Ledger, close, revenue recognition, and consolidation terminology, written for people evaluating financial systems rather than for accountants — with notes where a concept is commonly implemented badly.
Recognising an expense or revenue in the period it relates to rather than when cash moves.
AgeingWorking capital
Receivables or payables grouped by how overdue they are.
ASC 606Revenue
The US revenue recognition standard: identify the contract, identify performance obligations, determine price, allocate it, recognise as obligations are satisfied.
Cash positionWorking capital
Bank balance minus committed outflows — approved bills, scheduled payroll, taxes, and payments in flight.Not the same as bank balance, and the difference is what causes surprises.
Chart of accountsLedger
The structured list of accounts used to classify transactions. Should describe economics, with context carried by dimensions.Median chart we examine has 340 accounts, of which 38% have had no activity in three years.
ConsolidationGroup
Combining multiple legal entities into group figures, with intercompany eliminated and currency translated.
Contract modificationRevenue
A change to an existing contract, treated either prospectively or cumulatively depending on circumstances.
Cost layerCosting
A record of a specific receipt at a specific cost and quantity, consumed in a defined order. The alternative — a running average — absorbs errors invisibly.
Cut-offClose
Determining which period a transaction belongs to. The most common source of period-end error and the thing auditors test hardest.
Days sales outstandingWorking capital
Average days to collect a receivable. A company-level average hides its own explanation — the gap is usually three or four customers.
Deferred revenueRevenue
Amounts billed but not yet earned. A liability, and the figure diligence teams examine first in a subscription business.
Functional currencyGroup
The primary currency of an entity’s operating environment, which may differ from the group reporting currency.
Journal entryLedger
A recorded transaction with equal debits and credits. In an append-only system it is never edited; corrections are separate reversing entries.
Loaded costCosting
A person’s full cost including employer taxes, benefits, and allocated overhead. The input every honest margin calculation needs.A blended rate across a team misstates margin in both directions and most where the mix varies.
Minority interestGroup
The share of a partially owned subsidiary not attributable to the parent. Mid-period ownership changes are where hand-built consolidations reliably fail.
Performance obligationRevenue
A distinct promise in a contract. A deal bundling software, implementation, and support is usually three, each with its own pattern.Whether an obligation is distinct is a judgement. The system records who made it; an agent is not permitted to.
Period closeClose
The process of finalising a period so figures cannot change. Median in our sample is 11 working days, 62% of which is waiting rather than working.
Prepaid amortisationClose
Spreading a payment made in advance across the periods it covers.
ReconciliationClose
Proving two independent records agree. A reconciliation that shares assumptions with the process it checks confirms rather than tests them.
RollforwardClose
Opening balance, movement, closing balance for an account across a period. Stronger evidence than a closing balance alone.
Standalone selling priceRevenue
What each element of a bundle would sell for separately, used to allocate transaction price across obligations.
Standard cost varianceCosting
The difference between expected and actual cost, posted to a variance account rather than absorbed into inventory value.
SubledgerLedger
A detailed record supporting a single general ledger account — accounts receivable, payable, inventory, fixed assets.A trial balance can tie while a subledger underneath it does not. Check both.
Suspense accountLedger
A holding account for transactions that could not be classified. A growing suspense balance is a signal, not a solution.
Translation methodGroup
Income at average rate, balances at closing rate, equity at historical rate, with the difference to cumulative translation adjustment.Where CTA is computed as a plug, it silently absorbs every translation error.
Trial balanceLedger
A list of every account with its debit or credit balance, which must sum to zero. The first thing a reconciliation checks.
Six of these are worth testing in a demo
Not because the concepts are difficult, but because they are the ones implemented badly often enough that a demo reveals real differences between products.
Corrections. Ask to correct a posted transaction. Watch whether the original remains visible with a reversal beside it, or quietly changes.
Cumulative translation adjustment. Ask how it is computed. If the answer is that it balances the balance sheet, it is a plug absorbing translation errors.
Intercompany elimination. Ask what happens when the two sides disagree by a small amount. Matching transaction to transaction raises an exception; schedule-based elimination absorbs it.
Subledger to control account. Ask how often they are proven equal, and whether a divergence raises an alert or waits to be found.
Cost layers. Ask to decompose a unit cost into the receipts behind it. A running average cannot.
Performance obligations. Ask where the determination is recorded and who made it. It should never be a system judgement.
Ask to correct a posted transaction in the demo. What the system does next tells you more than an hour of feature discussion.
Where judgement stays human
Several terms here describe determinations that require professional judgement — whether an obligation is distinct, whether a cost is capitalisable, what basis to use for overhead allocation. No system should make those, and any vendor implying theirs does is describing something you would not want.
What a system should do is record the determination, who made it, and when, so a reviewer can evaluate the decision rather than only its result.
This is not accounting advice
These definitions are written to help you evaluate software. They are not a substitute for your accountants, and the treatment appropriate to your circumstances is a question for them. Where a definition here differs from how your auditors apply a standard, theirs governs.
Questions
Common follow-ups.
Is this accounting advice?
No. These definitions help you evaluate software. Treatment appropriate to your circumstances is a question for your accountants, and where they differ from us, theirs governs.
Why the implementation notes?
Because several of these concepts are implemented badly often enough that knowing the failure mode is more useful than knowing the definition.
What should we test in a demo?
Corrections, cumulative translation adjustment, intercompany elimination, subledger tie-out, cost layer decomposition, and where performance obligation determinations are recorded.
Should a system make accounting judgements?
No. It should record the determination, who made it, and when. Any vendor implying their system makes the judgement is describing something you would not want.
Can we suggest additions?
Yes. If we left something out deliberately we will tell you why, and if it was an oversight we will add it.
Ask to correct a posted transaction.
What the system does next tells you more about its architecture than an hour of feature discussion will.