Glossary

Guide 40: Glossary

Financial terms explained

A

Account - A record that tracks money, such as a bank account, credit card, or asset.

Accounts Payable (A/P) - Money you owe to vendors/suppliers.

Accounts Receivable (A/R) - Money owed to you by customers.

Accrual Accounting - Recording income when earned and expenses when incurred, regardless of cash movement.

Aging Report - Shows how long invoices have been outstanding.

Amortization - A schedule showing how each loan payment is split between principal and interest over the life of the loan.

Asset - Something of value that you own (cash, investments, property).

B

Balance - The amount of money in an account at a given time.

Balance Sheet - Report showing assets, liabilities, and equity at a point in time.

Budget - A plan for how money will be spent over a period.

C

Cash Accounting - Recording income when received and expenses when paid.

Category - A classification for transactions (e.g., Groceries, Utilities).

Cleared - A transaction that has been processed by the bank but not yet reconciled.

Credit - In double-entry accounting, an entry that decreases assets or increases liabilities.

D

Debit - In double-entry accounting, an entry that increases assets or decreases liabilities.

Double-Entry - Accounting method where every transaction affects at least two accounts.

Due Date - When a payment is expected.

E

Equity - The owner's stake in a business (Assets - Liabilities = Equity).

Escrow - An account held by a lender to pay property taxes and insurance on behalf of the borrower. Often part of a mortgage payment.

Expense - Money spent for goods or services.

F

Fiscal Year - A 12-month accounting period (may differ from calendar year).

Friendly Name - A cleaned-up version of a raw bank description. OtterLedger's AI extracts the merchant name from messy bank strings (e.g., "CHECKCARD 0115 STARBUCKS #12345" → "Starbucks").

I

Income - Money received for goods, services, or investments.

Invoice - A bill sent to a customer requesting payment.

L

Liability - Money owed to others (loans, credit cards, accounts payable).

Ledger - A record of all financial transactions.

M

Mileage Rate - IRS-approved rate for deducting business vehicle use.

N

Net Income - Income minus expenses (profit or loss).

Net Worth - Total assets minus total liabilities.

P

P/I Breakdown - Principal and Interest breakdown. Shows how much of each loan payment goes toward reducing the loan balance (principal) versus paying interest.

Payee - The person or business receiving payment.

P&L (Profit & Loss) - Report showing income and expenses over a period.

PDF Statement Import - OtterLedger's feature for importing transactions directly from bank/credit card PDF statements using AI-powered extraction.

Principal - The original amount of a loan, not including interest.

R

Reconciliation - Matching your records to bank statements to ensure accuracy.

Recurring Transaction - A transaction that repeats on a schedule.

S

Schedule C - IRS form for reporting business income and expenses.

Split Transaction - A single transaction divided into multiple categories.

Statement - A summary of account activity from a bank.

T

Tag - A custom label for tracking transactions across categories.

TIN - Taxpayer Identification Number (SSN or EIN).

Transfer - Movement of money between your own accounts.

V

Vendor - A business or person you pay for goods/services.

Voided - A transaction that has been cancelled but kept for records.

X

XGBoost - A machine learning algorithm used in OtterLedger's Tier 3 AI categorization. Trains on your categorized transactions to predict categories for new ones.

See also: Guide 42: FAQ