Bookkeeping Services

Bookkeeping GLOSSARY

  • Accounts Payable (AP) – Money owed by a business to its suppliers.
  • Accounts Receivable (AR) – Money owed to a business by its customers.
  • Accrual Basis – An accounting method where revenue and expenses are recorded when they are incurred, not when cash is exchanged.
  • Amortization – The gradual reduction of a debt over a period of time.
  • Assets – Resources owned by a business with economic value.
  • Balance Sheet – A financial statement showing a company’s assets, liabilities, and equity at a specific point in time.
  • Bookkeeping – The process of recording financial transactions in an organized manner.
  • Capital – Financial resources or assets owned by a business or individual.
  • Cash Basis – An accounting method where revenue and expenses are recorded only when cash is exchanged.
  • Cash Flow – The net amount of cash moving in and out of a business.
  • Chart of Accounts – A listing of all accounts in the general ledger, organized by category.
  • Closing the Books – The process of finalizing accounts at the end of an accounting period.
  • Cost of Goods Sold (COGS) – Direct costs attributable to the production of goods sold by a company.
  • Credit – An entry on the right side of an account, indicating an increase in liabilities or equity or a decrease in assets.
  • Debit – An entry on the left side of an account, indicating an increase in assets or a decrease in liabilities or equity.
  • Depreciation – The decrease in value of an asset over time.
  • Dividends – A distribution of a portion of a company’s earnings to its shareholders.
  • Double-Entry Accounting – An accounting system that requires every entry to have equal and opposite effects in at least two different accounts.
  • Equity – The value of an owner’s interest in a business.
  • Expense – Costs incurred by a business in the process of earning revenue.
  • Financial Statements – Reports that provide information about a business’s financial performance and position.
  • Fixed Assets – Long-term tangible assets like buildings and machinery.
  • General Ledger (GL) – The main accounting record summarizing all transactions.
  • Gross Profit – Revenue minus the cost of goods sold.
  • Income Statement – A financial statement showing revenue, expenses, and profit over a specific period.
  • Inventory – Goods available for sale and raw materials used to produce goods.
  • Invoice – A document requesting payment for goods or services provided.
  • Journal – A record of all transactions in chronological order.
  • Liabilities – Obligations or debts owed by a business.
  • Liquidity – The ability of a business to meet its financial obligations as they come due.
  • Net Income – Total revenue minus total expenses, also known as profit.
  • Operating Expenses – Expenses required for the day-to-day functioning of a business.
  • Overhead – Ongoing business expenses not directly attributed to a specific business activity.
  • Payroll – The total amount paid to employees by a business.
  • Petty Cash – A small amount of cash kept on hand for minor expenses.
  • Posting – The process of recording journal entries in the general ledger.
  • Profit and Loss Statement (P&L) – Another term for the income statement.
  • Reconciliation – The process of ensuring records are accurate and agree with financial statements.
  • Retained Earnings – Cumulative net income that has not been distributed to shareholders.
  • Revenue – The income generated from normal business operations.
  • Shareholder’s Equity – The owner’s residual interest in the company after liabilities.
  • Single-Entry Accounting – A simple form of accounting where each transaction is recorded once.
  • Subsidiary Ledger – A detailed ledger that breaks down individual accounts receivable or accounts payable.
  • Taxable Income – Income on which tax must be paid; it is gross income minus deductions.
  • Trial Balance – A list of all ledger accounts with their balances at a particular time.
  • Turnover – The rate at which inventory is sold or replaced.
  • Unearned Revenue – Revenue received before it is earned or before the goods/services are provided.
  • Variable Costs – Costs that change in proportion to production or sales levels.
  • Working Capital – The difference between current assets and current liabilities.
  • Write-Off – Reducing the book value of an asset due to uncollectibility or obsolescence.