Understanding the language your CPA uses — and the terms on your tax return — puts you in a stronger position to manage your business finances, ask better questions, and make more informed decisions. This glossary covers the most commonly used accounting, bookkeeping, tax, and financial terms relevant to Utah small business owners.
A
Accounts Payable (AP): Money your business owes to vendors and suppliers for goods or services received but not yet paid. Appears as a current liability on the balance sheet.
Accounts Receivable (AR): Money owed to your business by customers for goods or services delivered but not yet collected. Appears as a current asset on the balance sheet.
Accrual Accounting: An accounting method that recognizes revenue when earned and expenses when incurred — regardless of when cash changes hands. Required for businesses above certain revenue thresholds; produces more accurate financial statements than cash basis.
Adjusted Gross Income (AGI): Gross income minus specific above-the-line deductions (such as self-employment tax deduction, IRA contributions, student loan interest). The starting point for calculating taxable income on federal Form 1040.
Amortization: The systematic write-off of an intangible asset’s cost over its useful life. Section 197 intangibles (goodwill, customer lists, non-competes) are amortized over 15 years. Contrast with depreciation, which applies to tangible assets.
Assets: Resources owned by the business with economic value. Classified as current (converted to cash within 12 months) or non-current (long-term).
At-Risk Rules: IRC Section 465 limits deductible losses to the amount the taxpayer has economically at risk in the activity. Amounts borrowed on a non-recourse basis are generally not at risk.
B
Balance Sheet: A financial statement showing the business’s assets, liabilities, and equity at a specific point in time. Follows the equation: Assets = Liabilities + Equity.
Basis (Tax Basis): The cost or other value assigned to an asset for tax purposes, used to calculate gain or loss on disposition and to determine allowable depreciation.
Bonus Depreciation: A first-year deduction for qualifying business property (new or used), allowing immediate expensing of a percentage of the asset’s cost. The percentage phases down from 100% (2022 and prior) to 60% (2024) and 40% (2025).
Bookkeeping: The systematic recording of all financial transactions of a business. The foundation of accurate financial statements and tax returns.
Built-In Gains Tax: A corporate-level tax imposed on S-Corporations that converted from C-Corp status, applicable to gains from assets that were appreciated at the time of conversion, if those assets are sold within 5 years of the S election.
C
C-Corporation (C-Corp): A business entity taxed separately from its owners under Subchapter C of the IRC. Subject to 21% federal corporate income tax. Dividends paid to shareholders are taxed again at the shareholder level (double taxation).
Capital Gain: Profit from the sale of a capital asset (stock, real estate, business assets held for investment). Long-term capital gain (assets held more than one year) is taxed at preferential rates (0%, 15%, or 20% federally). Short-term capital gain is taxed as ordinary income.
Cash Basis Accounting: An accounting method that recognizes revenue when cash is received and expenses when cash is paid. Simpler than accrual; acceptable for most small businesses below certain revenue thresholds.
Chart of Accounts (COA): The master list of all account categories a business uses to classify and record transactions. Organized into assets, liabilities, equity, revenue, and expenses.
Cost of Goods Sold (COGS): The direct costs of producing goods sold during a period — materials, direct labor, and manufacturing overhead. Gross Profit = Revenue – COGS.
Current Ratio: Current Assets ÷ Current Liabilities. Measures short-term liquidity. A ratio above 1.5–2.0 generally indicates adequate working capital.
D
Depreciation: The systematic allocation of a tangible asset’s cost over its useful life for tax and accounting purposes. Methods include straight-line (equal annual amounts) and accelerated (MACRS, Section 179, bonus depreciation).
Disregarded Entity: A single-member LLC that is treated as the same taxpayer as its owner for federal tax purposes. Income and expenses flow directly to the owner’s Form 1040 Schedule C.
Distributions: Payments from a pass-through entity (S-Corp, LLC, partnership) to its owners, representing a return of profit. Unlike wages, distributions from S-Corps are not subject to FICA payroll taxes.
E
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. A common measure of operating profitability used in business valuations. Approximates cash-generating ability before capital structure and accounting choices.
Employer Identification Number (EIN): A nine-digit number assigned by the IRS to identify a business entity for tax purposes. Required for business bank accounts, payroll, and most business tax filings.
Equity: The owner’s residual interest in the business after all liabilities are subtracted from assets. Includes paid-in capital, retained earnings, and accumulated other comprehensive income.
Estimated Tax Payments: Quarterly tax prepayments required of self-employed individuals and businesses that do not have withholding. Due April 15, June 16, September 15, and January 15.
F
FICA: Federal Insurance Contributions Act. Payroll taxes that fund Social Security (6.2% employee + 6.2% employer) and Medicare (1.45% employee + 1.45% employer). Self-employed individuals pay the combined 15.3% as self-employment tax.
Fiscal Year: A 12-month accounting period that does not necessarily coincide with the calendar year. Most small businesses use a calendar year (January 1–December 31).
Fixed Assets: Long-term tangible assets used in business operations — property, plant, and equipment. Depreciated over their useful lives.
Form 1040: The primary federal individual income tax return. Used by sole proprietors, S-Corp shareholders, and partners to report business income from Schedule C, K-1s, and other sources.
Form 1065: Federal partnership tax return. Reports partnership income, deductions, and allocations; issues K-1s to each partner.
Form 1120-S: Federal S-Corporation tax return. Reports S-Corp income, deductions, and allocations; issues K-1s to each shareholder.
G – K
General Ledger: The complete record of all financial transactions, organized by account. The source of truth for all financial statements.
Goodwill: The intangible value of a business above its identifiable net assets — representing reputation, customer relationships, brand, and workforce. Amortized over 15 years for tax purposes after an asset acquisition.
Gross Profit: Revenue minus Cost of Goods Sold. Measures the profitability of producing what the business sells before overhead expenses.
Installment Sale: A sale in which at least one payment is received after the tax year of sale. The seller recognizes gain proportionally as payments are received, spreading the tax liability over multiple years (IRC Section 453).
IRC: Internal Revenue Code. The primary body of federal tax law codified in Title 26 of the United States Code.
K-1 (Schedule K-1): A tax form issued by partnerships, S-Corps, and trusts to each owner, reporting their allocable share of income, deductions, credits, and other items. Used to complete the owner’s personal tax return.
L – N
Liability: An obligation of the business to pay money or deliver goods/services in the future. Classified as current (due within 12 months) or long-term.
LLC (Limited Liability Company): A flexible business entity that provides personal liability protection for owners (members) while allowing pass-through tax treatment. Utah LLCs are governed by the Utah Revised Uniform LLC Act.
MACRS (Modified Accelerated Cost Recovery System): The federal depreciation system for tangible personal property. Most equipment depreciates over 5 or 7 years using an accelerated front-loaded method.
Net Income: Revenue minus all expenses (COGS, operating expenses, interest, and taxes). The bottom line of the income statement.
Net Operating Loss (NOL): When deductible expenses exceed gross income for a tax year. Under current law, NOLs may be carried forward indefinitely but limited to 80% of taxable income in any carryforward year.
O – Q
Operating Cash Flow: Cash generated by the business’s core operations, distinct from investing and financing activities. The most reliable indicator of sustainable business health.
Pass-Through Entity: An entity whose income is not taxed at the entity level but passes through to owners’ personal tax returns — includes sole proprietorships, partnerships, LLCs (not taxed as corporations), and S-Corps.
Pass-Through Entity Tax (PTET): Utah’s elective entity-level tax for pass-through entities, allowing the entity to deduct state income tax for federal purposes, bypassing the $10,000 SALT cap for individual owners.
Payroll Taxes: Taxes withheld from employee wages and paid by employers: federal income tax withholding, FICA (Social Security and Medicare), FUTA, and Utah state income tax withholding and SUI.
QBI Deduction (Section 199A): A deduction of up to 20% of qualified business income available to owners of pass-through entities (sole proprietors, partners, S-Corp shareholders). Subject to limitations for high-income taxpayers.
R – S
Retained Earnings: Cumulative net income of the business since inception, less all distributions paid to owners. Increases with profits; decreases with distributions and losses.
S-Corporation (S-Corp): A business entity taxed under Subchapter S of the IRC. Income passes through to shareholders; owners who work in the business pay themselves a reasonable W-2 salary; remaining distributions avoid FICA taxes.
Section 179: An IRC provision allowing businesses to immediately deduct the full cost of qualifying equipment in the year placed in service, rather than depreciating it over time. 2024 limit: $1,220,000.
Self-Employment (SE) Tax: The self-employed individual’s equivalent of FICA — 15.3% on net self-employment earnings up to the Social Security wage base, plus 2.9% above. Half is deductible as an adjustment to gross income.
SUTA / SUI: State Unemployment Tax Act / State Unemployment Insurance. Utah employers pay SUI at a rate assigned by the Utah Department of Workforce Services, funding unemployment insurance benefits.
T – Z
Taxable Income: Gross income minus allowable deductions. The base on which tax rates are applied.
Trial Balance: A listing of all accounts in the general ledger with their debit or credit balances, used to verify that total debits equal total credits.
Utah TC-20: Utah corporate income tax return.
Utah TC-20S: Utah S-Corporation income tax return.
Utah TC-40: Utah individual income tax return.
Utah TC-65: Utah partnership income tax return.
W-2: Annual wage statement issued to employees by January 31, reporting wages paid and taxes withheld during the prior year.
1099-NEC: Annual compensation statement issued to independent contractors paid $600 or more during the year. Filed with the IRS and provided to the contractor by January 31.
1031 Exchange: A provision allowing real property held for investment or business use to be exchanged for like-kind property without immediate recognition of gain, deferring the tax. Strict timing and identification rules apply.
Questions about any of these terms in the context of your business? Call (801) 927-1337 or email admin@cpaone.net — our team is happy to explain how any of these concepts applies to your specific situation.
About the Author
Missy Dennis, CPA | Partner | FJ & Associates, PLLC | Kaysville, Utah
Missy holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant. She is committed to providing clear, accurate, and actionable guidance so clients can navigate complex financial decisions with confidence. With more than twenty years of public accounting experience, Missy Dennis specializes in:
- Tax preparation and tax advisory
- Bookkeeping strategy alignment
- Estate and trust taxation
- Audit and consulting services
- Low-income housing tax credits
- Non-profit accounting
- Small- and mid-sized business advisory
