Accounting terms dictionary, part 3: letters N to Z

Accounting terms dictionary, part 3: letters N to Z

This dictionary gathers, in alphabetical order, the accounting, inventory, purchasing, sales, treasury and tax terms most used by a business that buys and sells goods. This part covers the letters N to Z.

Each entry explains the term in one or two lines. The complete dictionary is split into three parts by letter blocks: part 1 goes from A to G, part 2 from H to M and part 3 from N to Z. Use the letter table below to find what you need quickly.

Letter index for this part:

N

• negative adjustment: Correction that reduces the recorded stock of an item when the physical count shows a quantity lower than the one recorded in the system.
• negative stock: Situation in which an item's record shows a quantity below zero, indicating data entry errors or control mismatches.
• net income for the period: Profit or loss resulting from the difference between the revenues and expenses of an accounting period.
• net margin: Ratio that relates net profit to revenues, showing the final profitability for each unit sold.
• net profit: Final result for the period after subtracting all expenses, costs, interest and taxes from revenues.
• net realizable value: Estimated amount obtainable from selling an asset in the normal course of business, deducting the costs needed for the sale.
• nominal account: Temporary income statement account that accumulates revenues and expenses and is closed at the end of the accounting period.
• non-current asset: Resource whose realization or conversion into cash is expected to occur beyond the normal operating cycle of the business.
• non-current liability: Obligation whose payment or settlement extends beyond the normal operating cycle or the following year.
• normal shrinkage: Foreseeable and unavoidable decrease in inventory under normal operating conditions, recognised as a cost of the period.
• notes to the financial statements: Disclosures that complement and explain the financial statements, detailing the accounting policies and relevant items.

O

• obligation to suppliers: Outstanding debt that the organization holds with its suppliers for purchases received, whose payment will be made as agreed.
• obsolete inventory: Inventory that has lost usefulness or commercial value due to technological or fashion changes, deterioration or prolonged disuse.
• online store: Virtual commercial establishment where customers browse products freely and complete their purchases through the internet.
• opening entry: Initial record reflecting the balances of assets, liabilities and equity at the start of a new accounting period.
• operating profit: Result obtained by deducting the operating expenses from the gross profit, without considering financial interest or income taxes.
• order preparation: Process of preparing and separating the products requested by a customer or an internal area before their delivery or dispatch.
• Output tax: Tax calculated on the sales or income of a period, which the responsible party must declare and pay as defined by local regulations (varies by country).
• owner's withdrawals: Goods or money that the owner takes out of the business for personal use, reducing its equity.

P

• packaging: Material that wraps or contains a product to protect it, preserve it and ease its handling, transport and display.
• partial payment: Full or partial payment that the customer applies to an outstanding debt, thereby reducing its balance.
• payment terms: Terms agreed between buyer and supplier on the form, timing and deadlines within which the value of a purchase must be paid.
• periodic inventory: System in which inventory and cost of sales are determined through physical counts at the close of each accounting period.
• perpetual inventory: System that continuously records every entry and exit of inventory, keeping the available balance updated at all times.
• petty cash: Cash used for daily operations to cover small expenses without going through the formal payment system.
• petty cash fund: Amount of cash set aside for minor recurring expenses, which is periodically replenished to the established level.
• physical count: Manual and direct verification of the actual quantities of each item in the warehouse, in order to compare them with the records.
• physical kardex: Detailed record of the entries and issues of each item in units, used to know and verify the actual stock held in the warehouse.
• point of sale: Physical place or system where the customer makes payment and the sale transaction is commercially recorded.
• positive adjustment: Correction that increases the recorded stock of an item so it matches the actual quantity verified during the physical count.
• postdated check: Check issued with a future date, which can only be cashed or deposited starting on the indicated day.
• price list: Ordered list of products with their current prices, used as a reference for quoting, buying or selling merchandise.
• price request: Request addressed to one or several suppliers to learn the price and conditions of a product before deciding on its purchase.
• product family: Group of items that share features, use or commercial line and that are grouped under a single classification category.
• product subgroup: More specific division within a product family, made up of items with common attributes that make their analysis and control easier.
• product warranty: Commitment of the seller or manufacturer to answer for product defects during a period, through repair, replacement or refund.
• profit: Positive result obtained when the revenues of the period exceed the related expenses and costs.
• profit on sale: Gain resulting from subtracting the cost of the good or service delivered from the selling price.
• profitability: Ability of an investment or business to generate profits in relation to the resources employed.
• promotion: Temporary offer that seeks to increase sales through reduced prices, gifts, or special terms offered to buyers.
• provision: Reserve of resources recognized for a probable obligation or loss whose amount or date is still uncertain.
• purchase order: Formal document issued by the buyer to request merchandise from a supplier, stating items, quantities, prices and agreed conditions.
• purchase requisition: Internal request through which an area asks the purchasing department to acquire certain goods or services that it needs.
• purchase return: Return to the supplier of merchandise previously purchased due to defects, errors or breach, with the corresponding reduction of the debt or refund.

R

• raw material: Basic goods incorporated into the production process that are transformed into the finished product through manufacturing activity.
• real account: Permanent account that represents assets, liabilities or equity and whose balance carries over to the next period.
• receivables portfolio: Total set of outstanding credits that a company holds against its customers for sales already invoiced and pending collection.
• reclassification: Transfer of the balance of one account to another in order to correct its location without changing the total result.
• reorder point: Inventory level which, when reached, triggers a new purchase order to replenish the item before it runs out.
• replenishment level: Quantity defined as the operating limit for issuing a new order and restoring inventory to its optimal working level.
• residual value: Estimated amount an asset could fetch when sold at the end of its useful life, after deducting selling costs.
• retailer: Merchant who sells products directly to the end consumer in small quantities, normally from a commercial premises.
• retained earnings: Accumulated profits that were not distributed to the owners and were reinvested in the business.
• revenue: Increase in economic benefits that raises assets or reduces liabilities and is reflected in equity.
• revolving credit: Financing line that allows funds to be drawn, repaid, and used again up to an established limit.

S

• safety stock: Additional quantity of inventory kept to cover unexpected demand variations or delays in supply deliveries.
• sale: Transfer of a good or service to another party in exchange for an agreed payment between buyer and seller.
• sales channel: Path or medium through which a company delivers its products to the customer, such as a physical store or the internet.
• sales commission: Variable compensation paid to the salesperson as a percentage or fixed amount for each sale they manage to close.
• sales credit note: Document that reduces the value of an invoice already issued, due to returns, discounts, or billing errors.
• sales debit note: Document that increases the value of an invoice already issued, for additional charges or upward corrections.
• sales discount: Reduction of the sale price granted to the customer for commercial terms, volume, or early payment.
• sales invoice: Document that details the goods or services sold, their price, and the total amount payable by the customer.
• sales invoicing: Process of issuing and recording the invoices corresponding to the sales made in a given period.
• sales note: Internal or simplified document that records a sale transaction without the formality of an invoice.
• sales price list: Ordered listing of the products offered with the price assigned to each for sale to the public.
• sales receipt: Simplified receipt given to the customer as proof of the payment made in a particular purchase.
• sales returns and allowances: Account that groups the reductions of revenue for goods returned by customers or for allowances granted to them.
• sales target: Quantified goal of revenue or units that a company or salesperson expects to reach in a period.
• Sales tax: Tax levied on the transfer of goods and the provision of services, applied to the value of each transaction as defined by local regulations (varies by country).
• sales warranty: Seller's commitment to repair or replace the product if it fails within a specified period.
• salesperson: Person responsible for contacting customers and closing sales of the products or services offered by a company.
• selling price: Monetary amount that the customer must pay to acquire a good or service offered by the company.
• Sequential numbering: Rule requiring invoices and documents to be numbered continuously and without gaps, ensuring their control and identification as defined by local regulations (varies by country).
• serial number: Unique code assigned to an individual unit of a product, allowing it to be distinguished and identified exclusively.
• shrinkage: Loss or reduction of inventory arising from natural, technical or operational causes that cannot be entirely avoided.
• standard cost: Predetermined cost technically set for an item, serving as a reference to measure efficiency and analyse deviations.
• statement of cash flows: Financial statement that reports the cash inflows and outflows of the entity, classified into operating, investing and financing activities.
• statement of changes in equity: Statement that shows the changes in equity during the period, such as contributions, withdrawals and results.
• statement of financial position: Financial statement that shows the position of assets, liabilities and equity at a specific date.
• Statutory accounting: Accounting kept in accordance with legal rules and requirements, serving as the basis for returns and reports to the tax authority as defined by local regulations (varies by country).
• statutory audit: Oversight function that verifies that the financial information and the acts of the entity comply with the rules.
• Statutory books: Books the merchant must keep by legal requirement to record its operations, such as journal, ledger and inventories, as defined by local regulations (varies by country).
• stock: Quantity of goods available at a given moment, grouped by reference, location or state, to meet expected demand.
• stock on hand: Set of tangible goods the entity keeps to sell, use in production or consume in the normal course of its activity.
• stock reservation: Temporary separation of a product from available inventory to ensure its delivery to a specific customer.
• stockout: Situation in which inventory is exhausted and cannot meet demand, generating lost sales or operational interruptions.
• storage: Act of receiving and keeping products under suitable conditions for a period, preserving their quantity, quality and identification.
• store credit sale: Informal credit sale in which the customer takes the goods and promises to pay later, without a formal contract.
• subsidiary ledger: Complementary record that details the information of the general ledger for accounts that require a greater breakdown.
• supplier: Person or company that supplies goods or services to another organization, undertaking to deliver them under the agreed conditions.
• supplier evaluation: Periodic analysis of supplier performance in aspects such as quality, compliance with deadlines and service, to decide whether to continue the relationship.
• supplier quotation: Process of requesting and comparing offers from several suppliers on prices and conditions, in order to choose the most convenient purchase option.
• supplier rebate: Amount or additional discount that the supplier grants the buyer as a commercial incentive, reducing the total cost of the transaction.
• supplier registry: Up-to-date file with the identification data, conditions and background of each supplier, used for their selection and administrative control.
• supply contract: Agreement by which one party undertakes to deliver goods or services periodically and the other to pay for them under the agreed conditions.
• Supporting document: Document that supports costs, deductions or purchases made from parties not required to invoice, as required by local regulations (varies by country).

T

• T-account: Graphic representation of an account with two T-shaped columns, used to visualize debits, credits and its balance.
• Tax: Compulsory contribution the State levies on individuals and companies to fund public spending, calculated according to local regulations (varies by country).
• Tax audit: Review that the tax administration or an auditor performs on a taxpayer's records and returns to verify compliance, as defined by local regulations (varies by country).
• Tax credit balance: Favorable result when amounts paid or withheld exceed those owed, creating a credit that may be offset or claimed as defined by local regulations (varies by country).
• Tax identification: Unique number that identifies a person or company before the tax administration and appears on its documents as defined by local regulations (varies by country).
• Tax payable: Difference between the tax generated on sales and the deductible tax on purchases, when the result is positive and must be paid per local regulations (varies by country).
• Tax penalty: Punishment or fine imposed by the tax administration for failure to comply with fiscal obligations, as defined by local regulations (varies by country).
• Tax prescription: Extinction of the obligation or of the authority's power to collect or review taxes after the legal period elapses, as defined by local regulations (varies by country).
• Tax rate: Percentage or value set by law that is applied to the taxable base to determine the amount of tax, as defined by local regulations (varies by country).
• Tax refund: Process through which the taxpayer recovers from the treasury amounts overpaid or entitled to refund, as defined by local regulations (varies by country).
• Tax registry: Official register where taxpayers enroll before the tax administration, stating their activity and data as defined by local regulations (varies by country).
• Tax return: Document through which the taxpayer reports income, taxes and transactions of a period to the tax authority, as defined by local regulations (varies by country).
• Taxable base: Value or amount on which the rate is applied to calculate the tax, determined under the rules of local regulations (varies by country).
• Taxable event: Situation or act established by law that gives rise to the tax obligation, such as a sale or the earning of income, as defined by local regulations (varies by country).
• Taxable period: Time span set by law for calculating and declaring taxes, usually monthly, bimonthly or annual as defined by local regulations (varies by country).
• Taxpayer: Natural or legal person obliged to meet tax obligations, declaring and paying the corresponding tax as defined by local regulations (varies by country).
• Third party: Natural or legal person other than the parties to a transaction, including clients, suppliers and creditors with whom accounting relations exist as defined by local regulations (varies by country).
• traceability: Ability to track a good along its supply chain, identifying its origin, transformations and movements over time.
• trade credit: Facility that a supplier or seller grants to a customer to pay for purchases at a later date.
• trade discount: Reduction of the list price that the supplier grants the buyer for volume, negotiation or other commercial reasons, unrelated to the payment method.
• transfer between warehouses: Movement of goods from one warehouse to another, recorded to keep stock levels and the location of each item up to date.
• transport documentation: Set of documents that cover the transport of merchandise and certify its origin, content and destination before the parties and the corresponding controls.

U

• unit cost: Value corresponding to a single unit of an item, obtained by dividing the total cost of a group by its number of units.
• unit of measure: Quantitative standard used to express the quantities of an item, such as units, kilograms, litres or metres.
• useful life: Estimated period during which an asset can be used productively before it is exhausted or becomes obsolete.

V

• valued kardex: Record of the movements of each item expressed in units and in monetary values, useful to know the cost and balance of the inventory.

W

• warehouse: Physical space used to store and preserve goods and materials, organized to support their control, custody and later distribution.
• warehouse entry: Record of goods entering the warehouse, which increases available stock and documents the origin, quantity and receiving conditions.
• warehouse issue: Record of goods leaving the warehouse, which reduces stock and documents the destination, quantity and person responsible for the handover.
• warehouse location: Specific point inside a warehouse where an item is placed, identified by aisle, shelf or level so it can be found quickly.
• warranty return: Return of a product to the supplier because it shows failures covered by the warranty, for repair, replacement or refund of the amount.
• weighted average cost: Valuation method that computes a unit cost by dividing total available cost by total units, updating it with each purchase.
• wholesaler: Merchant who buys large quantities of goods to resell them later to retailers or other similar businesses.
• Withholding agent: Person or entity obliged to withhold taxes when making payments to third parties and to remit them to the treasury, as defined by local regulations (varies by country).
• Withholding tax: Mechanism by which the payer of a good or service deducts and remits to the treasury part of the beneficiary's tax, as defined by local regulations (varies by country).
• work in process: Goods being transformed in production that at period end are not yet finished nor ready for sale.
• working capital: Difference between current assets and current liabilities, reflecting the resources available to operate the business.

How to use this dictionary

Look up your term by the letter it starts with inside this part's block. Each language version follows its own alphabetical order, so a term may fall under a different letter depending on the language you type it in: for instance, an English word may start with a letter that does not match the Spanish one.

The definitions are general reference material and explain the concept as it is used in day-to-day business. They do not replace professional advice: if a term affects your taxes, your financial statements or a legal decision, confirm it with an accountant before applying it.

How the complete dictionary is organized

The dictionary has three parts: part 1 covers the letters A to G, part 2 the letters H to M and part 3 the letters N to Z. If a term is not here, check the other two parts by its first letter. It is the same split as a paper dictionary published in three volumes: letters are never mixed between volumes.

Common mistakes when looking up an accounting term

Readers usually get lost for three reasons: looking for a plural when the entry is singular (or the other way around), typing a word without its accents and expecting to find it accented, and confusing similar terms (for example, profit and margin). If you cannot find a word, try its singular form or check the neighbouring concept: it is almost always defined next to its pair.

Key terms in this block

This block includes, among others, these essential terms: negative adjustment, periodic inventory, raw material, sales receipt, store credit sale, Taxable event. All of them show up again and again in the daily work of buying, storing and selling, so they are worth mastering.

Frequently asked questions

Does the dictionary include every accounting term? No: it is a selection of the terms most used by a business that buys and sells goods. Specialized topics are explained in the Accounting Manual lessons.

Why is a term I know missing from this part? Because its first letter belongs to another block: check parts 1, 2 and 3 according to the letter the word starts with.

Are the definitions identical in the three languages? Each version explains the concept in its own language and with its own terms; it is not a word-for-word translation, although the underlying meaning is the same.

Can I use this as accounting advice? No. It is reference material to understand the vocabulary; specific decisions are discussed with an accountant.

Reference glossary from the Kardex Tauro team, the inventory software for small businesses.