Topic: English for Accounting 3

VOCABULARY REVIEW: Accounting

Need to review common terms used in accounting? We've got you covered!

Cost of goods sold (COGS)
COGS is the direct cost of producing or purchasing the goods a company sells. It does not include indirect expenses like marketing.
Example: For a clothing store, COGS includes the cost of buying clothes from suppliers.

Gross profit
Gross profit is the difference between revenue and cost of goods sold. It shows how efficiently a company produces or sells its products.
Example: If a company earns $100,000 in sales and has $60,000 in COGS, its gross profit is $40,000.

Net profit
Net profit is the final profit after all expenses, taxes, and costs are deducted from revenue. It shows the company's overall profitability.
Example: After paying rent, salaries, and taxes, a company may have a net profit of $15,000 for the month.

Audit
An audit is an independent review of a company's financial records to ensure accuracy and compliance with rules. Audits increase trust.
Example: A large company hires an external auditor to review its financial statements annually.

Internal controls
Internal controls are policies and procedures designed to protect company assets and prevent errors or fraud. They help ensure reliable reporting.
Example: A company requires two approvals for large payments to reduce the risk of fraud.

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