Domain Context

Why this chapter

You'll be talking with Controllers, Treasurers, and FP&A leads. They speak their own dialect. Using the correct term in the correct context buys you trust faster than any technical depth. Skim this once a day until the words are reflexive.

The close cycle

• Close (monthly / quarterly / annual): the process of finalizing the financial period — booking all transactions, reconciling all accounts, producing financial statements.
• 1-day / 3-day / 5-day close: shorthand for how fast the books close after period end. World-class is 3-5 day monthly close; legacy is 10-20.
• Hard close vs. soft close: hard = full close including all reconciliations and reporting; soft = preliminary, for management view, refined later.
• Period end: the cutoff date (e.g., last day of the month).
• Cutoff: the rules ensuring transactions are recorded in the right period.
• Close calendar: the schedule of tasks, owners, dependencies for the close.
• Sign-off: Controller / CFO certification that the close is complete and accurate.
• True-up: an adjusting entry that corrects an earlier estimate to actuals.

SOX, ICFR, controls

• SOX: Sarbanes-Oxley Act of 2002. Public companies must attest to ICFR effectiveness.
• Section 302: CEO/CFO certify financial statements quarterly.
• Section 404: Management documents and tests ICFR annually; external auditor opines.
• ICFR: Internal Controls over Financial Reporting.
• COSO framework: the conceptual scaffolding for ICFR (control environment, risk assessment, control activities, info/comms, monitoring).
• Key control: control whose failure could lead to material misstatement.
• Preventive vs. detective control: preventive blocks the bad thing happening; detective catches it after.
• Walkthrough: auditor traces one transaction through every control.
• Test of controls vs. substantive testing: testing the control vs. testing the balances directly.
• Deficiency / significant deficiency / material weakness: increasing severity of control failures.
• Segregation of duties (SoD): no single person creates and approves a financial action.
• Management representation letter: management's written attestation to the auditor.

GL, subledger, journal entries

• General Ledger (GL): the summary book; every account's balance.
• Subledger: detailed transaction records by account (AR, AP, fixed assets, crypto lots).
• Chart of accounts (CoA): hierarchical structure of accounts.
• Journal entry (JE): a single posting that affects 2+ accounts (debit/credit must balance).
• Trial balance: snapshot of every GL account's balance at a date.
• Top-side / topside JE: a JE posted directly to the GL bypassing the subledger. Audited closely — these are often where errors live.
• Reversing entry: a JE that reverses a previous one — accounting's substitute for delete.
• Adjusting entry: a JE made during close to record items not captured by daily transaction processing.
• Recurring entry: a JE that repeats each period (depreciation, rent accrual).
• AR (Accounts Receivable): money owed to the company.
• AP (Accounts Payable): money the company owes.
• Intercompany: transactions between entities of the same parent; eliminate in consolidation.
• Elimination entry: a JE removing intercompany balances at consolidation.
• Consolidation: rolling up subsidiary financials into the parent.

Accruals & deferrals

• Accrual basis accounting: record when earned/incurred, not when cash moves.
• Accrued expense: incurred but not yet billed/paid (e.g., December utilities bill arriving in January).
• Accrued revenue: earned but not yet billed.
• Deferred revenue: cash received but not yet earned (subscription paid upfront).
• Prepaid expense: cash paid but not yet incurred (annual insurance premium).
• Depreciation / amortization: allocating cost of an asset over its useful life.
• Impairment: writing down an asset's value when fair value drops below book.

Reconciliation types

• Bank reconciliation: GL cash account vs. bank statement.
• Custody reconciliation: GL crypto holdings vs. Fireblocks / Lukka.
• On-chain reconciliation: internal records vs. blockchain reality.
• Intercompany reconciliation: receivables on one entity vs. payables on the other.
• Subledger-to-GL reconciliation: detail rolls up to summary.
• Trial balance reconciliation: prior-period closing balance ties to current opening.
• Open item vs. balance reconciliation: matching specific items vs. matching ending totals.
• Three-way match: PO + receipt + invoice tie before payment (AP control).
• Bank rec break: an item appearing on one side but not the other.
• Reconciling item: an item explaining a balance difference.

Treasury concepts

• Cash position: how much cash, where, in what currency, right now.
• Liquidity: how much cash (or near-cash) you can access on short notice.
• Sweep: automatic movement of excess cash from operating accounts into a concentration / investment account.
• ZBA (zero-balance account): account that empties to a concentration account each day.
• MMF (money-market fund): short-term, high-quality liquid investment for excess cash.
• FX (foreign exchange): currency conversion; spot, forward, swap.
• FX revaluation: period-end re-pricing of foreign-currency balances to functional currency.
• Functional currency: the primary currency of the entity's operations.
• Reporting currency: the currency the consolidated statements are presented in.
• Hedge / hedging: offsetting an exposure (FX, rate, commodity).
• Counterparty exposure: how much you have at risk with a single counterparty (bank, exchange, custodian).
• SWIFT / MT940 / BAI2: bank data formats.
• Cash forecasting: predicting future cash positions.
• Payment factory: centralized payments execution.

FP&A vocabulary

• FP&A (Financial Planning & Analysis): forward-looking finance — budgets, forecasts, variance analysis.
• Budget: annual plan, approved.
• Forecast: updated expectation, typically monthly or quarterly.
• Actuals: what really happened (from the GL).
• Variance: actual vs. budget or actual vs. forecast difference.
• Flux analysis: explaining period-over-period variance.
• P&L (Profit & Loss) or income statement: revenue - expenses = net income.
• Balance sheet: assets = liabilities + equity at a point in time.
• Cash flow statement: operating, investing, financing flows over a period.
• EBITDA: earnings before interest, tax, depreciation, amortization.
• Run rate: annualized projection from recent period.
• KPI: key performance indicator.

Regulators & standards

• SEC (Securities and Exchange Commission): US securities regulator; public companies file periodic reports.
• PCAOB (Public Company Accounting Oversight Board): regulates the audit firms that audit public companies.
• FASB: Financial Accounting Standards Board — sets US GAAP.
• GAAP (Generally Accepted Accounting Principles): US accounting standards.
• IFRS: International Financial Reporting Standards (used outside US).
• ASU 2023-08: FASB's crypto-asset fair-value standard — relevant to the company's books.
• 10-K / 10-Q / 8-K: SEC annual / quarterly / material-event filings.
• FINRA, FCA, MAS, BaFin: various securities / financial regulators by jurisdiction.

Crypto-native finance

The pieces that make the company's finance stack different from a traditional fintech.

• Custody: holding crypto assets securely. Self-custody, qualified custody (e.g., Anchorage), MPC-based (Fireblocks).
• MPC (Multi-Party Computation): cryptographic technique for distributed signing without ever assembling a private key.
• Hot wallet / warm wallet / cold storage: gradations of availability vs. security.
• Vault: Fireblocks-style organizational holder of assets.
• On-chain reconciliation: tying internal books to blockchain-confirmed reality.
• Confirmation depth: how many blocks deep a transaction is — confidence in finality.
• UTXO model (Bitcoin) vs. account model (Ethereum) — different transaction shapes.
• Cost basis: original cost of an asset for gain/loss calculation.
• Lot accounting: tracking individual purchase lots for disposal accounting.
• FIFO / HIFO / specific ID: lot selection methods for disposals.
• Fair value: principal-market price at a timestamp.
• Realized vs. unrealized gain: realized = sold; unrealized = held but marked.
• Staking rewards: yield from validating a proof-of-stake chain; income at receipt.
• Airdrop: free tokens distributed; income at receipt at FV.
• Fork: chain split creating new tokens; income event.
• Wrapped token: a token representing another asset (wBTC = wrapped Bitcoin on Ethereum).
• Lukka: crypto subledger and fair-value vendor; produces accounting-grade ledgers from on-chain + exchange data.
• Travel Rule: regulatory requirement to share counterparty info on crypto transfers above a threshold.

One-page glossary — print and tape to your monitor