A Glossary Of Commonly Used Bookkeeping Terms

Every industry has its own language and terms. These words and phrases can be confusing to anyone who is not part of the daily operations of a specific sector, and the accounting business is no exception.

To help you understand the terms, acronyms, and phrases regularly used when working with a bookkeeper, Spickerman Bookkeeping has created this handy reference guide. Here you’ll find valuable information allowing you to comprehend and communicate your accounting needs effectively.

Financial statements
It’s a compilation of the balance sheet, income statement, and statement of cash flows.

Balance sheet
The report is cumulative, as the balances roll over from period to period. This report incorporates bank accounts, credit card accounts, loans and other items that you owe others, and the equity you have provided to your business.

Asset
A resource with economic value, including bank accounts, fixed assets, accounts receivable, and inventory.

Fixed asset
Assets that cannot be quickly turned into cash (e.g., equipment, vehicles).

Liability
Something owed to someone else (e.g., credit cards, loans).

Income statement
This report is considered a snapshot in time. It captures the revenue and expenses for a specific period. These accounts return to zero at the beginning of the fiscal year.

Revenue
The amount of money received for services rendered or products sold.

Cash basis
Accounting basis that recognizes revenue or expenses in the order received. Income is recognized when payment is received. Expenses are recognized when payments get made.

Accrual basis
This basis recognizes income and expenses when they are incurred. When an invoice is sent to a client, the income is recognized. When a bill is received, it is recognized at that point.

Bad debt
It’s when a customer’s balance is deemed uncollectible, and they will not pay you what they owe.

Equity
Ownership interests in the business (It’s what the owner brings into the business).

Gross income
It’s worked out by the formula, Revenues Less Costs of Goods Sold.

Costs of goods sold
The direct cost of providing the service or product being sold.

Net income (loss)
It’s worked out by the formula, Revenues Less Cost of Goods Sold Less All Other Expenses.

Journal entry
This is how transactions get logged into the accounting system.

We hope these terms made you feel more comfortable working with a bookkeeper. If you’re looking for a bookkeeper, reach out to the experts at Spickerman Bookkeeping. With many years of experience, we specialize in Quickbooks set-up/training, bookkeeping catch-up/ clean-up, reviews, and reports. We offer our virtual bookkeeping services to small and medium-sized businesses across the USA.

Please view our complete list of services here, read customer reviews here, or get in touch with us here.