards for public interest entities in Bangladesh.Example: Prescribes IFRS and ISA for applicable entities and monitors audit quality.

Forensic accounting

A specialism that uses financial analysis, evidence gathering and investigation techniques to uncover fraud, quantify losses and support legal disputes.Example: Tracing duplicate vendor payments in a procure-to-pay investigation.

G

Generally accepted accounting principles (GAAP)

The body of standards and practices a jurisdiction accepts for financial reporting. Many countries’ GAAP is IFRS or based on IFRS.Example: “US GAAP” is set by the FASB; IFRS is set by the IASB.

Going concern IAS 1 / IFRS 18, IAS 10

The assumption that the entity will continue operating for the foreseeable future, so assets are not valued at forced-sale prices.Example: Material uncertainties about going concern must be disclosed.

H

Historical cost Cost principle IAS 16 cost model

Measuring assets at the amount paid to acquire them (adjusted for depreciation and impairment), rather than current market value.Example: Land bought for BDT 3 crore stays at cost under the cost model even if its market value doubles.

I

Income statement Statement of profit or loss (IFRS) IFRS 18

Reports what the entity earned and what it cost to earn it over a period, ending with the profit or loss for that period.Example: “For the year ended 30 June 2026.” From 2027, IFRS 18 adds required subtotals.

International Accounting Standards Board (IASB) IFRS Foundation

The independent standard-setter of the IFRS Foundation that issues IFRS Accounting Standards.Example: Successor (since 2001) to the IASC, which issued the IAS series.

IFRS Accounting Standards IFRS IFRS

The global set of accounting standards issued by the IASB, including IFRS 1–19, the IAS still in force, and interpretations.Example: Required or permitted in over 140 jurisdictions.

Investments by owner Owner contributions / capital introduced Equity

Cash or other resources contributed by owners in return for an ownership interest. Contributions increase equity, but they are not revenue because nothing has been earned.Example: A shareholder subscribes for new shares for BDT 50 lakh.

L

Liabilities Conceptual Framework

Present obligations to transfer an economic resource as a result of past events.Example: Supplier payables, bank loans, lease liabilities, provisions.

M

Management accounting Managerial accounting ICMAB / CIMA

Accounting for insiders: costing, budgeting, performance measurement and analysis that help managers plan, control and decide.Example: Budgets, costing, variance analysis and KPI dashboards.

Materiality Conceptual Framework / IAS 8

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence users’ decisions.Example: A BDT 5,000 misclassification is immaterial for a large group but could be material for a small NGO.

Monetary unit assumption

Accounts record only items that can be measured in money, in a single currency of measurement — non-financial factors stay outside the books, however important.Example: Employee morale is not recorded, although it may matter to the business.

N

Net income Profit

What remains for the period after all expenses are deducted from revenues and other income — the bottom line when the result is positive.

Net loss Loss

The shortfall for the period when total expenses are greater than revenues and other income.

P

Partnership

A business carried on by two or more people under an agreement to share profits; partners are usually personally and jointly liable for its debts.Example: Governed in Bangladesh by the Partnership Act 1932.

Public accounting Practice

Accountants offering professional services — audit, tax, advisory — to clients.Example: Chartered accountancy firms.

R

Relevance Conceptual Framework

A fundamental quality of useful information: it helps users predict future outcomes or confirm (or correct) their earlier expectations, so it can change what they decide.Example: A segment margin breakdown that shows which product lines lose money.

Revenue IFRS 15

Income earned from the entity’s ordinary activities — selling goods or providing services. IFRS 15 sets out when and in what amount it is recognised.Example: Export sales recognised when control of goods transfers to the buyer.

S

Sole proprietorship Proprietorship

An unincorporated business with a single owner, who keeps all the profit and carries unlimited personal liability for its debts.Example: A family-owned retail shop.

Statement of cash flows IAS 7

Explains why cash went up or down during a period, grouping movements into operating, investing and financing activities.

Statement of changes in equity Owner’s equity statement IAS 1 / IFRS 18

A statement showing the movements in each component of equity for a period: profit, owner contributions, distributions and other changes.

T

Taxation IAS 12 for tax accounting

Professional work on tax compliance, planning and representation before tax authorities.Example: Corporate income tax returns and VAT compliance.

Transactions

Exchanges or events with a measurable financial effect that the business records in its books.Example: A sale, a purchase, a salary payment. A job interview is an event but not a transaction.

3. Textbook terms vs IFRS terms

4. Who uses accounting information

5. Practice questions

Choose an answer, then click “Show answer” to check your reasoning.

1. Which statement is prepared as at a specific date rather than for a period?

   1. Statement of profit or loss
   2. Statement of financial position
   3. Statement of cash flows
   4. Statement of changes in equity
   Show answer

   Answer: (b) Statement of financial position. The statement of financial position (balance sheet) is a snapshot at a date. The other statements cover a period.

2. A business buys equipment for BDT 200,000 on credit. What is the effect on the accounting equation?

   1. Assets up, equity up
   2. Assets up, liabilities up
   3. Assets down, liabilities up
   4. No effect until payment
   Show answer

   Answer: (b) Assets up, liabilities up. An asset (equipment) and a liability (payable) both increase by BDT 200,000. Equity is unchanged.

3. Under IFRS, what is the more common name for the ‘income statement’?

   1. Statement of earnings
   2. Statement of profit or loss
   3. Trading account
   4. Revenue statement
   Show answer

   Answer: (b) Statement of profit or loss. IFRS uses ‘statement of profit or loss’ (and other comprehensive income), although other titles are permitted.

4. Total assets are BDT 900,000 and equity is BDT 350,000. What are total liabilities?

   1. BDT 1,250,000
   2. BDT 550,000
   3. BDT 350,000
   4. BDT 900,000
   Show answer

   Answer: (b) BDT 550,000. Liabilities = Assets − Equity = 900,000 − 350,000 = BDT 550,000.

5. Which assumption requires the owner’s personal expenses to be kept out of the business accounts?

   1. Going concern
   2. Monetary unit
   3. Economic (reporting) entity
   4. Accrual basis
   Show answer

   Answer: (c) Economic (reporting) entity. The economic entity assumption treats the business as separate from its owner.

6. Who issues IFRS Accounting Standards?

   1. FASB
   2. IASB
   3. SEC
   4. FRC Bangladesh
   Show answer

   Answer: (b) IASB. The IASB issues IFRS Accounting Standards. National bodies such as Bangladesh’s FRC adopt or prescribe them locally.

7. Which of these is NOT an expense?

   1. Depreciation
   2. Salaries
   3. Owner’s drawings
   4. Rent
   Show answer

   Answer: (c) Owner’s drawings. Drawings reduce equity but are distributions to the owner, not expenses.

8. Information that could change a decision because it helps predict or confirm outcomes is described as…

   1. Verifiable
   2. Relevant
   3. Timely
   4. Comparable
   Show answer

   Answer: (b) Relevant. Relevance is one of the two fundamental qualitative characteristics; the others listed are enhancing characteristics.

All definitions, examples and questions on this page are original and written for educational purposes. For authoritative wording, refer to the IFRS Conceptual Framework and the standards issued by the IASB as adopted in your jurisdiction.

Standards referenced in this article

IAS and IFRS are one body of standards — IFRS Accounting Standards, issued by the IASB. Standards issued before 2001 keep their IAS numbers and remain fully in force unless replaced. See the full IFRS & IAS standards list for every number and replacement.

Frequently asked questions

What is the difference between bookkeeping and accounting?

Bookkeeping is the recording part — entering transactions accurately in journals and ledgers. Accounting includes bookkeeping but also analysing, interpreting and reporting financial information and applying judgement under accounting standards.

What is the basic accounting equation?

Assets = Liabilities + Equity. The expanded form is Assets = Liabilities + Owner's capital − Drawings + Revenues − Expenses, which shows how profit and owner transactions change equity.

Is a balance sheet the same as a statement of financial position?

Yes. ‘Statement of financial position’ is the title used in IFRS, but IFRS allows entities to use other titles such as balance sheet. Both report assets, liabilities and equity at a specific date.

Conclusion

Accounting vocabulary is the foundation for everything that follows — journals, financial statements, analysis and IFRS. Learn the terms with their IFRS equivalents, practise the accounting equation until it becomes automatic, and come back to this glossary whenever a term is unclear. The IFRS Conceptual Framework guide and the IFRS & IAS standards list are good next steps.

Written by Liakat Hossain

Finance and accounts professional with experience in FP&A, SAP FICO, Power BI, internal control, reporting, audit, tax, VAT and export-oriented business operations.

Author profile · Editorial policy

This article is original educational content based on professional finance practice. Real-project examples are anonymized, and scenario figures are identified as model outputs rather than guaranteed results.