The Glossary of Money Software

Account

A ledger's labeled record that tracks increases and decreases of an amount called balance.

First seen in How to Explain Accounting To Payments Engineers

See Entry, Ledger, Normality, Cardinality

Accounts Payable

Total amount of money a company owes to suppliers for goods or services received but not yet paid for. It is usually a Liability.

First seen in Accounting For Multi-Currency Ledgers

See Accounts Receivable

Accounts Receivable

Total amount of money owed to a company by its customers for goods or services delivered but not yet paid for. It is usually an Asset.

See Accounts Payable

Acquirer

The bank or financial institution that processes card payments on behalf of a merchant. When a customer pays with a card, the acquirer communicates with the card network and the issuer to authorize, clear, and settle the transaction.

See Issuer, Payment Rail

Accrual Accounting

An accounting method that records revenue and expenses when they are earned or incurred, regardless of when cash actually changes hands. Most modern businesses use accrual accounting because it provides a more accurate picture of financial health than cash-based accounting.

First seen in How to Explain Accounting To Payments Engineers

Amortization

The process of spreading the cost of an intangible asset (such as a patent or software license) over its useful life. Each period, a portion of the cost is recorded as an expense.

See Depreciation (which is for tangible assets)

Cardinality

Some accounts belong to many users, and record entries independently, but are conceptually identical. Those have high cardinality. Others, such as sweep accounts, belong to the company or to a bigger entity, and are conceptually separated. Those have low cardinality.

First seen in Why Low Cardinality Accounts Are A Ledger's Bottleneck

See Hot Accounts

Cash Position

The total amount of cash and cash equivalents a company holds at any given time. It reflects the organization's immediate liquidity and ability to meet short-term obligations.

Chart of Accounts

A structured list of all accounts in a ledger, organized by category (assets, liabilities, equity, revenue, expenses). It defines the taxonomy that a ledger uses to classify every transaction.

First seen in Why Don't You Use Generics in Ledgers?

Color of Money

A Formance term. The idea that not all money in a ledger is the same: different units of money carry different metadata, restrictions, or purposes. A dollar earmarked for taxes is not the same as a dollar available for spending, even if both sit in the same account. Tracking the "color" of money lets ledgers enforce rules about how funds can be used.

First seen in Money as Metadata

See Fungibility

Continuous Accounting

An approach that distributes accounting tasks (such as reconciliation, close activities, and reporting) evenly throughout the period, rather than batching them at month-end or quarter-end. It reduces the close cycle and catches errors earlier.

Credit

An entry recorded on the right side of an account. Credits increase liabilities, equity, and revenue accounts, and decrease asset and expense accounts.

First seen in How to Explain Accounting To Payments Engineers

See Debit, Normality

Debit

An entry recorded on the left side of an account. Debits increase asset and expense accounts, and decrease liability, equity, and revenue accounts.

See Credit, Normality

Depreciation

The process of allocating the cost of a tangible, physical asset over its useful life. Similar to amortization, but applied to physical rather than intangible assets.

See Amortization

Double-Entry

A bookkeeping method where every financial transaction is recorded in at least two accounts: one debited and one credited. This ensures the accounting equation (Assets = Liabilities + Equity) always holds.

First seen in Why Ledgers Are More Than Data Warehouses of Money

See Entry, Transaction, Integrity

Entry (aka Journal Entry, Ledger Entry, or Post)

A single debit or credit recorded against an account. Entries are the building blocks of transactions: a transaction is composed of two or more entries that must balance.

First seen in Why Ledgers Must be Immutable

See Transaction, Double-Entry, Account

FBO (For Benefit Of) Account (aka Omnibus Account)

A bank account held by one party (such as a platform or fintech) on behalf of its end users. The funds legally belong to the underlying beneficiaries, not the account holder. Platforms use FBO accounts to pool user funds while tracking individual balances via virtual accounts.

See Virtual Account

Fungibility

The property of money (or any asset) that makes one unit interchangeable with another of the same kind. A dollar is fungible because any dollar can replace any other dollar. In ledger design, fungibility is often deliberately broken by tagging money with metadata, restrictions, or purpose.

First seen in The Intuition of Money

See Color of Money

Hot Accounts

Low-cardinality accounts that receive a disproportionately high volume of concurrent entries, creating contention and bottlenecks. Examples include company-wide settlement accounts or pooled cash accounts.

First seen in Why Low Cardinality Accounts Are A Ledger's Bottleneck

See Cardinality

Human Not Present (HNP)

A transaction or interaction initiated by AI or automated agents, without a human directly involved at the point of purchase. This category of commerce introduces new challenges for fraud detection, authorization, and payment flows.

First seen in Why AI Commerce Isn't Going Anywhere

Idempotency (for ledgers)

The guarantee that performing the same operation multiple times produces the same result as performing it once. In ledger systems, idempotency prevents duplicate entries when a request is retried due to network failures or timeouts.

First seen in Exactly-Once Payments At Airbnb

Immutability (for ledgers)

The principle that once an entry is recorded in a ledger, it cannot be altered or deleted. Corrections are made by adding new, offsetting entries rather than modifying existing ones. This creates a complete audit trail.

First seen in Why Ledgers Must be Immutable

See Entry

Integrity (for ledgers)

The property that ensures all entries in a ledger remain accurate, consistent, and trustworthy. Integrity is maintained through constraints such as double-entry balancing, immutability, and validation rules that prevent invalid states.

First seen in Why Ledgers Are More Than Data Warehouses of Money

See Double-Entry, Immutability

Intuitions of Money

A framework of five properties that any form of money must satisfy to function as money software: Atomicity (every currency has a smallest indivisible unit), Conservation (money cannot be created or destroyed), Fungibility (all units of account are equivalent and tradeable), Storability (money can be preserved indefinitely), and Non-reproducibility (money must be impossible to duplicate).

First seen in The Intuition of Money

See Fungibility

Issuer

The bank or financial institution that issues a payment card to a consumer. When a cardholder makes a purchase, the issuer is responsible for authorizing the transaction and ultimately transferring funds to the acquirer.

First seen in What Payment Providers Can Learn from Go Contexts

See Acquirer, Payment Rail

Ledger

A system of record that tracks all financial transactions for an entity. A ledger contains accounts, entries, and transactions, and enforces rules such as double-entry balancing, immutability, and integrity.

See Account, Entry, Transaction

Momentum Accounts

Accounts that track the flow of value over a period of time, such as revenue and expense accounts. They accumulate entries during a period and are typically reset at the end of each accounting cycle. Contrasted with Wealth Accounts, which represent a point-in-time balance.

See Wealth Accounts

Money Software

Software that moves, stores, or manages money. This includes payment processors, ledgers, banking platforms, treasury management systems, and any application where the correctness of financial data is critical.

Multi-Currency Balancing Rule

The constraint that a transaction involving multiple currencies must still balance in accounting terms. Each currency must independently balance (debits equal credits within that currency), or the transaction must include a conversion entry that accounts for the exchange.

First seen in Accounting For Multi-Currency Ledgers

Non-cyclical State Machines

The principle that payment state machines should never contain cycles. What appears to be a cyclical flow (such as a payment retried after failure) is better modeled as multiple independent state machines, each progressing forward without returning to a previous state. A cycle in a state machine may well be two independent state machines.

First seen in Payment State Machines Are Not Cyclical

Normality

A convention that determines whether an account's positive balance is a debit or a credit. Assets and expenses are "debit-normal" (debits increase, credits decrease), while liabilities, equity, and revenue are "credit-normal" (credits increase, debits decrease).

First seen in How to Explain Accounting To Payments Engineers

See Credit, Debit

On-ramp/Off-ramp

Partners or services that convert between fiat currency and digital assets (such as stablecoins). An on-ramp converts fiat into crypto; an off-ramp converts crypto back into fiat. These are critical components of stablecoin-based transfer flows.

See Stablecoin Sandwich

Payment Rail

The infrastructure or network through which money moves from one party to another. Examples include card networks (Visa, Mastercard), wire transfer systems (SWIFT, Fedwire), ACH, and blockchain networks. Different rails have different speeds, costs, and geographical reach.

First seen in Why Payments Aren't Money Movements

See Issuer, Acquirer

Payments as Promise

The foundational axiom that a payment is a promise made by an authorized party about a transfer. “Promise” because a payment is a proxy for an event that could complete in the future; “authorized party” because the fundamental question of any payment is whether the payer has both the funds and the identity to pay.

First seen in Payments Patterns: Elements of Reusable Money Software

See Transfer

Penny Test

A verification technique where a tiny amount of money (typically one cent) is sent to an account to confirm that the account is valid and reachable. Commonly used in payment systems to verify bank account ownership.

Reconciliation

The process of comparing two sets of records—typically an internal ledger against an external source such as a bank statement—to ensure they agree. Any discrepancies are flagged for investigation and correction.

First seen in Ledger Transactions Don't Have to Be Atomic

Stablecoin Sandwich

A Modern Treasury term. A transfer pattern in which fiat currency sits on both ends, with stablecoins in the middle. The sender's fiat is converted to stablecoins via an on-ramp partner, transferred on-chain, and then converted back to fiat via an off-ramp partner.

First seen in Modern Treasury's Stablecoin Sandwich

See On-ramp/Off-ramp

Transaction

A group of two or more entries that together represent a complete financial event. In a double-entry ledger, a transaction's total debits must equal its total credits.

First seen in Why Ledgers Are More Than Data Warehouses of Money

See Entry, Double-Entry, Up-in-the-airness

Transfer

The movement of funds from one account to another, whether within the same ledger or across different financial institutions. A transfer is typically implemented as a transaction with at least one debit entry and one credit entry.

See Transaction

Up-in-the-airness (aka Float, Funds in Flight)

The inherent property of money being in transit: neither fully at the origin nor fully at the destination. During a transfer, funds exist in a liminal state where they have left one account but have not yet settled in another.

First seen in Ledger Transactions Don't Have to Be Atomic

See Transaction, Transfer

Virtual Account

A ledger-level account that exists only in software, not at a bank. Virtual accounts allow a platform to track balances for individual users or purposes while pooling the actual funds in a single FBO account at the bank level.

See FBO Account

Wealth Accounts

Accounts that represent stored value at a point in time, such as assets, liabilities, and equity. Contrasted with Momentum Accounts, which track flows over a period.

See Momentum Accounts