The plain-English bookkeeping glossary.

All terms

• Accounts Payable (A/P) — Money your business owes vendors for bills received but not yet paid.
• Accounts Receivable (A/R) — Money customers owe you for invoices you've sent.
• Accrual Accounting — Recording income when earned and expenses when incurred — regardless of when cash moves.
• Cash-Basis Accounting — Recording income when money arrives and expenses when money leaves.
• Debits and Credits — The two sides of every bookkeeping entry — left and right, not good and bad.
• Double-Entry Bookkeeping — Every transaction recorded in at least two accounts, with debits equal to credits.
• Chart of Accounts — The organized list of every account a business uses to categorize money.
• General Ledger — The complete record of every transaction, organized by account.
• Journal Entry — A manual bookkeeping entry recording debits and credits directly.
• Trial Balance — Every account and its balance in one list — proving debits equal credits.
• Bank Reconciliation — Matching the books to the bank statement, monthly, until every difference is explained.
• Balance Sheet — What the business owns, owes, and is worth — at a single moment.
• Profit & Loss Statement (Income Statement) — Income minus expenses over a period — did the business make money?
• Cash Flow Statement — Where cash actually came from and where it went.
• Depreciation — Spreading a long-lived asset's cost over the years it's used.
• Cost of Goods Sold (COGS) — The direct cost of producing what you sold.
• Gross Profit — Revenue minus cost of goods sold — the product's own profitability.
• Net Profit — The bottom line: what's left after every expense.
• Retained Earnings — All the profit the business has kept over its life, not paid out to owners.
• Owner's Draw — Money the owner takes out of the business — a reduction of equity, not an expense.
• Owner's Equity — The owners' claim on the business: assets minus liabilities.
• Fixed Assets — Long-lived property used to run the business — vehicles, equipment, buildings.
• Current Liabilities — Debts due within a year — bills, cards, payroll, and sales tax collected.
• Working Capital — Current assets minus current liabilities — the operating cushion.
• Unearned Revenue — Customer money received before the work is done — a liability until earned.
• Accrued Expenses — Costs incurred but not yet paid or billed — recorded so the period tells the truth.
• Prepaid Expenses — Costs paid in advance — assets that become expenses over time.
• Bad Debt — A customer invoice that will never be collected, written off honestly.
• Petty Cash — A small cash fund for minor expenses — small, but still real bookkeeping.
• Undeposited Funds — QuickBooks' holding account that groups payments into bank-matching deposits.

Put the vocabulary to work

Terms stick when you use them: the Daily Challenge serves ten questions a day built on exactly these concepts, and the ProAdvisor and bookkeeping certification readiness checks show you which ones you actually own. Running your own business? The owner's guide turns this vocabulary into a monthly system.

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