Business Expense & Accounting Glossary
This business expense glossary explains 74 receipt, expense management, tax and accounting terms, so small business owners, freelancers and finance teams can read reports, file taxes and talk to their accountant with confidence.
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A
Accountable Plan
An employer reimbursement arrangement that meets three IRS rules: a business connection, proof of expenses within a reasonable time and return of any excess. Payments under it aren’t taxable wages.
Accounts Payable
Money your business owes suppliers and vendors for goods or services you’ve received but not yet paid for. It’s recorded as a current liability on the balance sheet.
Audit Trail
The chain of records that links a transaction from the original receipt to your books and tax return, showing who recorded, approved or changed it and when.
B
Bank Reconciliation
Matching every line on your bank or card statement to your own records and receipts, so you can spot missing receipts, duplicates, bank fees and errors.
Bookkeeping
The routine recording of a business’s income and expenses, from capturing receipts and categorizing costs to keeping the ledger ready for reports and taxes.
Budgeting
Planning how much you expect to earn and spend over a period, then comparing actual spending from your receipts against that plan.
Business Expense
A cost that is ordinary and necessary for running your trade or business. Most business expenses are deductible, but personal costs and some mixed-use costs aren’t.
C
Capital Expenditure (CapEx)
Money spent to buy or improve long-term assets such as equipment, vehicles or property. It’s usually depreciated over several years instead of deducted all at once.
Cash Advance
Money an employer gives an employee before a business trip or purchase. The employee later accounts for it with receipts and returns anything not spent.
Cash Flow
The money moving into and out of your business over a period. Positive cash flow means more comes in than goes out.
Cash vs Accrual Accounting
Two ways to record transactions. Cash accounting records income and expenses when money changes hands; accrual accounting records them when they’re earned or incurred.
Chart of Accounts
The organized list of every account your business uses, such as cash, revenue, rent and supplies, that each transaction is filed under.
Corporate Card
A company-issued payment card employees use for approved business spending. Purchases are billed to the company, but each one still needs a receipt.
Cost Allocation
Dividing a shared cost across departments, clients, projects or business and personal use, so each one carries its fair share.
Cost of Goods Sold (COGS)
The direct cost of the products you sold during a period, including materials, inventory and direct labor. Revenue minus COGS gives gross profit.
D
Depreciation
Spreading the cost of a long-term asset, such as a computer or vehicle, over its useful life instead of deducting it all in the year you buy it.
Digital Receipt (E-Receipt)
A receipt delivered or stored electronically, such as an email receipt, an in-app purchase record or a scanned photo of a paper receipt.
E
Estimated Taxes
Quarterly tax payments self-employed people and business owners make to the IRS on income that has no tax withheld.
Expense Category
A label that groups similar costs, such as travel, meals, supplies or software, so you can track spending and map it to tax form lines.
Expense Claim
A request to be repaid for one or more business costs you paid personally, usually submitted with receipts.
Expense Fraud
Submitting false, inflated, duplicate or personal expenses for reimbursement, for example fake receipts, padded mileage or the same receipt claimed twice.
Expense Management
The process of capturing, categorizing, approving, reimbursing and reporting business expenses, from the moment a receipt is issued until it reaches your books.
Expense Policy
A written set of rules that tells employees what they can spend on, how much, which receipts they need and how to get reimbursed.
Expense Reimbursement
Paying an employee back for business costs they covered with their own money. Under an accountable plan, the repayment isn’t taxable income.
Expense Report
A document that lists business expenses for a trip, project or period, with receipts attached, used for reimbursement, client billing or tax records.
F
Fiscal Year
The 12-month period a business uses for accounting and taxes. It can match the calendar year or end in another month.
Fixed and Variable Costs
Fixed costs, such as rent, stay the same regardless of sales. Variable costs, such as materials or shipping, rise and fall with activity.
Foreign Exchange Rate
The price of one currency in terms of another. It decides how much a purchase made abroad costs in your home currency.
Foreign Transaction Fee
A charge some card issuers add, often up to 3% of the amount, to purchases processed outside your home country or in a foreign currency.
Form 1099
A family of IRS information returns that report income other than wages, such as Form 1099-NEC for payments to independent contractors.
G
General Ledger
The master record of all your business’s financial transactions, organized by account. Financial statements are built from it.
Gross Receipts
The total amount your business receives from all sources during the tax year, before subtracting returns, costs or expenses.
H
Home Office Deduction
A tax deduction for self-employed people who use part of their home regularly and exclusively for business, using the simplified or regular method.
I
Incidental Expenses
Small travel costs such as tips to porters, baggage carriers and hotel housekeeping. In federal per diem, they’re part of the M&IE rate.
Invoice
A bill a seller sends a customer listing goods or services, amounts and payment terms. An invoice asks for payment; a receipt proves payment was made.
Itemized Receipt
A receipt that lists each item or service bought with its price, plus tax, total, date and merchant, rather than only the total.
J
Journal Entry
A record of a single transaction in the accounting system, showing the date, the accounts affected and equal debit and credit amounts.
K
K-1 Form (Schedule K-1)
A tax form partnerships, S corporations and some trusts issue to each owner or beneficiary, reporting their share of income, deductions and credits.
L
Line Item
A single entry on a receipt, invoice or expense report, such as one product, service or fee, with its own amount.
Lodging Expense
The cost of a hotel or other accommodation during business travel away from your tax home. The IRS requires a receipt for lodging, whatever the amount.
M
Meal Expense Deduction
The tax rule for business meals. Most qualifying business meals are 50% deductible, while entertainment is generally not deductible.
Mileage Reimbursement
Payment for business use of a personal vehicle, usually business miles multiplied by a per-mile rate such as the IRS standard mileage rate.
N
Net Income
What remains after subtracting all expenses, including taxes, from revenue. It’s the bottom line of a profit and loss statement.
Non-Deductible Expense
A cost the tax code doesn’t let you subtract from income, such as personal expenses, fines and penalties, political contributions and most entertainment.
O
OCR (Optical Character Recognition)
Technology that reads text in an image, such as a photo of a receipt, and turns it into editable data like the merchant, date and total.
Operating Expenses (OPEX)
The ongoing costs of running a business day to day, such as rent, payroll, software and utilities, as opposed to long-term asset purchases.
Out-of-Pocket Expense
A cost you pay with your own money. At work it’s usually an expense waiting to be reimbursed; in health insurance it’s the share you pay yourself.
Overhead
Ongoing costs that keep a business running but aren’t tied to a specific product or client, such as rent, insurance and admin salaries.
P
Per Diem
A fixed daily allowance for lodging, meals and incidental expenses during business travel, often based on federal GSA rates, used instead of tracking every meal.
Petty Cash
A small cash fund kept on hand for minor business purchases. Each payment is backed by a receipt or voucher, and the fund is topped up to a set amount.
Prepaid Expense
A cost paid in advance for something you’ll use later, such as an annual insurance premium. It’s recorded as an asset and expensed over time.
Profit and Loss Statement
A report showing revenue, costs and expenses over a period and whether the business made a profit or a loss. Also called an income statement.
Proof of Purchase
Any document showing what you bought, when and for how much, such as a receipt, order confirmation or card statement, used for returns, warranties, claims and rebates.
Purchase Order
A document a buyer sends a supplier to approve a purchase before it happens, listing items, quantities, prices and delivery terms.
Q
Qualified Business Income (QBI) Deduction
A federal deduction that lets many owners of pass-through businesses, such as sole proprietorships, partnerships and S corporations, deduct up to 20% of qualified business income.
R
Receipt
Written proof of a completed purchase that shows who you paid, when, what you bought and how much. For taxes and reimbursements, it’s your main evidence of an expense.
Record Retention
How long you keep financial records such as receipts and tax returns. The IRS generally expects records for at least three years after you file.
Recurring Expense
A cost that repeats on a regular schedule, such as rent, software subscriptions, insurance or phone bills.
S
Sales Tax
A state or local tax added to the price of many goods and some services, collected by the seller at checkout and shown on the receipt.
Schedule C
The IRS form sole proprietors and single-member LLCs file with Form 1040 to report business income and expenses and work out their profit or loss.
Self-Employment Tax
Social Security and Medicare tax self-employed people pay on net earnings: 12.4% Social Security up to the wage base plus 2.9% Medicare. Deductible expenses lower it.
Spend Management
A broader approach than expense management that controls all company spending, from purchase requests and vendor bills to cards and reimbursements.
Substantiation (IRS)
Proving a deduction with adequate records. For travel, gifts and vehicle costs, you must show the amount, time, place and business purpose of each expense.
T
Tax Deductible Expense
A cost the tax code lets you subtract from taxable income, which lowers the tax you owe. Business expenses must be ordinary, necessary and documented.
Three-Way Match
A payables check that compares the purchase order, the supplier’s invoice and the goods received before an invoice is paid.
Travel and Entertainment (T&E) Expense
The spending category for business travel such as flights, hotels, meals and ground transport. Under current federal law, entertainment itself is generally not deductible.
Travel Expense
An ordinary and necessary cost of traveling away from your tax home for business, such as airfare, lodging, rental cars and 50% of meals.
U
Unreimbursed Employee Expenses
Job costs an employee pays and the employer doesn’t repay. Under current federal law, most employees can’t deduct them on their tax return.
V
VAT (Value Added Tax)
A consumption tax charged at each stage of production and sale, used in the UK, the EU and many other countries. Businesses can often reclaim the VAT they pay.
Vendor
A person or company that sells goods or services to your business. The vendor’s name is one of the key details on any receipt or invoice.
W
Write-Off
An informal term for a deductible business expense. In accounting, it also means removing an asset or debt that has lost its value.
Y
Year-End Closing
The process of reviewing, reconciling and finalizing your books at the end of the fiscal year, so financial statements and tax returns are accurate.
Year-to-Date (YTD)
The period from the start of the current calendar or fiscal year up to today. YTD totals show spending or income so far this year.
Z
Zero-Based Budgeting
A budgeting method where every expense must be justified from zero each period, instead of starting from last year’s numbers.
Put these terms to work
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