Numbers can feel like a foreign language when you first encounter them in an ACCA classroom. Many students who enrol in ACCA come from business, law, or management backgrounds and find themselves staring at balance sheets wondering where to even begin.

A solid understanding of core accounting and finance terms gives you the foundation to tackle ACCA papers with confidence, follow your tutors clearly, and apply what you learn to real-world business scenarios.

Below is a focused breakdown of the basic terms in finance that appear most often across ACCA modules, written specifically for students without a finance background.  

Strong ACCA Foundations Start with Finance Terms 

ACCA papers are built on a core set of financial concepts that repeat across subjects. The Financial Accounting (FA), Financial Reporting (FR), and Performance Management (PM) papers all assume familiarity with terms like accruals, depreciation, and working capital.

Students who skip this foundation often find mid-level papers much harder than they need to be. Investing time in these terms early means fewer surprises in the exam hall.

Speak with charterED for a guided study plan built around your background. 

Quick Reference: Key Terms and Their ACCA Relevance

The table below summarises the most important accounting and finance terms and where they appear in your ACCA journey. 

Term	Category	Why It Matters for ACCA
Accrual Accounting	Core Concept	Tested in FA and FR papers
Working Capital	Liquidity	Key ratio in PM and AFM papers
Depreciation	Asset Management	Covered in FA, FR and TX papers
Deferred Tax	Taxation	High-frequency FR and TX exam topic
EBITDA	Profitability	Used in PM and SBR analysis
Cash Flow Statement	Reporting	Core to FR and SBR papers

How These Terms Connect Across ACCA Papers

The same foundational terms reappear at every level of the ACCA qualification.

ACCA Paper	Key Finance Terms Introduced or Applied	Why It Matters
Applied Knowledge – FA	Financial statements, accruals, depreciation	Builds the basic accounting foundation needed for later ACCA papers.
Applied Skills – FR	Deferred tax, group accounts, complex reporting standards	Expands core accounting knowledge into more technical financial reporting areas.
Applied Skills – PM	Cost behaviour, budgeting, variance analysis, working capital	Applies finance concepts to business performance and decision-making.
Applied Skills – Tax	Tax computations, taxable income, allowances, deductions	Shows how accounting concepts are used in tax planning and compliance.

Students who secure a clear grasp of these basic terms in finance at the start of their studies find the progression from paper to paper considerably smoother.

Check out how to manage your ACCA study time for learning the accounting and finance terms.

10 Basic Terms in Finance You Need to Know

These basic terms for finance form the starting point for understanding ACCA topics more clearly, especially when you begin connecting financial statements, business performance, and reporting requirements.

1. Accrual Accounting

Accrual accounting records income and expenses when they are earned or incurred, not when cash is received or paid. This is the standard approach under International Financial Reporting Standards (IFRS), which ACCA uses throughout its syllabus.

Example: A company delivers a service in March but receives payment in April. Under accrual accounting, the revenue is recorded in March.

2. Assets, Liabilities, and Equity

These three elements form the backbone of every balance sheet (also called the Statement of Financial Position).

• Assets: resources the business owns or controls, such as cash, inventory, and property.
• Liabilities: obligations the business owes, such as loans, payables, or deferred income.
• Equity: the residual interest of the owners after liabilities are deducted from assets.

The accounting equation ties them together: Assets = Liabilities + Equity.

3. Depreciation and Amortisation

Depreciation spreads the cost of a tangible asset (machinery, vehicles, equipment) over its useful life. Amortisation does the same for intangible assets such as patents or software licences.

These are non-cash expenses, which means they reduce profit on paper without reducing the cash balance. This distinction becomes critical in cash flow analysis.

4. Revenue vs Profit

Revenue (also called turnover or sales) is the total income generated from business activities before any costs are deducted. Profit is what remains after deducting costs.

ACCA papers test multiple types of profit:

• Gross profit: revenue minus the direct cost of goods sold.
• Operating profit: gross profit minus operating expenses.
• Net profit: operating profit after interest and tax deductions.

Understanding the difference matters for paper PM, where you analyse a business’s financial health using ratios.

5. Working Capital

Working capital is the difference between current assets and current liabilities. It measures a company’s ability to meet short-term obligations using its short-term resources.

A positive working capital generally means the business can cover its day-to-day costs. A negative figure may signal liquidity problems, a key concept tested across multiple ACCA papers.

Contact charterED to explore online courses designed around your learning needs and exam preparation goals. 

6. Cash Flow vs Profit

One of the most important distinctions in accounting: a business can be profitable and still run out of cash. This happens when customers delay payments or when large upfront costs are not yet reflected in the income statement.

The Statement of Cash Flows records actual cash movements under three headings: operating activities, investing activities, and financing activities. Financial Reporting (FR) and Strategic Business Reporting (SBR) papers examine this statement in depth.

7. Deferred Tax

Deferred tax arises when there is a timing difference between how income or expenses are treated for accounting purposes versus tax purposes. It represents tax payable in a future period (deferred tax liability) or tax recoverable in the future (deferred tax asset).

This concept appears frequently in the Financial Reporting paper and is a common area where non-finance students need careful explanation.

8. EBITDA

EBITDA stands for Earnings Before Interest, Tax, Depreciation, and Amortisation. It is used as a proxy for operating cash flow and is frequently referenced in business valuations and performance analysis.

In ACCA’s Performance Management (PM) and SBR papers, EBITDA is used to compare companies across different capital structures, since it strips out financing and accounting decisions.

9. Liquidity Ratios

Liquidity ratios measure how easily a business can meet its short-term obligations. The two most tested in ACCA are:

• Current ratio: current assets divided by current liabilities. A ratio above 1 suggests adequate short-term coverage.
• Quick ratio (acid test): (current assets minus inventory) divided by current liabilities. A stricter measure that excludes stock.

10. Capital Expenditure vs Revenue Expenditure

Capital expenditure (CapEx) refers to spending on long-term assets, such as purchasing a building or upgrading machinery. Revenue expenditure refers to day-to-day running costs, such as rent or salaries.

Misclassifying these can materially distort a company’s financial statements, making this an area ACCA examiners test carefully.  

Strengthen Your Accounting and Finance Terms with charterED

Accounting and finance terms become easier to understand when they are connected to the subjects where students actually use them. Through charterED’s ACCA online courses, learners can build familiarity with key terms across financial accounting, reporting, audit, tax, and business performance topics with our ACCA interactive learning material.

In the ACCA AA course, terms such as materiality, audit risk, internal control, audit evidence, assertions, and going concern become especially important. These concepts help students understand how to pass the ACCA F8 exam by knowing the way financial information is checked, challenged, and supported during the audit process.

The ACCA SBR course brings in more advanced reporting terms, including deferred tax, impairment, group accounts, leases, provisions, revenue recognition, and financial instruments. These terms are central to interpreting complex reporting scenarios and applying accounting standards more confidently.

Meanwhile, the Finance Course for Non-Finance relates more closely to practical business terms such as cash flow, profit margin, budgeting, working capital, cost control, ROI, and financial statements. These are the terms professionals often need when reviewing performance, making decisions, or discussing business results.

By learning accounting and finance terms in relation to specific papers and workplace situations, students and professionals can stop relying on memorised definitions and start using financial language with greater confidence.

Explore the difference of SBL and SBR ACCA courses, finance courses for non-finance managers, and considerations of CPA vs ACCA.

Start Your ACCA Journey with Stronger Exam Foundations

Do not let unfamiliar accounting and finance terms slow down your ACCA progress. These terms appear throughout every paper, covering basic financial statements, ratios, reporting standards, audit scenarios, and exam-style case questions. 

The earlier you build this foundation, the easier it becomes to understand lessons, attempt questions, and prepare with confidence.

charterED helps ACCA students strengthen their basics before moving into more technical exam areas. Guided online tuition, structured lessons, and tutor support make it easier to learn each concept step by step instead of struggling through definitions when you study ACCA while working full time.

Speak with charterED today to find the ACCA course that matches your current level, learning pace, and exam goals. 

Frequently Asked Questions About Finance and Accounting Terms